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Notes to Accounts of Expleo Solutions Ltd.

Mar 31, 2022

Note 15.1: Capital Redemption reserve

As per provisions of Section 69 of the Companies Act, 2013, Capital Redemption Reserve is to be created when Company purchases (buy back) it’s own shares out of the free reserves for an amount equal to the nominal value of shares (Share Capital extinguished) so purchased. Accordingly, during the Financial year ended March 31, 2020 an amount of Rs. 4.61 Millions , i.e., the share capital extinguished had been transferred from Retained Earnings to Capital Redemption Reserve.

Note 15.2: Employee Stock Compensation Reserve

The Employee Stock Compensation Reserve is used to recognise the grant date fair value of options issued under the Group’s Stock Option Plan provided to employees as part of their remuneration.

Note 15.3: General Reserve

The Company had transferred a portion of its net profit to the General Reserve, on a voluntary basis during the previous years.

Note 15.4: Retained Earnings

Retained Earnings are the profits that the Company has earned till date, less any transfers to General Reserve, dividends or other distributions paid to shareholders.

a) Disaggregation of Revenue

The table below presents disaggregated revenues from contracts with customers for the years ended March 31, 2022 and March 31, 2021 by contract type. The Company believes that this disaggregation best depicts how the nature, amount, timing and uncertainty of their revenues and cash flows are affected by economic factors.

The Company derives its revenue across two categories of contracts - Fixed Bid contracts and Time & Material (T&M) contracts. The Company has identified a single reportable segment namely ‘Software Validation and Verification Services’ as disclosed in Note 37 to the Standalone Financial Statements. The Company has disclosed revenue generated by geographical market which is provided only as per the specific requirement of Ind AS 108 for a single reportable segment. However, the Company does not assess revenue based on geography and hence there is no disaggregation of revenue disclosed based on geography.

b) The contract liabilities (unearned revenue) primarily relate to the advance consideration received from customers for which revenue is recognised over time. An amount of Rs.2.77 Millions (Previous Year: Rs.0.64 Millions) recognised in contract liabilities as at April 1, 2021 has been recognised as revenue for the year ended March 31, 2022.

c) There is no revenue recognised in the reporting period for performance obligations satisfied in previous periods.

d) Transaction price allocated to the remaining performance obligations

The aggregate value of transaction price allocated to unsatisfied (or partially satisfied) performance obligations is Rs.Nil (Previous Year: Rs.94.55 Millions)which is expected to be recognised as revenue in the next year. Remaining performance obligation estimates are subject to change and are affected by several factors, including adjustments for currency.

e) Performance obligations and remaining performance obligations

The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as at the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation related disclosures for contracts where the revenue recognized corresponds directly with the value to the customer of the entity’s performance completed to date, typically those contracts where invoicing is on time and material basis and in the case of fixed bid contracts with an original expected project duration of less than one year.

(ii) Gratuity

The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/ termination is the employees’ last drawn basic salary per month computed proportionately for 15 days salary multiplied by the number of years of service. The gratuity plan is a funded plan and the Company makes contributions to Life Insurance Corporation of India (LIC) as per New Group Gratuity Cash Accumulation Plan for Pension and Group Schemes Fund by Insurance Regulatory and Development Authority (IRDA) Regulations. 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.

(i) 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 based on short term expected pay-outs in line with the actuary’s recommendations.

(ii) Usefulness & methodology adopted for sensitivity analysis

Sensitivity analysis is an analysis which will give the movement in liability if the assumptions were not to be true on a different count. This only signifies the change in the liability if the difference between the assumed & the actual is not following the parameters of the sensitivity analysis.

a) Fair Values and Risk Management

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices.

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

There have been no transfers among Level 1, Level 2 and Level 3 during the current year and previous yea r.

b) Measurement of Fair Value

The Company uses Discounted Cash Flow valuation technique (in relation to Fair Value of asset measured at amortised cost) which involves determination of present value of expected receipt/ payment discounted using appropriate discounting rates. The fair value so determined are classified as Level 2.

c) Financial Risk Management

The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit and liquidity, which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential adverse effects on the financial performance of the Company.

(i) Credit Risk

Credit risk is the risk of financial loss arising from counterparty’s failure to repay or service debt according to the contractual terms or obligations. Credit risk encompasses, both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. Credit risk of existing customer is controlled by continuous monitoring of the collection trend of each customer on a periodical basis. With respect to a new customer, the Company uses external/ internal sources to assess the potential customer’s credit quality.

Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, loans, cash and cash equivalents, other balances with banks and other financial assets. None of the financial instruments of the Company result in material concentration of credit risk.

Credit risk on cash and cash equivalents is limited as the Company generally invests in Fixed deposits with banks having high credit ratings.

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was Rs. 2,303.83 Millions (Previous Year: Rs. 1844.92 Millions) being the total of the carrying amount of trade receivables, cash and cash equivalents, other balances with banks and other financial assets.

Trade Receivables

Ind AS requires expected credit losses to be measured through a loss allowance. The Company assesses at each Balance Sheet Date whether a financial asset or a group of financial assets is impaired. The Company recognises lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 months expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.

The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience adjusted for forward-looking information. The concentration of credit risk is limited due to the fact that the customer base is large and unrelated. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates as given in the provision matrix.

(ii) Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes. The Company’s exposure to market risk is primarily on account of foreign currency exchange rate risk.

a) Foreign Currency exchange rate risk

The fl uctuation in foreign currency exchange rates may have potential impact on the Statement of Profit and loss, where any transaction references more than one currency or where assets/ liabilities are denominated in a currency other than the functional currency of the Company. Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in USD, EURO and GBP against the functional currency of the Company. The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks.

b) Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates to investments which are primarily short-term fixed deposits, which do not expose it to significant interest rate risk.

(iii) Liquidity Risk

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and by matching the maturity profiles of financial assets and liabilities.

Note 30: Capital Management

The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders. The Company is not subject to any externally imposed capital requirements.

Note 32: Disclosure required under Ind AS H6 “Leases"

The Company has entered into operating leases on its office buildings. These leases have terms of 3 to 6 years. Future minimum contractual rentals payable under non-cancellable operating leases as at March 31, 2022 is Rs.127.31 Millions (Previous Year: Rs.65.38 Millions).

The Company used a practical expedient, and did not recognise right-of-use assets and liabilities for leases for which the lease term ends within 12 months of the date of initial application. The Lease payments associated with these amounting to Rs.5.30 Millions (Previous Year: Rs.3.30 Millions) are recognised as expenses on a straight line basis over the lease term.

The Lease Liabilities as at March 31, 2022 amounting to Rs.127.31 Millions (Previous Year: Rs.65.38 Millions) comprises of Non-Current Lease liabilities of Rs.105.62 Millions (Previous Year: Rs.50.94 Millions) and current lease liability of Rs.21.69 Millions (Previous Year: Rs.14.44 Millions). The contractual maturities of lease liabilities as of March 31, 2022 is disclosed in Note 29.

The incremental borrowing rates derived by a valuer, on the basis of the borrowing rate for each lease contract for the remaining life of the lease contract, adjusted with the credit profile of the Company, are used for each of the office buildings separately and the average lessee’s incremental borrowing rate applied to lease liabilities recognised in the balance sheet at the date of initial application ranges from 4.56% to 12.59%.

The Service Tax Authorities had made a demand for Rs.329.14 Millions along with interest and penalty for an equivalent amount, towards tax leviable for certain services rendered by the Company for the period April, 2011 to March, 2016. The Service Tax Authorities had also made a demand for Rs.126.90 Millions along with interest and penalty of Rs.1.2 Millions towards tax leviable for certain services rendered by the Company for the period April, 2016 to June, 2017. The Company has filed an appeal before the Central Excise and Service Tax Appellate Tribunal (CESTAT) for both the demands and the Management expects it’s position to be upheld by the Authorities in respect of both the demands.

Contingent liabilities include demand from the Income tax authorities for payment of additional tax of Rs.157.69 Millions (Previous Year: Rs. 156.70 Millions) for the fiscal years 2008-09, 2009-10, 2011-12, 2012-13, 2013-14, 2014-15, 2015-16, 2016-17 and 2017-18. The tax demand is mainly on account of disallowance of a portion of the deduction claimed by the Company under Section 10A/10AA of the Income Tax Act and also other expenses disallowed. The Company has filed appeals before CIT (Appeals), ITAT and Madras High Court. The Company has also paid an amount of Rs.73.99 Millions (after adjusting the refund of Rs.13.36 Millions related to earlier years), towards the outstanding demand (under protest). The Management believes that its position in respect of all the years will be upheld by the Authorities.

During the FY 20-21 the Company has made an additional tax provison of Rs.6.58 Millions for the FY 2009-10 and also has made a payment under protest for the FY 2009-10 amounting to Rs.27.90 Millions only for the issue pertaining to S. 10A of the Income Tax Act, 1961. The Company after discusson with the management and the tax consultants decided to make the payment under protest for the S. 10 A issue alone for the FY 2009-10 . The Company believes that for the FY 2009-10, other issues will be in favour of the Group. The payment under protest was made to mitigate future interest on the S. 10A issue alone. However, the management has decided to litigate further for the FY 2009-10.

Note 35: Foreign Exchange Difference

The amount of exchange loss included in the Statement of Profit & Loss is Rs.1.28 Millions (Previous Year: Gain of Rs.32.29 Millions).

Note 36: Corporate Social Responsibility

The Company has spent Rs.10.04 Millions during the current year (Previous Year: Rs.8.76 Millions) as per provisions of Section 135 of the Companies Act, 2013 towards Corporate Social Responsibility (CSR) activities grouped under Note 26 ‘Other Expenses’.

a) The Gross amount required to be spent by the Company during the year is Rs.10.04 Millions (Previous Year: Rs.8.76 Millions).

Note 39: Merger

The Board of Directors of the Company at their meeting held on July 9, 2021, considered and approved the scheme of amalgamation involving, Expleo India Infosystems Private Limited (EIIPL) and its Subsidiaries (Transferor Companies) with Expleo Solutions Limited (Transferee Company), subject to approval by the Regulatory authorities, the Shareholders and National Company Law Tribunal (NCLT).

Note 40: Asset Purchase

The Board of Directors of the Company at their meeting held on March 25, 2022, has approved the definitive agreements to be entered with Lucid Technologies and Solutions Private Limited and its subsidiary Lucid Technologies and Solutions LLC (“Lucid”) towards purchase of their specific assets i.e. Intellectual Property (“IP”) and Technical Knowhow in India and Customer Contracts in US. The definitive agreements are executed with effective date as April 01, 2022.


Mar 31, 2018

Note: 1

First time adoption of Ind AS:

The Standalone Financial Statements for the year ended March 31, 2017 have been prepared in accordance with Ind AS. For the purposes of transition to Ind AS, the Company has followed the guidance prescribed in Ind AS 101, First-Time Adoption of Indian Accounting Standards with April 1, 2016 as the transition date and Indian GAAP as the previous GAAP.

The transition to Ind AS has resulted in changes in the presentation of financial statements, disclosures in the notes thereto and accounting policies and principles. All applicable Ind AS have been applied consistently and retrospectively wherever required. The resulting difference between the carrying amounts of the assets and liabilities in the financial statements under both Ind AS and Previous GAAP as of the Transition Date have been recognized directly in equity at the Transition Date. The accounting policies set out in Note 2 have been applied in preparing the standalone financial statements for the year ended March 31, 2018 and the comparative information. An explanation of how the transition from Previous GAAP to Ind AS has affected the Company’s Balance Sheet and the Statement of Profit and Loss and voluntary exemptions and mandatory exceptions availed on the first-time adoption of Ind AS in accordance with Ind AS 101 have been set out in Note 44.

Note 2: The Company has availed the deemed cost exemption in relation to the property, plant and equipment and intangible assets on the date of the transition and hence the net carrying amount has been considered as the gross carrying amount on that date. Refer note below for the gross carrying value & accumulated depreciation on April 01, 2016 under the Previous GAAP.

e) SQS India BFSI Limited benefits from the tax holiday available for unit set up under the Special Economic Zone Act, 2005. The unit set up under SEZ will be eligible for deductions of 100% of profits or gains derived from export of services for the first five years, 50% of such profits or gains for a further period of five years and 50% of such profit or gains for another period of five years subject to fulfilment of certain conditions. This is the ninth year of deduction u/s 10AA of the Income Tax Act, 1961. From April 1, 2011 units set up under SEZ scheme are subject to Minimum Alternate Tax (MAT).

f) The Company offsets tax assets & liabilities if and only if it has a legally enforceable right to set off current tax assets & current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority. Significant management judgment is required in determining provision for income tax, deferred income tax assets and liabilities and recoverability of deferred income tax assets.

g) The recoverability of deferred income tax assets is based on the estimate of taxable income in the tax jurisdiction in which the entity operates and the period over which deferred income tax assets will be recovered.

h) As on March 31, 2018, the tax liability with respect to the dividends proposed is Rs. 43.61 Million (Previous Year March 31, 2017: Rs. 43.51 Million; April 01, 2016: Rs. 43.14 Million).

f) Rights, preferences and restrictions attached to Equity shares

The Company has only one class of equity shares having a par value of Rs. 10/- per share. Each holder of equity share is entitled to one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the Shareholders in the Annual General Meeting except in case of interim dividend. In the event of liquidation, the shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

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

h) Equity Shares Reserved for Issue Under Options

For Details of shares reserved for issue under the Employee Stock Option (ESOP) plan of the Company, please refer Note 34 (a).

* Denotes an amount less than Rs. 5,000/-.

Note 3: Securities Premium

The Securities Premium Account has been created on account of premium on issue of Equity shares. The reserve is utilized in accordance with the provisions of the Companies Act, 2013.

Note 4: General Reserve

The Company has transferred a portion of the net profit of the Company to general reserve, on a voluntary basis.

Note 5: Employee Stock Option Reserve

The Employee Stock Option Reserve is used to recognize the grant date fair value of options issued under Group (SQS Software Quality Systems AG) stock based payment arrangement to an employee of the Company under the employee stock option plan (Refer Note 34 (b) for details on ESOP issued to the employee).

Note 6: Dividend Recommended by the Board

For the Financial Year 2017-18, the Board of Directors have recommended a final dividend of Rs. 20/- per share (Previous Year March 31, 2017: Rs. 20/- per share) amounting to Rs. 214.21 Million (Previous Year March 31, 2017: Rs. 213.72 Million) which is subject to the approval of the shareholders. Further, the same is subject to dividend distribution tax at the applicable rate which amounts to Rs. 43.61 Million (Previous Year March 31, 2017: Rs. 43.51 Million).

Note 7: There are no amounts due for payment to the Investor Education and Protection Fund as at the end of the current year, previous year ended March 31, 2017 and as at April 01, 2016.

(b) Diluted Earnings Per Share

The calculation of diluted earnings per share is based on the profit attributable to equity shareholders and weighted average number of equity shares outstanding after adjustment for the effects of all dilutive potential equity shares.

b) Gratuity

The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/ termination is the employee’s last drawn basic salary per month computed proportionately for 15 days salary multiplied by the number of years of service. The gratuity plan is a funded plan and the Company makes contributions to Life Insurance Corporation of India (LIC) as per New Group Gratuity Cash Accumulation Plan for Pension and Group Schemes Fund by Insurance Regulatory and Development Authority (IRDA) Regulations. 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.

Refer Note:

(i) 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 the defined benefit plans based on short term expected payouts in line with the actuary’s recommendations.

(ii) Usefulness & methodology adopted for sensitivity analysis

Sensitivity analysis is an analysis which will give the movement in liability if the assumptions were not to be true on different count. This only signifies the change in the liability if the difference between assumed & the actual is not following the parameters of the sensitivity analysis.

(iii) The net benefit liability towards gratuity as at March 31, 2018 as per actuarial valuation excludes an amount of Rs. 3.46 Million contributed by the Company but not considered by LIC in it’s fund movement as at March 31, 2018. The Company has reduced the amount paid to LIC of Rs. 3.46 Million while providing for the liability towards gratuity as at March 31, 2018 as reflected in Note 22.

Note 8. Financial Instruments - Fair Values and Risk Management

(a) The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices.

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

There have been no transfers among Level 1, Level 2 and Level 3 during the period.

(b) Measurement of Fair Value

The Company uses Discounted Cash Flow valuation technique (in relation to Fair Value of asset measured at amortized cost) which involves determination of present value of expected receipt / payment discounted using appropriate discounting rates. The fair value so determined are classified as Level 2.

(c) Financial Risk Management

The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit and liquidity, which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential adverse effects on the financial performance of the Company.

(i) Credit Risk

Credit risk is the risk of financial loss arising from counterparty failure to repay or service debt according to the contractual terms or obligations. Credit risk encompasses both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. Credit risk of existing customer is controlled by continuous monitoring of the collection trend of each customer on a periodical basis. With respect to new customer, the Company uses external/internal sources to assess the potential customer’s credit quality.

Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, loans, cash and cash equivalents, other balances with banks and other financial assets. None of the financial instruments of the Company result in material concentration of credit risk.

Credit risk on cash and cash equivalents is limited as the Company generally invest in Fixed deposits with banks with high credit ratings.

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was Rs. 1,668.83 Million (Previous Year March 31, 2017: Rs. 1,074.84 Million; April 01, 2016: Rs. 1,203.73 Million), being the total of the carrying amount of loans, trade receivables, cash and cash equivalents, other balances with banks, loans and other financial assets.

Trade Receivables

Ind AS requires expected credit losses to be measured through a loss allowance. The Company assesses at each balance sheet date whether a financial asset or a group of financial assets is impaired. The Company recognizes lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 months expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.

The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking information. The concentration of credit risk is limited due to the fact that the customer base is large and unrelated. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates as given in the provision matrix.

The following table gives the details in respect of the amount and percentage of trade receivables from major customers:

(ii) Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes. The Company exposure to market risk is primarily on account of foreign currency exchange rate risk.

a) Foreign Currency Exchange Rate Risk

The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit and loss, where any transaction references more than one currency or where assets/ liabilities are denominated in a currency other than the functional currency of the respective entities. Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in USD, Euro and GBP against the respective functional currency of SQS India BFSI Limited. The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks.

* Holding all other variables constant

b) Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates to investments which are primarily short-term fixed deposits, which do not expose it to significant interest rate risk.

(iii) Liquidity Risk

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

The following are the remaining contractual maturities of financial liabilities at the reporting date:

Note 9: Capital Management

The Company manages its capital to ensure that it will be able to continue as going concern while maximizing the return to stakeholders. The Company is not subject to any externally imposed capital requirements.

The weighted average remaining contractual life for the stock options outstanding as at March 31, 2018 is 2.57 Years (Previous Year March 31, 2017: 2.69 Years; April 01, 2016: 3.76 years). The exercise price for options outstanding at the end of the year is Rs. 114.70 (Previous Year March 31, 2017: Rs. 114.70). The range of exercise price for options outstanding as at April 01, 2016 is Rs. 38.05 to Rs. 114.70.

The weighted average fair value of stock options granted during the year - No Options have been granted during the year or the previous year ended March 31, 2017.

Total expenses arising from share based payment transaction recognised in the Statement of Profit and Loss as part of employee benefit expense is Rs. Nil (Previous Year March 31, 2017: Rs. Nil).

b) The Holding company, SQS Software Quality Systems AG (SQS AG), Germany had granted 20,000 stock options to senior employees of the Group in March, 2016. These options shall vest over a period of four years from the date of the grant i.e. March 18, 2016 and can be exercised within five years from the end of the vesting period i.e. May 31, 2025. The Holding Company does not charge any cost for this benefit.

During the Financial Year 2017-18, the shares of SQS Software Quality Systems AG, got acquired by As system Services Deutschland GmbH including the stock options. This has resulted in vesting of these options on an accelerated basis and the stock options have been exercised and settled in the current year. There were no outstanding options at the end of the year and hence there was no contractual life of options outstanding at the end of March 31, 2018.

Fair Value of options granted

The fair value of the option at the grant date of Rs. 65.14 (GBP 0.685) has been determined as the difference between the weighted average of the share price at the date of grant as reduced by the exercise price.

The Exercise price of the stock option at the date of grant by SQS Software Quality Systems AG, Germany is an amount that shall be determined as follows:

The Option Price is based on the average (mean) of the closing prices for Depositary Interests of the Company (ISIN DE 005493514) on the AIM segment of the London Stock Exchange (hereinafter referred to as the “AIM Trading”) determined in British Pound (“GBP”) on the last 20 trading days preceding the day of the offer to subscribe (“Reference Price”), minus a deduction of 15% from the Reference Price.

Notes to Standalone Financial Statements for the year ended March 31, 2018

These stock options have been accounted for as an equity settled share based payment transaction in the financial statements of the Company in accordance with Ind AS 102 ‘Share Based Payments’.

Expected volatility has been based on an evaluation of the historical volatility of the Company’s share price for expected periods between 90 and 180 days.

Note 10: Asset pledged as security

The company has a cash credit facility with a bank is secured by hypothecation of book debts of the Company, both present and future. There is no outstanding amount due on this account as at the end of the current year, the previous year ended March 31, 2017 and as at April 01, 2016.

The Service Tax Authorities had made a demand for Rs. 3.61 Million along with interest and penalty for an equivalent amount, towards tax leviable for certain services rendered by the Company during the period July, 2003 to December, 2005. During the current year, the Customs, Excise and Service Tax Appellate Tribunal has passed an order in favour of the Company, and hence, it is not considered in the contingent liability mentioned above for the year ended March 31, 2018.

Contingent liabilities include demand from the Indian tax authorities for payment of additional tax of Rs. 55.90 Million for the financial years 2008-09 and 2011-12 to 2013-14. The tax demand is mainly on account of disallowance of a portion of the deduction claimed by the Company under Section 10A/ 10AA of the Income Tax Act, 1961 and also on account of other expenses being disallowed. The Company has filed appeals before CIT (Appeals). The Company has also paid an amount of Rs. 13.41 Million towards the outstanding demand (under protest). The Management believes that its position in respect of all the years will be upheld by the Authorities.

Note 11 : Micro and Small Enterprises

Disclosure of trade payables and other liabilities is based on the information available with the company regarding the status of the suppliers as defined under the “Micro, Small & Medium Enterprises Development Act, 2006”. There is no amount overdue to Micro & Small Enterprises on account of principal amount together with interest.

* Amounts paid to the erstwhile Statutory Auditor.

** Includes Rs. 0.15 Million paid to the erstwhile Statutory Auditor.

Note 12 : Foreign Exchange Difference

The amount of exchange gain/ (loss) included in the Statement of Profit & Loss is Rs. 53.72 Million (Previous Year March 31, 2017: Rs. (84.01) Million).

Note 13 : Corporate Social Responsibility

The company has spent Rs. 7.18 Million during the current financial year (Previous Year March 31, 2017: Rs. 7.34 Million) as per the provisions of Section 135 of the Companies Act, 2013 towards Corporate Social Responsibility (CSR) activities grouped under ‘Other Expenses’.

a) Gross amount required to be spent by the Company during the year Rs. 7.18 Million (Previous Year March 31, 2017: Rs. 7.34 Million).

Note 14 : Segment Information

The Company publishes these Standalone Financial Statements along with the Consolidated Financial Statements. In accordance with Ind AS 108, Operating Segments, the Company has disclosed the segment information in the Consolidated Financial Statements.

a) Related Parties and their relationship

i) Ultimate Holding Entities:

Assystem SA, France Ardian LBO Fund VI B, France

ii) Holding Company:

SQS Software Quality Systems AG, Germany

* The wholly owned subsidiary, Thinksoft Global Services (Europe) GmbH has been liquidated during the year.

iv) Key Management Personnel (KMP):

Aarti Arvind - Managing Director (w.e.f. April 01, 2016)

K. Ramaseshan - Executive Director and CFO (Executive Director w.e.f. January 25, 2018 & CFO w.e.f. June 09, 2017) N. Vaidyanathan - Executive Director (upto September 05, 2017)

David Bellin, Chairman & Non - Executive Director Prof. K. Kumar, Independent Director Prof. S. Rajagopalan, Independent Director Lilian Jessie Paul, Independent Director Rajiv Kuchhal, Independent Director Rene Gawron, Non - Executive Director Diederik Vos, Non - Executive Director Ulrich Baumer, Independent Director

v) Fellow Subsidiaries:

SQS India Infosystems Private Limited, India SQS Software Quality Systems Egypt S.A.E, Egypt SQS Software Quality Systems Ges.mbH, Austria SQS Group Limited, UK

SQS Software Quality Systems (Ireland) Limited, Ireland SQS Software Quality Systems (Schweiz) AG, Zurich, Switzerland SQS USA Inc., USA SQS Nederland, Nederland

SQS Software Quality Systems France SASU, France SQS Group Ltd., South Africa SQS Group Ltd., (Belfast)

SQS North America, LLC

* Managerial Remuneration comprises of short term employment benefits and includes perquisite value of motor car and other benefits as per the service contract including incentive.

** Includes Rs. 6.96 Million being the perquisite value of ESOP granted by SQS software Quality Systems AG and exercised during the year ended the March 31, 2018.

Note 15: First time adoption of Ind AS

These are the Company’s first financial statements prepared in accordance with Ind AS. The adoption of Ind AS was carried out in accordance with Ind AS 101 using April 1, 2016 as the transition date. Ind AS 101 requires that all Ind AS that are effective for the first Ind AS financial statements for the year ended March 31, 2018, be applied consistently and retrospectively for all fiscal years presented.

The accounting policies set out in Note 2 have been applied in preparing the financial statements for the year ended March 31, 2018, the comparative information presented in these financial statements for the year ended March 31, 2017 and in the preparation of the opening Ind AS balance sheet as at April 1, 2016 (the Company’s date of transition). In preparing its opening Ind AS balance sheet, the Company has adjusted the amounts reported previously in the financial statements prepared in accordance with the accounting standards specified under Section 133 of the Companies Act, 2013 read with rule 7 of the Companies (Accounts) Rules, 2014 and other relevant provisions of the Act (previous GAAP or Indian GAAP).

All applicable Ind AS have been applied consistently and retrospectively, wherever required. The resulting difference between the carrying amounts of the assets and liabilities in the financial statements under both Ind AS and Previous GAAP as of the transition date have been recognized directly in equity at the transition date.

In preparing this financial statements, the Company has availed itself of the certain exemptions and exceptions in accordance with Ind AS 101 as explained below:

a) Optional Exemptions from retrospective application availed

i) Property, Plant and Equipment Exemption

Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition. This exemption can also be used for intangible assets covered by Ind AS 38 ‘Intangible Assets’.

Accordingly, the Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value.

ii) Share-based payment exemption

Ind AS 101 permits a first-time adopter not to apply the requirements of Ind AS 102 to equity instruments vested before transition date. But it requires to disclose the information required by Ind AS 102 for all grants of equity instruments to which Ind AS 102 has not been applied.

The Company has elected to apply this exemption and it has disclosed the information for equity instruments vested prior to the date of transition as required by Ind AS 102.

iii) Investments in subsidiaries

Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of it’s investment in subsidiaries as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition.

Accordingly, the Company has elected to measure all it’s investments in subsidiaries at their previous GAAP carrying value.

b) Mandatory exceptions from retrospective application

i) Estimates

An entity’s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.

On assessment of the estimates made under the Previous GAAP financial statements, the Company has concluded that there is no necessity to revise the estimates under Ind AS, as there is no objective evidence of an error in those estimates. However, estimates that were required under Ind AS but not required under Previous GAAP are made by the Company for the relevant reporting dates reflecting conditions existing as at that date as listed below:

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

- Fair valuation of financial assets and liabilities excluding derivatives.

ii) De-recognition of financial assets and financial liabilities

Ind AS 101 requires a first-time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows a first-time adopter to apply the de-recognition requirements in Ind AS 109 retrospectively from a date of the entity’s choosing, provided that the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognised as a result of past transactions was obtained at the time of initially accounting for those transactions.

The Company has elected to apply the de-recognition provisions of Ind AS 109 prospectively for the transaction occurring on or after the date of transition to Ind AS.

iii) Classification and measurement of financial assets

As required under Ind AS 101, the Company has classified and measured the financial assets on the basis of the facts and circumstances existing at the date of transition to Ind AS.

1. Security deposits

Under the previous GAAP, interest free lease security deposits (that are refundable in cash on completion of the lease term) are recorded at their transaction value. Under Ind AS, all financial assets are required to be recognised at fair value. Accordingly, the Company has fair valued these security deposits under Ind AS. Difference between the fair value and transaction value of the security deposit has been recognised as deferred rent. Deferred rent is recognised as an expense on a straight line basis over the period of lease with corresponding recognition of interest income on the outstanding amount.

2. Deferred Taxes

Deferred Tax has been recognised on the adjustments made on transition to Ind AS.

3. MAT Credit Entitlement

Under Previous GAAP, MAT Credit entitlement under the Income Tax Act, 1961 was disclosed as a non-current assets under Long-term Loans and Advances. As per Ind AS 12, all tax credits are required to be disclosed as deferred tax asset. The adjustments to deferred tax asset includes the tax impact of the transition date & comparative period Ind Adjustments and classification of MAT Entitlement as deferred tax asset.

4. Expected Credit Loss

Represents impact on account of creating additional (allowance) / reversal of provision on trade receivables based on the requirements of Ind AS 109 Financial Instruments.

5. Proposed dividend - Short Term Provisions

Prior to the commencement of the Companies (Accounting Standards) Amendment Rules, 2016, dividend recommended by the board of directors after the balance sheet date but before the approval of the financial statements was considered as an adjusting event. Accordingly, provision for proposed dividend was recognised as an liability. Under Ind AS, such dividends are recognised when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend included under provisions has been reversed with corresponding adjustment to retained earnings. Consequently, the total equity has increased.

6. Retained earnings

Retained earnings as at April 1, 2016 has been adjusted consequent to the above Ind AS transition adjustments.

7. Employee Stock Option Plan (ESOP)

Employee Stock Compensation Cost for Stock option granted to an employee by the Holding Company, SQS Software Quality Systems AG, Germany accounted in the books of the Company as an equity-settled share-based payment transaction as per the requirements of Ind AS 102 Share-based Payments.

8. Re-measurements of post-employment benefit obligations

Under Ind AS, re-measurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognised in other comprehensive income instead of profit or loss. Under the previous GAAP, these re-measurements were forming part of the profit or loss for the year. There is no impact on the total equity and profit.

9. Other Comprehensive Income

Both under Indian GAAP and Ind AS, the Company recognized costs related to post-employment defined benefit plan on an actuarial basis. Under Indian GAAP, actuarial gains and losses are charged to the Statement of Profit and Loss, however in Ind AS, the actuarial gain and losses are recognized through Other Comprehensive Income.

Note 16 : Open Public Offer

As system Services Deutschland GmbH (“Acquirer”) and SQS Software Quality Systems AG (“Person Acting in Concert”) have made an Open Offer for acquisition of up to 2,785,480 fully paid-up Equity Shares of face value of Rs. 10/- each, representing 26% of the voting share capital, at a price of Rs. 482.95 per share from the eligible shareholders of the Company. The date of commencement and closure of Tendering Period is: Thursday, May 03, 2018 to Wednesday, May 16, 2018 (both days inclusive).

Note 17 : Disclosure u/s 186(4) of the Companies Act, 2013

Details of investments made are disclosed under Note 5. There are no loans or guarantees given by the company. Note 48 : Previous Year Figures

Previous figures have been regrouped / reclassified so as to conform to the current year’s classification.


Mar 31, 2017

b. Terms/rights attached to equity shares

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

c Aggregate number of bonus shares issued, shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date - Nil

d. Details of shares held by Holding Company & shareholders owing more than 5% shares in the Company

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

e. Shares reserved for issue under options

For details of shares reserved for issue under the employee stock option (ESOP) plan of the Company, please refer Note 23.

f. For the year 2016-17, the Board of Directors have recommended final dividend of Rs.20 per share (in addition to interim dividend of Rs 4 per share already distributed),which is subject to the approval of the shareholders. During the previous year 2015-16, the Company had declared final dividend of Rs.20 per share (in addition to interim dividend of Rs.4 per share).

g. Share application money of Rs. NIL (PY Rs.2,362,160) (Share capital of Rs.NIL (PY Rs.230,000) and share premium of Rs.NIL (PY Rs. 2,132,160)) represents funds received from employees towards NIL (PY Rs.23,000) options exercised during the period for which shares were yet to be allotted as on the Balance Sheet date.

* Consists of Audit fee Rs.500,000 (PY Rs.500,000)

Tax audit Rs.300,000 (PY Rs.300,000)

Quarterly Review / Group Consolidation Rs.550,000 (PY Rs.550,000) Taxation services Rs.260,000 (PY Rs.385,000)

Certification Rs.37,000 (PY Rs.74,000)

Estimated contribution towards gratuity for next year - Rs.150 Lakhs Note 23: Employee stock option plans

The Company provides share based payment schemes to its employees. During the year ended March 31, 2017 an employee stock option plan (ESOP) was in existence. The relevant details of the scheme and the grant are as below.

On April 29, 2011 the Board of Directors approved the equity settled ESOP scheme 2011 (Scheme 2011) for issue of stock options to the key employees and directors of the Company setting aside 10,05,100 options under this scheme. According to the scheme 2011, the employees selected by the remuneration committee from time to time will be entitled to options, subject to satisfaction of the prescribed vesting conditions, viz., continuing employment of 3 years. The contractual life (comprising vesting period and exercise period) of options granted is 8 years. The other relevant terms of the grant are as below:

The weighted average remaining contractual life for the stock options outstanding as at March 31, 2017 is 2.69 Years (March 31, 2016: 3.76 Years). The range of exercise price for options outstanding at the end of the year is Rs.114.70 (March 31, 2016 Rs.38.05 to Rs.114.70)

The weighted average fair value of stock options granted during the year - No Options has been granted during the year (PY: NIL).

The Company measures the cost of ESOP using intrinsic value method. Had the Company used fair value model to determine compensation, its profit after tax and earning per share would have changed to the amounts indicated below:

Note 1: Operating lease: Company as lessee

The Company has entered into commercial leases on certain buildings. These leases have an average life of between three and five years with no renewal option included in the contracts. There are no restrictions placed upon the Company by entering into these leases.

The Service Tax Authorities had made a demand for Rs.3,609,338 along with interest and penalty for an equivalent amount, towards tax leviable for certain services rendered by the Company during the period July 2003 to December 2005. Management contends that the Company has sufficient grounds to defend its position and has filed an appeal before Customs, Excise and Service tax appellate Tribunal, furnishing the necessary explanations / responses to support its position. Tribunal has since remitted back the issue to the Commissioner of Service Tax Appeals for his reconsideration. Under the circumstances, no provision has been made in the financial statements.

Contingent liabilities include demand from the Indian tax authorities for payment of additional tax of Rs.55,902,233 for the fiscal year 2008-09, 2011-12, 2012-13 and 2013-14. The tax demand is mainly on account of disallowance of a portion of the deduction claimed by the Company under Section 10A and 10AA of the Income Tax Act. For Fiscal year 2011-12, 2012-13 and 2013-14 the Company has filed appeals before CIT (Appeals). For the Fiscal year 2008-09, the matter has been remitted back to DCIT by Ho’ble Tribunal of Income Tax. Management believes that its position in respect of all the years will be upheld by the Authorities.

Note 2: Exposure in foreign currency

a The Company, in accordance with its risk management policies and procedures enters into foreign currency forward contracts to manage its exposure in foreign exchange rates. The counter party is generally a Bank. There are no Forward contracts pending as at the Balance Sheet date.

The Company has not entered into any other derivative instruments during the year.

Note 3: Dues to Micro, Small and Medium enterprises

On the basis of the information and records available with the management, there are no outstanding dues to the Micro, Small and Medium enterprises.

Other disclosures required under the Micro, Small and Medium Enterprises Development Act, 2006 (''MSMED’) are as follows:

Note 4: Disclosure on Cash Credit Facility with Banks

The Company has a cash credit facility with bank which is secured by hypothecation of certain fixed assets and book debts of the Company both present and future. There is no outstanding amount due on this account as at the end of the year and previous year.

Note 5: Previous year figures

Previous year figures have been regrouped / reclassified so as to conform to the current year’s groupings.


Mar 31, 2016

b. Terms/rights attached to equity shares

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

e. Shares reserved for issue under options

For details of shares reserved for issue under the employee stock option (ESOP) plan of the Company, please refer Note 25.

f. For the year 2015-16, the Board of Directors have recommended final dividend of Rs.20 per share (in addition to interim dividend of Rs 4 per share already distributed),which is subject to the approval of the shareholders. During the previous year 2014-15, the Company had declared final dividend of Rs.20 per share (in addition to interim dividend of Rs.4 per share).

g. Share application money of Rs.2,362,160 (PY Rs.1,777,850) (Share capital of Rs.230,000 (PY Rs.155,000) and share premium of Rs.2,132,160 (PY Rs.1,622,850)) represents funds received from employees towards 23,000 (PY 15,500) options exercised during the period for which shares are yet to be alloted. Pending board approval and statutory filings, this amount is disclosed as share application money pending allotment.

Note:1 Employee stock option plans

The Company provides share based payment schemes to its employees. During the year ended March 31, 2016 an employee stock option plan (ESOP) was in existence. The relevant details of the scheme and the grant are as below.

On April 29, 2011 the Board of Directors approved the equity settled ESOP scheme 2011 (Scheme 2011) for issue of stock options to the key employees and directors of the Company setting aside 10,05,100 options under this scheme. According to the scheme 2011, the employees selected by the remuneration committee from time to time will be entitled to options, subject to satisfaction of the prescribed vesting conditions, viz., continuing employment of 3 years. The contractual life (comprising vesting period and exercise period) of options granted is 8 years. The other relevant terms of the grant are as below:

Note:2 Operating lease: Company as lessee

The Company has entered into commercial leases on certain buildings. These leases have an average life of between three and five years with no renewal option included in the contracts. There are no restrictions placed upon the Company by entering into these leases.

The Service Tax Authorities had made a demand for Rs 3,609,338 along with interest and penalty for an equivalent amount, towards tax livable for certain services rendered by the Company during the period July 2003 to Dec 2005. Management contends that the Company has sufficient grounds to defend its position and is filing an appeal before Customs, Excise and Service tax appellate Tribunal, furnishing the necessary explanations / responses to support its position. Consequently, no provision has been made for the same in these financial statements.

Contingent liabilities include demand from the Indian tax authorities for payment of additional tax of Rs.59,612,513 for the fiscal year 2006-07, 2008-09, 2011-12 and 2012-13. The tax demand is mainly on account of disallowance of a portion of the deduction claimed by the Company under Section 10A and 10AA of the Income Tax Act. The matter for fiscal year 2006-07 has been referred back by CIT(Appeals) to DCIT to pass a fresh order. For Fiscal year 2008-09, 2011-12 and 2012-13 the Company is in the process of filing an appeal before CIT (Appeals). Management believes that its position will likely be upheld in the CIT (Appeals) process.

Note 3: Exposure in foreign currency

a. She Company, in accordance with its risk management policies and procedures enters into foreign currency forward contracts to manage its exposure in foreign exchange rates. The counter party is generally a Bank. There are no Forward contracts pending as at the Balance Sheet date.

The Company has not entered into any other derivative instruments during the year.

Note 4:Dues to Micro, Small and Medium enterprises

On the basis of the information and records available with the management, there are no outstanding dues to the Micro and Small enterprises.

Note 5: Previous year figures

Previous year figures have been regrouped / reclassified so as to confirm to the current year’s groupings


Mar 31, 2015

A Terms/rights attached to equity shares

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

B Aggregate number of bonus shares issued, shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date - Nil

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

C Shares reserved for issue under options

For details of shares reserved for issue under the employee stock option (ESOP) plan of the company, please refer Note 25.

D For the year 2014-15, the Board of Directors have recommended final dividend of Rs. 20 per share (in addition to interim dividend of Rs 4 per share already distributed),which is subject to the approval of the share holders. During the previous year 2013-14, the company had declared final divided of Rs.4 per share (in addition to interim dividend of Rs.5 per share).

E Share application money of Rs.1,777,850 (Share capital of Rs.155,000 and share premium of Rs.1,622,850) represents funds received from employee in March 2015 towards options exercised (15,500 shares to be alloted) during the period. Pending board approval and statutory filings, funds received during the period has been disclosed as share application money pending allotment.

The company also has a cash credit facility with bank which is secured by hypothecation of certain fixed assets and book debts of the company both present and future. There is no outstanding amount due on this account, as at the end of the year. The interest rate on Term Loan ranges from 12.00% to 13.75% during the year and repayment term is about 6.5 Years

The company provides share based payment schemes to its employees. During the year ended March 31, 2015 an employee stock option plan (ESOP) was in existence. The relevant details of the scheme and the grant are as below.

On April 29, 2011 the Board of Directors approved the equity settled ESOP scheme 2011 (Scheme 2011) for issue of stock options to the key employees and directors of the company setting aside 10,05,100 options under this scheme. According to the scheme 2011, the employees selected by the remuneration committee from time to time will be entitled to options, subject to satisfaction of the prescribed vesting conditions, viz., continuing employment of 3 years. The contractual life (comprising vesting period and exercise period) of options granted is 8 years. The other relevant terms of the grant are as below:

The weighted average remaining contractual life for the stock options outstanding as at March 31,2015 is 4.95 Years (March 31,2014: 5.46 Years). The range of exercise price for options outstanding at the end of the year is Rs.38.05 to Rs.114.70 (March 31,2014 Rs.38.05 to Rs.114.70)

The weighted average fair value of stock options granted during the year - No Options has been granted during the year (March 31, 2014: NIL). The black scholes valuation model has been used for computing weighted average fair value considering the following inputs:

The expected life of the stock is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of options is indicative of future trends, which may also not necessarily be the actual outcome.

Note 2: Operating lease: Company as lessee

The company has entered into commercial leases on certain buildings. These leases have an average life of between three and five years with no renewal option included in the contracts. There are no restrictions placed upon the company by entering into these leases.

Future minimum rentals payable under non-cancellable operating lease are as follows:

March 31,2015 March 31, 2014

Particulars Rs. Rs.

Estimated amount of contracts remaining to be executed on capital account and not Nil 626,186 provided for (Net of advance)

Service tax related matters 7,218,676 7,218,676

Income tax related matters 57,202,781 57,202,781

Counter guarantees issued to the bank for the bank guarantee obtained 10,645,670 31,800,731

The Service Tax Authorities had made a demand for Rs.3,609,338 along with interest and penalty for an equivalent amount, towards tax leviable for certain services rendered by the Company during the period July 2003 to Dec 2005. Management contends that the Company has sufficient grounds to defend its position and is filing an appeal before Customs, Excise and Service tax appellate Tribunal, furnishing the necessary explanations / responses to support its position. Consequently, no provision has been made for the same in these financial statements.

Contingent liabilities include demand from the Indian tax authorities for payment of additional tax of Rs.57,202,781 for the fiscal year 2006-07 & 2008-09. The tax demand is mainly on account of disallowance of a portion of the deduction claimed by the company under Section 10A of the Income tax Act. The matter for fiscal 2006-07 & 2008-09 is pending before CIT (Appeals). Management believes that its position will likely be upheld in the CIT (Appeals) process.

Company has received a show cause notice from SEBI in March 2015 for certain delay in filing of information in 2010. Company is seeking condonation for the delay and does not expect any significant financial impact there from.

Note 29: Disclosure as per Accounting Standard - 18 on ‘Related Party Disclosures'' a Related Parties

i) Holding Company

SQS Software Quality Systems AG, Germany

ii) Subsidiaries

SQS BFSI Pte.Ltd., Singapore SQS BFSI Inc, USA

Thinksoft Global Services (Europe) GmbH, Germany SQS BFSI UK Ltd., UK SQS BFSI FZE., UAE

iii) Key Management Personnel (KMP)

For Financial Year 2014-15

Dr. Martin Muller - Managing Director

For Financial Year 2013-14

Mr. A V Asvini Kumar - Managing Director *

Ms.Vanaja Arvind - Executive Director *

Mr.Mohan Parvatikar - Whole time Director **

iv) Relatives of Key Management Personnel ( Relatives of KMP) For Financial Year 2014-15

None

For Financial Year 2013-14

Ms. Aarti Arvind Ms. A K Latha Mr. A K Krishn

Mr. Chalapathi Rao Peddineni Mr. C V Rajan

v) Fellow Subsidiaries

SQS India Infosystems Private Limited, India SQS Egypt S.A.E, Egypt

SQS Software Quality Systems Ges.mbH, Austria SQS Group Limited, UK

SQS software Quality Systems (Ireland) Limited, Ireland

SQS Software Quality Systems (Schweiz) AG, Zurich, Switzerland

SQS USA Inc., USA

Note 3: Dues to Micro,Small and Medium enterprises

On the basis of the information and records available with the management, there are no outstanding dues to the Micro and Small enterprises.

Note 4: Previous year figures

Previous year figures have been regrouped / reclassified so as to conform to the current year''s groupings.


Mar 31, 2014

I Background:

Thinksoft Global Services Limited ("Thinksoft" or "the Company"), incorporated on June 8, 1998 as a private limited company was converted into a public limited company with effect from 19th August 2008.The Company made its Initial Public Offering (IPO) of its Equity Shares on September 24, 2009 (issue open date) and shares under IPO were allotted on October 14, 2009.The Company''s shares are listed in National Stock Exchange and Bombay Stock Exchange with effect from October 26, 2009.

The Company is an India based software service provider primarily delivering software validation and verification services to the banking and financial services industry worldwide. The Company has invested in five wholly owned subsidiaries in Singapore, USA, Germany, UK and UAE for market development and service delivery in the respective regions.

In terms of the Share Purchase Agreement dated November 8, 2013 (the "SPA") executed amongst SQS Software Quality Systems AG and Mr. A. V. Asvini Kumar, Ms. Vanaja Arvind, Mr. Mohan Parvatikar, Ms. A.K. Latha, Mr. A.K. Krishna, Ms. Aarti Arvind and Mr. Rajan C.V. (the "Sellers"), the Sellers had sold 2,644,612 equity shares (the "Acquisition Shares") of the Company constituting 25.76% of the paid up equity share capital of the Company to SQS Software Quality Systems AG at a per share price of Rs. 260/- (the "Acquisition").

In February 2014, SQS Software Quality Systems AG, launched a tender offer for equity shares of the Company constituting at least 26% of the paid up equity share capital of the Company, held by the public shareholders of the Company in accordance with the terms of the SEBI (SAST) Regulations (the "Open Offer"). The aggregate shareholding of SQS after the completion of the Open Offer and the Acquisition was less than 51% of the paid equity Share Capital of the Company. In accordance with the SPA, the Sellers (other than Mr. Rajan C.V.) have sold their balance equity shares in the Company to make up for the shortfall, resulting in SQS acquiring a 53.35% controlling interest in the company by April 2014.

The Company has become a subsidiary Company of SQS Software Quality Systems AG

ii Basis of preparation of financial statements:

The financial statements of the company have been prepared and presented under historical cost convention on the accrual basis of accounting as a going concern and materially comply with the Companies (Accounting Standards) Rules, 2006 issued by the Central Government and the relevant provisions of the Companies Act to the extent applicable. The accounting policies applied by the Company are consistent with those used in the previous year.

iii The Financial Statements include figures pertaining to Head office and Branches/Places of Business located at Madras Export Processing Zone - Chennai, United Kingdom, Australia, Belgium, Hong Kong, Cyprus and Malaysia.

The management has decided to wind up the operations of German Subsidiary and also the place of business in Cyprus. The management expects to realize at least the book values for the net assets carried in respect of these businesses.

Note 1: Disclosure as per Accounting Standard - 18 on ''Related Party Disclosures''

a Related Parties

i) Holding Company

SQS Software Quality Systems AG

ii) Subsidiaries

Thinksoft Global Services Pte Ltd, Singapore

Thinksoft Global Services Inc, USA

Thinksoft Global Services (Europe) GmbH, Germany

Thinksoft Global Services UK Ltd, UK

Thinksoft Global Services FZE, UAE

iii) Key Management Personnel (KMP)

Mr. A V Asvini Kumar - Managing Director *

Ms.Vanaja Arvind - Executive Director *

Mr.Mohan Parvatikar - Whole time Director **

iv) Relatives of Key Management Personnel ( Relatives of KMP)

Ms. Aarti Arvind

Ms. A K Latha

Mr. A K Krishna

Mr. Chalapathi Rao Peddineni

Mr. C V Rajan

Note 2: Previous year figures

Previous year figures have been regrouped / reclassified so as to conform to the current year''s groupings.


Mar 31, 2013

Note 1

i. Background :

Thinksoft Global Services Limited ("Thinksoft" or "the Company"), incorporated on June 8, 1998 as a private limited company was converted into a public limited company with effect from 19th August 2008.The Company made its Initial Public Offering (IPO) of its Equity Shares on 24th September 2009 (issue open date) and shares under IPO were allotted on 14th October 2009.The Company''s shares are listed in National Stock Exchange and Bombay Stock Exchange with effect from 26th October 2009.

The Company is an India based software service provider primarily delivering software validation and verification services to the banking and financial services industry worldwide. The Company has invested in five wholly owned subsidiaries in Singapore, USA, Germany, UK and UAE for market development and service delivery in the respective regions.

ii. Basis of preparation of financial statements:

The financial statements of the company have been prepared and presented under historical cost convention on the accrual basis of accounting as a going concern and materially comply with the Companies (Accounting Standards) Rules, 2006 issued by the Central Government and the relevant provisions of the Companies Act, 1956, to the extent applicable. The accounting policies applied by the Company are consistent with those used in the previous year.

iii. The Financial Statements include figures pertaining to Head office and Branches/Places of Business located at Madras Export Processing Zone - Chennai, United Kingdom, Australia, Belgium, Hong Kong, Cyprus and Malaysia.

Note 2: Disclosure as per Accounting Standard - 18 on ''Related Party Disclosures'' a. Related Parties

i. Subsidiaries

Thinksoft Global Services Pte Ltd, Singapore

Thinksoft Global Services Inc, USA

Thinksoft Global Services (Europe) GmbH, Germany

Thinksoft Global Services UK Ltd, UK

Thinksoft Global Services FZE, UAE

ii. Key Management Personnel (KMP)

Mr. A V Asvini Kumar - Managing Director Ms. Vanaja Arvind - Executive Director

Mr. Mohan Parvatikar - Whole time Director

iii. Relatives of Key Management Personnel ( Relatives of KMP)

Ms. Aarti Arvind

Ms. A K Latha

Mr. A K Krishna

Mr. Chalapathi Rao Peddineni

Mr. C V Rajan

Ms. Lalitha Devi

Note 3: Previous year figures

Previous year figures have been regrouped / reclassified so as to conform to the current year''s groupings.


Mar 31, 2012

I. Background

Thinksoft Global Services Limited ("Thinksoft" or "the Company") was incorporated on June 8, 1998 under the Companies Act, 1956 as a private limited company. The Company has been converted into a public limited company with effect from 19th August 2008. The Company had made an Initial Public Offering (IPO) on 24th September 2009 (issue open date) as approved by the members in the Extra Ordinary General Meeting held on 17th September 2008. The Shares under IPO were allotted on 14th October 2009 and the Company shares have been listed in National Stock exchange and Bombay Stock exchange on 26th October 2009.

The Company is an India based software service provider primarily delivering software validation and verification services to the banking and financial services industry worldwide. The Company has invested in five wholly owned subsidaries in Singapore, USA, Germany, UK and UAE for market development in the respective regions.

The Company has a cash credit facility with Lakshmi Vilas Bank, Chennai, which is secured by hypothecation of fixed assets, book debts of the Company both present and future and also by personal guarantee of two Directors of the Company.

ii. Basis of preparation of financial statements

The financial statements of the company have been prepared and presented under historical cost convention on the accrual basis of accounting as a going concern and materially comply with the Companies (Accounting Standards) Rules, 2006 issued by the Central Government, in consultation with National Advisory Committee on Accounting Standards and the relevant provisions of the Companies Act, 1956, to the extent applicable. The accounting policies applied by the Company are consistent with those used in the previous year.

iii. This Balance Sheet and Profit & Loss account include figures pertaining to Head office and Branches/Places of Business located at Madras Export Processing Zone, Chennai, United Kingdom, Australia, Belgium, Hong Kong, Velankani Technology Park, Bengaluru, India,Cyprus and Malaysia.

Note : 1 Employee stock option plans

The company provides share based payment schemes to its employees. During the year ended March 31, 2012 an employee stock option plan (ESOP) was in existence. The relevant details of the scheme and the grant are as below.

The weighted average remaining contractual life for the stock options outstanding as at March 31, 2012 is 3.96 years (March 31, 2011: Not applicable since no option outstanding). The range of exercise price for options outstanding at the end of the year was Rs.38.05 (March 31, 2011 Not applicabble since no option outstanding)

The expected life of the stock is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the histiorical volatility over a period similar to the life of options is indicative of future trends, which may also not necessarily be the actual outcome.

Note : 2 Operating lease: Company as lessee

The company has entered into commercial leases on certain buildings. These leases have an average life of between three and five years with no renewal option included in the contracts. There are no restrictions placed upon the company by entering into these leases.

The Service Tax Authorities had made a demand for Rs 3,609,338 along with interest and penalty for an equivalent amount, towards tax leviable for certain services rendered by the Company during the period July 2003 to Dec 2005. Management contends that the Company has sufficient grounds to defend its position and is filing an appeal before Customs, Excise and Service tax appellate Tribunal, furnishing the necessary explanations / responses to support its position. Consequently, no provision has been made for the same in these financial statements.

Contingent liabilities include demand from the Indian tax authorities for payment of additional tax of Rs.51,238,609/= for the fiscal year 2005-06 & 2008-09. The tax demand is mainly on account of disallowance of a portion of the deduction claimed by the company under Section 10A of the Income tax Act. The matter for fiscal 2005-06 & 2008-09 is pending before CIT (Appeals). Management believes that its position will likely be upheld in the CIT (Appeals) process.

Company has however made provision amouting Rs.23,100,000 in the books of account during the year in respect of other financial years considering the issues under dispute.

Note : 3 Disclosure as per Accounting Standard - 18 on 'Related Party Disclosures'

a. Subsidiaries

Thinksoft Global Services Pte Ltd, Singapore

Thinksoft Global Services Inc, USA

Thinksoft Global Services (Europe) GmbH, Germany

Thinksoft Global Services FZE, UAE

Thinksoft Global Services UK Ltd, UK

b. Related Parties

i. Key Management Personnel (KMP)

Mr. A V Asvini Kumar - Managing Director

Ms. Vanaja Arvind - Executive Director

Mr. Mohan Parvatikar - Wholetime Director

ii. Relatives of Key Management Personnel (Relatives of KMP):

Ms. Aarti Arvind

Ms. A K Latha

Mr. A K Krishna

Ms. Lalitha Devi

Mr. Chalapathi Rao Peddineni

Mr. C V Rajan

Other transactions

During the year ended 31 March 2012, the company had proposed final dividend of Rs. 3 per share, which is yet to be approved by the share holders in the ensuing Annual General Meeting.

Note 4 Previous year figures

Till the year ended March 31, 2011, the company was using pre-revised Schedule VI to the Companies Act, 1956, for preparation and presentation of financial statements. During the year ended March 31, 2012, the revised schedule VI notified under the Companies Act 1956, has become applicable to the company. The company has reclassified previous year figures to confirm to this year's classification. The adoption of revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However it significantly impacts presentation and disclosure made in the financial statements, particularly presentation of Balance sheet.


Mar 31, 2011

1.1 Background

Thinksoft Global Services Limited ("Thinksoft" or "the Company") was incorporated on June 8, 1998 under the Companies Act, 1956 as a private limited company. The Company has been converted into a public limited company with effect from August 19, 2008. The Company had made an Initial Public Offering (IPO) on September 24, 2009 (issue open date) as approved by the members in the Extra Ordinary General Meeting held on September 17, 2008. The Shares under IPO were allotted on October 14, 2009 and the Company shares have been listed in National Stock exchange and Bombay Stock exchange on October 26, 2009.

The Company is an India based software service provider primarily delivering software validation and verification services to the banking and financial services industry worldwide. The Company has invested in five wholly owned subsidiaries in India, Singapore, USA, Germany and UK for market development in the respective regions. The Subsidiary of the company in India has been wound up during the year on January 1, 2011.

1.2 Other notes

1.2.1 Winding up of the Indian subsidiary

Thinksoft (India) Services Private Limited, a wholly owned subsidiary had applied for its voluntary winding up on August 13, 2010 and has been wound up on January 1, 2011. Accordingly the Investment of INR 100,000 made in the share capital of this subsidiary has been written off as loss on investment in the current year.

1.2.2 Secured loans

The Company has a cash credit facility with Lakshmi Vilas Bank, Chennai, which is secured by hypothecation of fixed assets, book debts of the Company both present and future and also by personal guarantee of two Directors of the Company. The Company has not utilized this facility either in the current year or in the previous year.

15.3.3 This Balance Sheet and Profit & Loss account include figures pertaining to Head office and Branches/Places of Business located at MEPZ (Madras Export Processing Zone, Chennai) India, United Kingdom, Australia, Belgium, Hong Kong, Velankani Technology Park (VTP) and Cyprus.

1.2.4 Employees' Stock Option Plan (ESOP)

The Company does not have any Employees' Stock Option Plan currently in operation.

The Service Tax Authorities had made a demand for INR 3,609,338 along with interest and penalty for an equivalent amount, towards tax leviable for certain services rendered by the Company during the period July 2003 to December 2005. Management contends that the Company has sufficient grounds to defend its position and is filing an appeal before Customs, Excise and Service tax appellate Tribunal, furnishing the necessary explanations/responses to support its position. Consequently, no provision has been made for the same in these financial statements.

Contingent liabilities include demand from the Indian tax authorities for payment of additional tax of INR 5,339,067 for fiscal year 2001-02, 2002-03 and 2005-06. The tax demand is mainly on account of disallowance of a portion of the deduction claimed by the company under Section 10A of the Income tax Act. The deductible amount is determined by the ratio of export turnover to total turnover. The disallowance arose from certain expenses incurred in foreign currency being reduced from export turnover but not reduced from total turnover. The matter for fiscal 2001-02, 2002-03 and 2005-06 is pending before Income tax Appellate Tribunal (ITAT). Management believes that its position is likely to be upheld in the appellate process. No tax expense has been accrued in the financial statements for the tax demand.

1.2.5 Exposure in foreign currency:

a. The company has not entered into any Foreign Currency or other derivative instruments during the year.

1.2.6 Related party disclosures (not disclosed elsewhere in these financial statements)

1. Subsidiaries

Thinksoft (India) Services Private Limited (dissolved on January 1, 2011)

Thinksoft Global Services Pte Ltd, Singapore

Thinksoft Global Services Inc, USA

Thinksoft Global Services (Europe) GmbH, Germany

Thinksoft Global Services (UK) Limited, UK

2. Key management personnel

Mr. A V Asvini Kumar – Managing Director

Ms. Vanaja Arvind – Executive Director

Mr. Mohan Parvatikar – Whole Time Director

3. Relatives of key management personnel

Ms. Aarti Arvind

Ms. A K Latha

Mr. A K Krishna

Ms. Lalitha Devi

Mr. Chalapathi Rao Peddineni

Mr. C V Rajan

1.2.7 Prior period comparatives

Prior year figures have been reclassified/regrouped wherever necessary to conform to the current periods Classification.


Mar 31, 2010

1.1 Background

Thinksoft Global Services Limited ("Thinksoft" or "the Company") was incorporated on June 8, 1998 under the Companies Act, 1956 as a private limited company. The Company has been converted into a public limited company with effect from 19th August 2008. The Company has made an Initial Public Offering (IPO) on 24th Sep 2009 (issue open date) as approved by the members in the Extra Ordinary General Meeting held on 17th Sep 2008. The Shares under IPO were allotted on 14th Oct 2009 and the Company shares have been listed in National Stock exchange and Bombay Stock exchange on 26th Oct 2009.

The Company is an India based software service provider primarily delivering software validation and verifi cation services to the banking and financial services industry worldwide. The Company has invested in four wholly owned subsidiaries in India, Singapore, USA and Germany for market development in the respective regions.

1.1 OTHER NOTES

1.1.1 Winding up of the Indian Subsidiary

The companys 100% Indian subsidiary, Thinksoft (India) Services Private Limited, has applied for voluntary winding-up; However, there is no material impact on the realization of the investments carried in the Balance Sheet.

1.1.2 Secured loans

The Company has a cash credit facility with Lakshmi Vilas Bank, Chennai, which is secured by hypothecation of fi xed assets, book debts of the Company both present and future and also by personal guarantee of two Directors of the Company. The Company has not utilized this facility either in the current year or in the previous year.

1.1.3 This Balance Sheet and profit & Loss account include fi gures pertaining to Head offi ce and Branches/Places of Business located at MEPZ (Madras Export Processing Zone, Chennai) India, United Kingdom, Australia, Belgium and Hong Kong.

1.1.4 Dues to Micro and Small enterprises

Under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED) which came into force from 2nd October 2006, certain disclosures are required to be made relating to Micro, Small enterprises. On the basis of the information and records available with the management, there are no outstanding dues to the Micro and Small enterprises as defi ned in the Micro and Small Enterprises Development Act, 2006 as set out in the following disclosures:

1.2.1 Employees Stock Option Plan (ESOP)

The Company does not have any Employees Stock Option Plan currently in operation. All the options under three ESOP in operation till last year were exercised/lapsed in the last year itself. Consequent to exercise/lapse of these options the amount of compensation cost of Rs. 58,12,500/- charged off to profit and Loss account in the earlier years were transferred to Share Premium account ( Rs.50,37,500/-) and General Reserve (Rs.7,75,000/-) in the previous year ended 31st March 2009.

The Service Tax Authorities had made a demand for Rs 3,609,338 along with interest and penalty for an equivalent amount, towards tax leviable for certain services rendered by the Company during the period July 2003 to Dec 2005. Management contends that the Company has suffi cient grounds to defend its position and is fi ling an appeal before Customs, Excise and Service tax appellate Tribunal, furnishing the necessary explanations / responses to support its position. Consequently, no provision has been made for the same in these fi nancial statements.

1.2.2 Related party disclosures (not disclosed elsewhere in these fi nancial statements)

1. Subsidiaries

Thinksoft (India) Services Private Limited Thinksoft Global Services Pte Ltd, Singapore Thinksoft Global Services Inc, USA Thinksoft Global Services (Europe) GmbH, Germany

2. Key Management personnel

Mr. A.V.Asvini Kumar - Managing Director Ms. Vanaja Arvind - Executive Director Mr. Mohan Parvatikar – Whole time Director

3. Relatives of Key Management personnel

Ms. Aarti Arvind

Ms. A. K. Latha

Mr. A. K. Krishna

Ms. Lalitha Devi

Mr. Chalapathi Rao Peddineni

Mr. C. V. Rajan

The Board of Directors in their meeting on 26th March 2010 have approved the changes in the utilisation of IPO proceeds and have sought Shareholders approval through Postal ballot for the proposed changes in utlisation of IPO proceeds. The results of Postal Ballot will be announced on 14th May 2010. On approval of the Shareholders, the new proposal will be implemented.

1.3. Prior period comparatives

Prior year figures have been reclassified / regrouped wherever necessary to conform to the current periods classification.

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