Mar 31, 2023
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 53 for details relating to stock options.
iii) On April 26, 2021 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 and shareholders at the Annual General Meeting held on July 30, 2021 approved the dividend amounting to '' 29,074 Million which is paid in the month of August 2021 . Further, special dividend of '' 15 per equity share was approved on October 25, 2021 and paid amounting to '' 14,550 Million. These amounts are recognized as distribution to equity shareholders.
On May 13, 2022 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31,2022 and shareholders at the Annual
General Meeting held on July 26, 2022 approved the dividend amounting to '' 29,183 Million which is paid in the month of August 2022.
The Board of directors of the Company have paid a special dividend of ''18 per share amounting to '' 17,522 Million in the month of November 2022.
On April 27, 2023 the Board of Directors of the Company had proposed a final dividend of ''32 per share in respect of year ended March 31, 2023 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 31,173 Million.â
iv) During the year ended March 31,2020, the Company bought back 20,585,000 equity shares for an aggregate amount of '' 19,556 Million. The equity shares bought back were extinguished.
v) The Company has increased the authorised share capital consequent to the approval of the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited with the Company.
vi) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
The estimated amount of contracts remaining to be executed on capital account (net of capital advances) as at March 31, 2023 is ''1,535 Million. (March 31, 2022: '' 2,598 Million).
Pursuant to a share purchase agreement, the Company acquired 100% stake in Thirdware Solution Limited on June 3, 2022 for a consideration of '' 7,838 Million out of which '' 6,708 Million was paid upfront and an earn out obligation linked to revenue of ''1,130 Million. During the year, Thirdware Solution Limited has paid a dividend of '' 4,912 Million out of which '' 4,700 Million has been adjusted against the value of the investments made as these repayments represents preacquisition profit. The Company has also agreed to pay the selling shareholders in three yearsâ time additional consideration of '' 1,130 Million based on certain revenue threshold for the FY2022- FY2024.The Company has included '' 983 Million as contingent consideration related to the additional consideration, which represents its fair value at the date of acquisition. The estimates are based on a discount rate of 23% and assumed probability-adjusted revenue over the next three years of acquired subsidiary between '' 5,822 Million and '' 9,266 Million. Out of the contractual obligation '' 395 Million has been paid during the year. As at March 31, 2023, contractual obligation towards the said acquisition amounts to '' 735 Million. Thirdware Solution Limited offers consulting, design, implementing, and support of enterprise applications services with a focus on the Automotive industry.
The acquisition will bolster Tech Mahindraâs digital solutions and services in automotive consulting, design, development, and implementation in areas like ERP (Enterprise Resource Planning), EPM (Enterprise Performance Management), RPA (Robotic Process Automation), and IIoT (Industrial Internet of Things). Thirdwareâs capability to provide end-to-end implementations and global rollouts of ERP solutions will give Tech Mahindra an edge in the manufacturing space.
The management has accounted for this Acquisition as per Provisional Purchase Price Allocation Details of Acquisition during the previous year:
i) Pursuant to a share purchase agreement, the Company acquired 100% stake in Allyis India Private Limited on December 31, 2021 for a consideration of USD 2.6 Million ('' 194 Million).
ii) Pursuant to a business purchase agreement, the Company acquired the business of M/s BrainScale on December 03, 2021 for a total consideration of '' 154 Million.
iii) Pursuant to a business purchase agreement, the Company acquired the business of Lodestone Software Services Private Limited on October 25, 2021 for a consideration of USD 6.7 Million ('' 497.5 million).
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011,
the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was compiled by erstwhile Satyam. The BG has been extended up to October 14, 2023.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
⢠In August 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,928 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: ''502 Million (March 31, 2022 '' 1,480 Million).
ii. Claims made on the Company not acknowledged as debt: ''301 Million (March 31, 2022''297 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Other contingencies '' 407 Million (March 31, 2022''407 Million).
32 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
35 MERGER/AMALGAMATION OF ENTITIES
The National Company Law Tribunal at Mumbai and Chennai Bench, respectively have, vide order dated January 5, 2023 and January 12, 2023 sanctioned Scheme of Merger by Absorption (âthe Scheme of Mergerâ) of Tech Mahindra Business Services Limited (TMBSL) and Born India Limited (Born) (Subsidiaries of Tech Mahindra Limited) with effective date as April 1, 2021. In accordance with the requirements of para 9(iii) of appendix C of Ind AS 103, the financial statements of the Company in respect of prior periods have been restated for all periods. Increase / (Decrease) in previous year numbers are as below.
Accounting treatment of the Scheme of Merger:
1. The aforesaid merger are accounted for as per Appendix C of Ind AS 103 - Business Combinations.
2. The identity of reserves as appearing in Born and TMBSL have been carried forward in these financial statements.
3. Intercompany balances have been eliminated on merger.
1. The financial statements in respect of March 31, 2022 is restated as if the business combination had occurred from the beginning of the preceding period in the financial statements. Accordingly, Scheme of Merger is accounted with effect from April 1, 2021.
2. The Company has recorded the asset and liabilities of TMBSL and Born vested in it pursuant to this Scheme at the respective book values appearing in the books of the Merged Undertakings.
3. The value of investment in Born ('' 873 Million) and TMBSL ('' 4,874 Million) in the books of the Company have been cancelled.
4. No adjustments are made to reflect fair values or recognise any new assets or liabilities.
5. The related disclosures have also been updated in these financial statements.
6. Goodwill as appearing in the consolidated financial statements with respect to Born and TMSBL, amounting to '' 2,886 Million has been recorded in the standalone financial statements as on March 31, 2022.
36 DIMINUTION IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2023.
Since the recoverable amount determined was lower than the carrying value of the respective investment, the Company has recognized an impairment loss of '' 5,508 Million for the year ended March 31, 2023 (March 31, 2022''4,669 Million).
At 31 March 2023, the recoverable amount of the investment was '' 2,761 Million.
The recoverable amount of this investment was based on its value in use, determined by discounting the future cash flows to be generated from the investment. The carrying amount of the investment was determined to be higher than its recoverable amount of '' 2,761 Million and an impairment loss of '' 5,508 Million during 2023 (2022: Nil) was recognised.
The key assumptions used in the estimation of the recoverable amount are: Terminal growth rate 2%, budgeted EBIDTA margin upto 12% over the budgeted cashflows. The values assigned to the key assumptions represent managementâs assessment of future trends in the relevant industries and have been based on historical data from both external and internal sources.
An analysis of the sensitivity of the computation of recoverable amount to a change in key parameters, based on reasonable assumptions, did not identify any probable scenario in which the recoverable amount of the investment would decrease below its carrying amount other than the amount already recognized in the books of account.
37 A. CERTAIN MATTERS RELATING TO ERSTWHILE SATYAM COMPUTER SERVICES LIMITED (ERSTWHILE SATYAM):
In the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtorâs position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
In 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realization, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD
39.2 Million; and
b) non-realization and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
Erstwhile Satyam had, in the past, received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed with legal notices claiming repayment of the alleged advances aggregating to '' 12,304 Million together with damages/compensation @ 18% per annum till the date of repayment. The erstwhile Satyam had not acknowledged any liability and replied to the legal notices stating that the claims are not legally tenable.
Subsequently, the 37 companies filed petitions for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court of Andhra Pradesh in its Order approving the merger of the erstwhile Satyam with the Company, held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in the names of the said 37 companies and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved. The matter is pending final adjudication.
Appeals were filed before the Division Bench of the Honâble High Court of Andhra Pradesh against the Order of the single judge of the Honâble High Court of Andhra Pradesh sanctioning the Scheme of merger of erstwhile Satyam with the Company w.e.f. April 1, 2011, which are yet to be heard.
Further, petition was filed by the 37 companies for winding-up of the erstwhile Satyam with the Honâble High Court of Andhra Pradesh which was subsequently rejected. One of the aforesaid companies also filed an appeal against the said order with the Division Bench of the Honâble High Court of Andhra Pradesh.
These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions.
In view of the aforesaid and based on an independent legal opinion, current legal status and lack of documentation to support the validity of the claim, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon will not be payable on final adjudication. As endorsed by the Honâble High Court in the scheme of merger, the said amount of '' 12,304 Million has been disclosed as "Amounts pending investigation suspense account (net)â ("Suspense Account (net)â), which override the relevant requirement of Conceptual Framework for Financial Reporting under Indian Accounting Standards (Ind AS). Accordingly, the amounts of these alleged advances are recorded separately from equity and liability of the Company in the books of account.
38 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honor the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
In the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order Before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
The company has not revalued its Property, Plant and Equipment (including Rightâ of use assets) or intangible assets or both during the current or previous year.
The Rental Income from investment property for the year is '' 103 million. The Direct Operating expenses to earn the income is not ascertainable.
40 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
41 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
43 DETAILS OF EMPLOYEE BENEFITS AS REQUIRED BY THE IND AS-19 - EMPLOYEE BENEFITS ARE AS UNDER:i. Defined Contribution Plans
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠''150 Million (March 31, 2022: '' 71 Million) for National Pension Scheme contributions.
⢠''823 Million (March 31, 2022: '' 461 Million) for Superannuation Fund contributions; and
⢠''5,552 Million (March 31, 2022: '' 4,312 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognized as of the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue. While disclosing the aggregate amount of transaction price yet to be recognized as revenue towards unsatisfied (or partially satisfied) performance obligations, along with the broad time band for the expected time to recognise those revenues, the Company has applied the practical expedient in Ind AS 115. Accordingly, the Company has not disclosed the aggregate transaction price allocated to unsatisfied (or partially satisfied) performance obligations which pertain to contracts where revenue recognised corresponds to the value transferred to customer typically involving time and materials. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
Based on the contract value agreed and committed with customers, the aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2023''385,998 Million. Out of this, the Company expects to recognise revenue of around 61% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
48 FINANCIAL RISK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''150,893 Million and '' 163,847 Million as of March 31,2023 and March 31, 2022 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2023 and March 31, 2022. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
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.
i. ESOP 2000 & ESOP 2010:
The Company has instituted âEmployee Stock Option Plan 2000â (ESOP 2000) and âEmployee Stock Option Plan 2010â (ESOP 2010) for eligible employees and Directors of the Company and its subsidiaries. The vesting pattern of the schemes has been provided below. The options can be exercised over a period of 5 years from the date of the grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Company at the time of grant for ESOP 2000 and exercise price as determined by the Nomination and remuneration Committee for ESOP 2010.
The Company has instituted âEmployee Stock Option Plan 2006â (ESOP 2006) ,âEmployee Stock Option Plan 2014â (ESOP 2014) and âEmployee Stock Option Plan 2018â (ESOP 2018) for eligible employees and Directors of the Company and its subsidiaries. In terms of the said plan, the Nomination and Remuneration Committee has granted options to the employees of the Company and its subsidiaries. The maximum exercise period is 7 years from the date of grant for ESOP 2006 and options can be exercised over a period of 5 years from the date of each grant for ESOP 2014 and ESOP 2018.
Erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Bâ (ASOP - B) under which 28,925,610 options were available for grant/exercise at the time the Scheme of Amalgamation became effective. Post-merger, these options were adjusted in terms of the approved Scheme of Amalgamation. Each option entitles the holder one equity share of the Company. These options vest over a period of 1 to 4 years from the date of the grant. Upon vesting, employees have 5 years to exercise the options. Postmerger, the name of the ESOP scheme has been changed to âTML ESOP B 2013â.
The erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Restricted Stock Units (ASOP - RSUs)â to be administered by the Administrator of the ASOP - RSUs, a committee appointed by the Board of Directors of the erstwhile Satyam in May 2000. Under the scheme, 1,529,412 equity shares (equivalent number of equity shares post-merger) are reserved to be issued to eligible associates at a price to be determined by the Administrator which shall not be less than the face value of the share. These RSUs vest over a period of 1 to 4 years from the date of the grant. The maximum time available to exercise the options upon vesting is five years from the date of each vesting. Post-merger, the name of the ESOP scheme has been changed to TML RSU.
Erstwhile Satyam had established an ESOP scheme viz., âAssociate Stock Option Plan - Aâ (ASOP - A) formulated prior to the SEBI Guidelines on ESOP and ESPS issued in 1999. This plan was administered through a Trust viz., Satyam Associates Trust (Satyam Trust). At the time the Scheme of Amalgamation and Arrangement became effective, the Satyam Trust was holding 2,055,320 shares of erstwhile Satyam, which post amalgamation were converted into 241,802 shares of the Company at the approved share exchange ratio and this scheme has been transitioned and renamed as ESOP-A. Satyam Trust grants warrants to the employees of the Company with an exercise price and terms of vesting advised by the Nomination and Remuneration Committee of the Company. Each warrant shall entitle the warrant holder to one equity share. The exercise period is 180 days from the date of each vesting.
Erstwhile MESL has established Employee Stock Option Scheme (ESOS) - ESOS for which 1,400,000 equity shares were earmarked. ESOS Scheme is administered through a Trust viz., MES Employees Stock Option Trust. The options under this Scheme vest over a period of 1 to 3 years from the date of the grant. Upon vesting, employees have 7 years to exercise the options. As on the effective date of amalgamation, 18,084 options were outstanding under ESOS, which were converted into equivalent 30,144 options of the Company giving effect to approved share exchange ratio, split and bonus.
x. The employee stock compensation cost for the Employee Stock Option Plan 2018, Employee Stock Option Plan 2010, Employee Stock Option Plan 2000, Employee Stock Option Plan- B 2013, ESOP-A, ESOP 2014 and TML-RSU schemes has been computed by reference to the fair value of share options granted and amortized over each vesting period. For the period ended March 31, 2023, the Company has accounted for employee stock compensation cost (equity settled) amounting to '' 677 Million (March 31, 2022: '' 712 Million). This amount is net of cost of options granted to employees of subsidiaries.
ii. The Company has not advanced or loaned or invested funds to any other person(s) or entities, including foreign entities (Intermediaries) with the understanding that the Intermediary shall: (a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or (b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
The Company has not received any fund from any person(s) or entities, including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall: (a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or (b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
iii. The Company does not have any transaction which is not recorded in the books of account that has been
surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.
iv. The Company has complied with the number of layers for its holding in downstream companies prescribed under clause (87) of section 2 of the Companies Act, 2013 read with the Companies (Restriction on number of Layers) Rules, 2017.
v. The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
vi. The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the
statutory period.
Mar 31, 2023
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 53 for details relating to stock options.
iii) On April 26, 2021 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 and shareholders at the Annual General Meeting held on July 30, 2021 approved the dividend amounting to '' 29,074 Million which is paid in the month of August 2021 . Further, special dividend of '' 15 per equity share was approved on October 25, 2021 and paid amounting to '' 14,550 Million. These amounts are recognized as distribution to equity shareholders.
On May 13, 2022 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31,2022 and shareholders at the Annual
General Meeting held on July 26, 2022 approved the dividend amounting to '' 29,183 Million which is paid in the month of August 2022.
The Board of directors of the Company have paid a special dividend of ''18 per share amounting to '' 17,522 Million in the month of November 2022.
On April 27, 2023 the Board of Directors of the Company had proposed a final dividend of ''32 per share in respect of year ended March 31, 2023 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 31,173 Million.â
iv) During the year ended March 31,2020, the Company bought back 20,585,000 equity shares for an aggregate amount of '' 19,556 Million. The equity shares bought back were extinguished.
v) The Company has increased the authorised share capital consequent to the approval of the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited with the Company.
vi) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
The estimated amount of contracts remaining to be executed on capital account (net of capital advances) as at March 31, 2023 is ''1,535 Million. (March 31, 2022: '' 2,598 Million).
Pursuant to a share purchase agreement, the Company acquired 100% stake in Thirdware Solution Limited on June 3, 2022 for a consideration of '' 7,838 Million out of which '' 6,708 Million was paid upfront and an earn out obligation linked to revenue of ''1,130 Million. During the year, Thirdware Solution Limited has paid a dividend of '' 4,912 Million out of which '' 4,700 Million has been adjusted against the value of the investments made as these repayments represents preacquisition profit. The Company has also agreed to pay the selling shareholders in three yearsâ time additional consideration of '' 1,130 Million based on certain revenue threshold for the FY2022- FY2024.The Company has included '' 983 Million as contingent consideration related to the additional consideration, which represents its fair value at the date of acquisition. The estimates are based on a discount rate of 23% and assumed probability-adjusted revenue over the next three years of acquired subsidiary between '' 5,822 Million and '' 9,266 Million. Out of the contractual obligation '' 395 Million has been paid during the year. As at March 31, 2023, contractual obligation towards the said acquisition amounts to '' 735 Million. Thirdware Solution Limited offers consulting, design, implementing, and support of enterprise applications services with a focus on the Automotive industry.
The acquisition will bolster Tech Mahindraâs digital solutions and services in automotive consulting, design, development, and implementation in areas like ERP (Enterprise Resource Planning), EPM (Enterprise Performance Management), RPA (Robotic Process Automation), and IIoT (Industrial Internet of Things). Thirdwareâs capability to provide end-to-end implementations and global rollouts of ERP solutions will give Tech Mahindra an edge in the manufacturing space.
The management has accounted for this Acquisition as per Provisional Purchase Price Allocation Details of Acquisition during the previous year:
i) Pursuant to a share purchase agreement, the Company acquired 100% stake in Allyis India Private Limited on December 31, 2021 for a consideration of USD 2.6 Million ('' 194 Million).
ii) Pursuant to a business purchase agreement, the Company acquired the business of M/s BrainScale on December 03, 2021 for a total consideration of '' 154 Million.
iii) Pursuant to a business purchase agreement, the Company acquired the business of Lodestone Software Services Private Limited on October 25, 2021 for a consideration of USD 6.7 Million ('' 497.5 million).
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011,
the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was compiled by erstwhile Satyam. The BG has been extended up to October 14, 2023.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
⢠In August 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,928 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: ''502 Million (March 31, 2022 '' 1,480 Million).
ii. Claims made on the Company not acknowledged as debt: ''301 Million (March 31, 2022''297 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Other contingencies '' 407 Million (March 31, 2022''407 Million).
32 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
35 MERGER/AMALGAMATION OF ENTITIES
The National Company Law Tribunal at Mumbai and Chennai Bench, respectively have, vide order dated January 5, 2023 and January 12, 2023 sanctioned Scheme of Merger by Absorption (âthe Scheme of Mergerâ) of Tech Mahindra Business Services Limited (TMBSL) and Born India Limited (Born) (Subsidiaries of Tech Mahindra Limited) with effective date as April 1, 2021. In accordance with the requirements of para 9(iii) of appendix C of Ind AS 103, the financial statements of the Company in respect of prior periods have been restated for all periods. Increase / (Decrease) in previous year numbers are as below.
Accounting treatment of the Scheme of Merger:
1. The aforesaid merger are accounted for as per Appendix C of Ind AS 103 - Business Combinations.
2. The identity of reserves as appearing in Born and TMBSL have been carried forward in these financial statements.
3. Intercompany balances have been eliminated on merger.
1. The financial statements in respect of March 31, 2022 is restated as if the business combination had occurred from the beginning of the preceding period in the financial statements. Accordingly, Scheme of Merger is accounted with effect from April 1, 2021.
2. The Company has recorded the asset and liabilities of TMBSL and Born vested in it pursuant to this Scheme at the respective book values appearing in the books of the Merged Undertakings.
3. The value of investment in Born ('' 873 Million) and TMBSL ('' 4,874 Million) in the books of the Company have been cancelled.
4. No adjustments are made to reflect fair values or recognise any new assets or liabilities.
5. The related disclosures have also been updated in these financial statements.
6. Goodwill as appearing in the consolidated financial statements with respect to Born and TMSBL, amounting to '' 2,886 Million has been recorded in the standalone financial statements as on March 31, 2022.
36 DIMINUTION IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2023.
Since the recoverable amount determined was lower than the carrying value of the respective investment, the Company has recognized an impairment loss of '' 5,508 Million for the year ended March 31, 2023 (March 31, 2022''4,669 Million).
At 31 March 2023, the recoverable amount of the investment was '' 2,761 Million.
The recoverable amount of this investment was based on its value in use, determined by discounting the future cash flows to be generated from the investment. The carrying amount of the investment was determined to be higher than its recoverable amount of '' 2,761 Million and an impairment loss of '' 5,508 Million during 2023 (2022: Nil) was recognised.
The key assumptions used in the estimation of the recoverable amount are: Terminal growth rate 2%, budgeted EBIDTA margin upto 12% over the budgeted cashflows. The values assigned to the key assumptions represent managementâs assessment of future trends in the relevant industries and have been based on historical data from both external and internal sources.
An analysis of the sensitivity of the computation of recoverable amount to a change in key parameters, based on reasonable assumptions, did not identify any probable scenario in which the recoverable amount of the investment would decrease below its carrying amount other than the amount already recognized in the books of account.
37 A. CERTAIN MATTERS RELATING TO ERSTWHILE SATYAM COMPUTER SERVICES LIMITED (ERSTWHILE SATYAM):
In the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtorâs position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
In 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realization, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD
39.2 Million; and
b) non-realization and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
Erstwhile Satyam had, in the past, received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed with legal notices claiming repayment of the alleged advances aggregating to '' 12,304 Million together with damages/compensation @ 18% per annum till the date of repayment. The erstwhile Satyam had not acknowledged any liability and replied to the legal notices stating that the claims are not legally tenable.
Subsequently, the 37 companies filed petitions for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court of Andhra Pradesh in its Order approving the merger of the erstwhile Satyam with the Company, held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in the names of the said 37 companies and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved. The matter is pending final adjudication.
Appeals were filed before the Division Bench of the Honâble High Court of Andhra Pradesh against the Order of the single judge of the Honâble High Court of Andhra Pradesh sanctioning the Scheme of merger of erstwhile Satyam with the Company w.e.f. April 1, 2011, which are yet to be heard.
Further, petition was filed by the 37 companies for winding-up of the erstwhile Satyam with the Honâble High Court of Andhra Pradesh which was subsequently rejected. One of the aforesaid companies also filed an appeal against the said order with the Division Bench of the Honâble High Court of Andhra Pradesh.
These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions.
In view of the aforesaid and based on an independent legal opinion, current legal status and lack of documentation to support the validity of the claim, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon will not be payable on final adjudication. As endorsed by the Honâble High Court in the scheme of merger, the said amount of '' 12,304 Million has been disclosed as "Amounts pending investigation suspense account (net)â ("Suspense Account (net)â), which override the relevant requirement of Conceptual Framework for Financial Reporting under Indian Accounting Standards (Ind AS). Accordingly, the amounts of these alleged advances are recorded separately from equity and liability of the Company in the books of account.
38 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honor the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
In the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order Before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
The company has not revalued its Property, Plant and Equipment (including Rightâ of use assets) or intangible assets or both during the current or previous year.
The Rental Income from investment property for the year is '' 103 million. The Direct Operating expenses to earn the income is not ascertainable.
40 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
41 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
43 DETAILS OF EMPLOYEE BENEFITS AS REQUIRED BY THE IND AS-19 - EMPLOYEE BENEFITS ARE AS UNDER:i. Defined Contribution Plans
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠''150 Million (March 31, 2022: '' 71 Million) for National Pension Scheme contributions.
⢠''823 Million (March 31, 2022: '' 461 Million) for Superannuation Fund contributions; and
⢠''5,552 Million (March 31, 2022: '' 4,312 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognized as of the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue. While disclosing the aggregate amount of transaction price yet to be recognized as revenue towards unsatisfied (or partially satisfied) performance obligations, along with the broad time band for the expected time to recognise those revenues, the Company has applied the practical expedient in Ind AS 115. Accordingly, the Company has not disclosed the aggregate transaction price allocated to unsatisfied (or partially satisfied) performance obligations which pertain to contracts where revenue recognised corresponds to the value transferred to customer typically involving time and materials. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
Based on the contract value agreed and committed with customers, the aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2023''385,998 Million. Out of this, the Company expects to recognise revenue of around 61% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
48 FINANCIAL RISK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''150,893 Million and '' 163,847 Million as of March 31,2023 and March 31, 2022 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2023 and March 31, 2022. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
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.
i. ESOP 2000 & ESOP 2010:
The Company has instituted âEmployee Stock Option Plan 2000â (ESOP 2000) and âEmployee Stock Option Plan 2010â (ESOP 2010) for eligible employees and Directors of the Company and its subsidiaries. The vesting pattern of the schemes has been provided below. The options can be exercised over a period of 5 years from the date of the grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Company at the time of grant for ESOP 2000 and exercise price as determined by the Nomination and remuneration Committee for ESOP 2010.
The Company has instituted âEmployee Stock Option Plan 2006â (ESOP 2006) ,âEmployee Stock Option Plan 2014â (ESOP 2014) and âEmployee Stock Option Plan 2018â (ESOP 2018) for eligible employees and Directors of the Company and its subsidiaries. In terms of the said plan, the Nomination and Remuneration Committee has granted options to the employees of the Company and its subsidiaries. The maximum exercise period is 7 years from the date of grant for ESOP 2006 and options can be exercised over a period of 5 years from the date of each grant for ESOP 2014 and ESOP 2018.
Erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Bâ (ASOP - B) under which 28,925,610 options were available for grant/exercise at the time the Scheme of Amalgamation became effective. Post-merger, these options were adjusted in terms of the approved Scheme of Amalgamation. Each option entitles the holder one equity share of the Company. These options vest over a period of 1 to 4 years from the date of the grant. Upon vesting, employees have 5 years to exercise the options. Postmerger, the name of the ESOP scheme has been changed to âTML ESOP B 2013â.
The erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Restricted Stock Units (ASOP - RSUs)â to be administered by the Administrator of the ASOP - RSUs, a committee appointed by the Board of Directors of the erstwhile Satyam in May 2000. Under the scheme, 1,529,412 equity shares (equivalent number of equity shares post-merger) are reserved to be issued to eligible associates at a price to be determined by the Administrator which shall not be less than the face value of the share. These RSUs vest over a period of 1 to 4 years from the date of the grant. The maximum time available to exercise the options upon vesting is five years from the date of each vesting. Post-merger, the name of the ESOP scheme has been changed to TML RSU.
Erstwhile Satyam had established an ESOP scheme viz., âAssociate Stock Option Plan - Aâ (ASOP - A) formulated prior to the SEBI Guidelines on ESOP and ESPS issued in 1999. This plan was administered through a Trust viz., Satyam Associates Trust (Satyam Trust). At the time the Scheme of Amalgamation and Arrangement became effective, the Satyam Trust was holding 2,055,320 shares of erstwhile Satyam, which post amalgamation were converted into 241,802 shares of the Company at the approved share exchange ratio and this scheme has been transitioned and renamed as ESOP-A. Satyam Trust grants warrants to the employees of the Company with an exercise price and terms of vesting advised by the Nomination and Remuneration Committee of the Company. Each warrant shall entitle the warrant holder to one equity share. The exercise period is 180 days from the date of each vesting.
Erstwhile MESL has established Employee Stock Option Scheme (ESOS) - ESOS for which 1,400,000 equity shares were earmarked. ESOS Scheme is administered through a Trust viz., MES Employees Stock Option Trust. The options under this Scheme vest over a period of 1 to 3 years from the date of the grant. Upon vesting, employees have 7 years to exercise the options. As on the effective date of amalgamation, 18,084 options were outstanding under ESOS, which were converted into equivalent 30,144 options of the Company giving effect to approved share exchange ratio, split and bonus.
x. The employee stock compensation cost for the Employee Stock Option Plan 2018, Employee Stock Option Plan 2010, Employee Stock Option Plan 2000, Employee Stock Option Plan- B 2013, ESOP-A, ESOP 2014 and TML-RSU schemes has been computed by reference to the fair value of share options granted and amortized over each vesting period. For the period ended March 31, 2023, the Company has accounted for employee stock compensation cost (equity settled) amounting to '' 677 Million (March 31, 2022: '' 712 Million). This amount is net of cost of options granted to employees of subsidiaries.
ii. The Company has not advanced or loaned or invested funds to any other person(s) or entities, including foreign entities (Intermediaries) with the understanding that the Intermediary shall: (a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or (b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
The Company has not received any fund from any person(s) or entities, including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall: (a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or (b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
iii. The Company does not have any transaction which is not recorded in the books of account that has been
surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.
iv. The Company has complied with the number of layers for its holding in downstream companies prescribed under clause (87) of section 2 of the Companies Act, 2013 read with the Companies (Restriction on number of Layers) Rules, 2017.
v. The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
vi. The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the
statutory period.
Mar 31, 2023
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 53 for details relating to stock options.
iii) On April 26, 2021 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 and shareholders at the Annual General Meeting held on July 30, 2021 approved the dividend amounting to '' 29,074 Million which is paid in the month of August 2021 . Further, special dividend of '' 15 per equity share was approved on October 25, 2021 and paid amounting to '' 14,550 Million. These amounts are recognized as distribution to equity shareholders.
On May 13, 2022 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31,2022 and shareholders at the Annual
General Meeting held on July 26, 2022 approved the dividend amounting to '' 29,183 Million which is paid in the month of August 2022.
The Board of directors of the Company have paid a special dividend of ''18 per share amounting to '' 17,522 Million in the month of November 2022.
On April 27, 2023 the Board of Directors of the Company had proposed a final dividend of ''32 per share in respect of year ended March 31, 2023 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 31,173 Million.â
iv) During the year ended March 31,2020, the Company bought back 20,585,000 equity shares for an aggregate amount of '' 19,556 Million. The equity shares bought back were extinguished.
v) The Company has increased the authorised share capital consequent to the approval of the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited with the Company.
vi) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
The estimated amount of contracts remaining to be executed on capital account (net of capital advances) as at March 31, 2023 is ''1,535 Million. (March 31, 2022: '' 2,598 Million).
Pursuant to a share purchase agreement, the Company acquired 100% stake in Thirdware Solution Limited on June 3, 2022 for a consideration of '' 7,838 Million out of which '' 6,708 Million was paid upfront and an earn out obligation linked to revenue of ''1,130 Million. During the year, Thirdware Solution Limited has paid a dividend of '' 4,912 Million out of which '' 4,700 Million has been adjusted against the value of the investments made as these repayments represents preacquisition profit. The Company has also agreed to pay the selling shareholders in three yearsâ time additional consideration of '' 1,130 Million based on certain revenue threshold for the FY2022- FY2024.The Company has included '' 983 Million as contingent consideration related to the additional consideration, which represents its fair value at the date of acquisition. The estimates are based on a discount rate of 23% and assumed probability-adjusted revenue over the next three years of acquired subsidiary between '' 5,822 Million and '' 9,266 Million. Out of the contractual obligation '' 395 Million has been paid during the year. As at March 31, 2023, contractual obligation towards the said acquisition amounts to '' 735 Million. Thirdware Solution Limited offers consulting, design, implementing, and support of enterprise applications services with a focus on the Automotive industry.
The acquisition will bolster Tech Mahindraâs digital solutions and services in automotive consulting, design, development, and implementation in areas like ERP (Enterprise Resource Planning), EPM (Enterprise Performance Management), RPA (Robotic Process Automation), and IIoT (Industrial Internet of Things). Thirdwareâs capability to provide end-to-end implementations and global rollouts of ERP solutions will give Tech Mahindra an edge in the manufacturing space.
The management has accounted for this Acquisition as per Provisional Purchase Price Allocation Details of Acquisition during the previous year:
i) Pursuant to a share purchase agreement, the Company acquired 100% stake in Allyis India Private Limited on December 31, 2021 for a consideration of USD 2.6 Million ('' 194 Million).
ii) Pursuant to a business purchase agreement, the Company acquired the business of M/s BrainScale on December 03, 2021 for a total consideration of '' 154 Million.
iii) Pursuant to a business purchase agreement, the Company acquired the business of Lodestone Software Services Private Limited on October 25, 2021 for a consideration of USD 6.7 Million ('' 497.5 million).
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011,
the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was compiled by erstwhile Satyam. The BG has been extended up to October 14, 2023.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
⢠In August 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,928 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: ''502 Million (March 31, 2022 '' 1,480 Million).
ii. Claims made on the Company not acknowledged as debt: ''301 Million (March 31, 2022''297 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Other contingencies '' 407 Million (March 31, 2022''407 Million).
32 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
35 MERGER/AMALGAMATION OF ENTITIES
The National Company Law Tribunal at Mumbai and Chennai Bench, respectively have, vide order dated January 5, 2023 and January 12, 2023 sanctioned Scheme of Merger by Absorption (âthe Scheme of Mergerâ) of Tech Mahindra Business Services Limited (TMBSL) and Born India Limited (Born) (Subsidiaries of Tech Mahindra Limited) with effective date as April 1, 2021. In accordance with the requirements of para 9(iii) of appendix C of Ind AS 103, the financial statements of the Company in respect of prior periods have been restated for all periods. Increase / (Decrease) in previous year numbers are as below.
Accounting treatment of the Scheme of Merger:
1. The aforesaid merger are accounted for as per Appendix C of Ind AS 103 - Business Combinations.
2. The identity of reserves as appearing in Born and TMBSL have been carried forward in these financial statements.
3. Intercompany balances have been eliminated on merger.
1. The financial statements in respect of March 31, 2022 is restated as if the business combination had occurred from the beginning of the preceding period in the financial statements. Accordingly, Scheme of Merger is accounted with effect from April 1, 2021.
2. The Company has recorded the asset and liabilities of TMBSL and Born vested in it pursuant to this Scheme at the respective book values appearing in the books of the Merged Undertakings.
3. The value of investment in Born ('' 873 Million) and TMBSL ('' 4,874 Million) in the books of the Company have been cancelled.
4. No adjustments are made to reflect fair values or recognise any new assets or liabilities.
5. The related disclosures have also been updated in these financial statements.
6. Goodwill as appearing in the consolidated financial statements with respect to Born and TMSBL, amounting to '' 2,886 Million has been recorded in the standalone financial statements as on March 31, 2022.
36 DIMINUTION IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2023.
Since the recoverable amount determined was lower than the carrying value of the respective investment, the Company has recognized an impairment loss of '' 5,508 Million for the year ended March 31, 2023 (March 31, 2022''4,669 Million).
At 31 March 2023, the recoverable amount of the investment was '' 2,761 Million.
The recoverable amount of this investment was based on its value in use, determined by discounting the future cash flows to be generated from the investment. The carrying amount of the investment was determined to be higher than its recoverable amount of '' 2,761 Million and an impairment loss of '' 5,508 Million during 2023 (2022: Nil) was recognised.
The key assumptions used in the estimation of the recoverable amount are: Terminal growth rate 2%, budgeted EBIDTA margin upto 12% over the budgeted cashflows. The values assigned to the key assumptions represent managementâs assessment of future trends in the relevant industries and have been based on historical data from both external and internal sources.
An analysis of the sensitivity of the computation of recoverable amount to a change in key parameters, based on reasonable assumptions, did not identify any probable scenario in which the recoverable amount of the investment would decrease below its carrying amount other than the amount already recognized in the books of account.
37 A. CERTAIN MATTERS RELATING TO ERSTWHILE SATYAM COMPUTER SERVICES LIMITED (ERSTWHILE SATYAM):
In the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtorâs position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
In 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realization, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD
39.2 Million; and
b) non-realization and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
Erstwhile Satyam had, in the past, received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed with legal notices claiming repayment of the alleged advances aggregating to '' 12,304 Million together with damages/compensation @ 18% per annum till the date of repayment. The erstwhile Satyam had not acknowledged any liability and replied to the legal notices stating that the claims are not legally tenable.
Subsequently, the 37 companies filed petitions for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court of Andhra Pradesh in its Order approving the merger of the erstwhile Satyam with the Company, held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in the names of the said 37 companies and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved. The matter is pending final adjudication.
Appeals were filed before the Division Bench of the Honâble High Court of Andhra Pradesh against the Order of the single judge of the Honâble High Court of Andhra Pradesh sanctioning the Scheme of merger of erstwhile Satyam with the Company w.e.f. April 1, 2011, which are yet to be heard.
Further, petition was filed by the 37 companies for winding-up of the erstwhile Satyam with the Honâble High Court of Andhra Pradesh which was subsequently rejected. One of the aforesaid companies also filed an appeal against the said order with the Division Bench of the Honâble High Court of Andhra Pradesh.
These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions.
In view of the aforesaid and based on an independent legal opinion, current legal status and lack of documentation to support the validity of the claim, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon will not be payable on final adjudication. As endorsed by the Honâble High Court in the scheme of merger, the said amount of '' 12,304 Million has been disclosed as "Amounts pending investigation suspense account (net)â ("Suspense Account (net)â), which override the relevant requirement of Conceptual Framework for Financial Reporting under Indian Accounting Standards (Ind AS). Accordingly, the amounts of these alleged advances are recorded separately from equity and liability of the Company in the books of account.
38 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honor the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
In the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order Before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
The company has not revalued its Property, Plant and Equipment (including Rightâ of use assets) or intangible assets or both during the current or previous year.
The Rental Income from investment property for the year is '' 103 million. The Direct Operating expenses to earn the income is not ascertainable.
40 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
41 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
43 DETAILS OF EMPLOYEE BENEFITS AS REQUIRED BY THE IND AS-19 - EMPLOYEE BENEFITS ARE AS UNDER:i. Defined Contribution Plans
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠''150 Million (March 31, 2022: '' 71 Million) for National Pension Scheme contributions.
⢠''823 Million (March 31, 2022: '' 461 Million) for Superannuation Fund contributions; and
⢠''5,552 Million (March 31, 2022: '' 4,312 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognized as of the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue. While disclosing the aggregate amount of transaction price yet to be recognized as revenue towards unsatisfied (or partially satisfied) performance obligations, along with the broad time band for the expected time to recognise those revenues, the Company has applied the practical expedient in Ind AS 115. Accordingly, the Company has not disclosed the aggregate transaction price allocated to unsatisfied (or partially satisfied) performance obligations which pertain to contracts where revenue recognised corresponds to the value transferred to customer typically involving time and materials. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
Based on the contract value agreed and committed with customers, the aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2023''385,998 Million. Out of this, the Company expects to recognise revenue of around 61% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
48 FINANCIAL RISK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''150,893 Million and '' 163,847 Million as of March 31,2023 and March 31, 2022 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2023 and March 31, 2022. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
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.
i. ESOP 2000 & ESOP 2010:
The Company has instituted âEmployee Stock Option Plan 2000â (ESOP 2000) and âEmployee Stock Option Plan 2010â (ESOP 2010) for eligible employees and Directors of the Company and its subsidiaries. The vesting pattern of the schemes has been provided below. The options can be exercised over a period of 5 years from the date of the grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Company at the time of grant for ESOP 2000 and exercise price as determined by the Nomination and remuneration Committee for ESOP 2010.
The Company has instituted âEmployee Stock Option Plan 2006â (ESOP 2006) ,âEmployee Stock Option Plan 2014â (ESOP 2014) and âEmployee Stock Option Plan 2018â (ESOP 2018) for eligible employees and Directors of the Company and its subsidiaries. In terms of the said plan, the Nomination and Remuneration Committee has granted options to the employees of the Company and its subsidiaries. The maximum exercise period is 7 years from the date of grant for ESOP 2006 and options can be exercised over a period of 5 years from the date of each grant for ESOP 2014 and ESOP 2018.
Erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Bâ (ASOP - B) under which 28,925,610 options were available for grant/exercise at the time the Scheme of Amalgamation became effective. Post-merger, these options were adjusted in terms of the approved Scheme of Amalgamation. Each option entitles the holder one equity share of the Company. These options vest over a period of 1 to 4 years from the date of the grant. Upon vesting, employees have 5 years to exercise the options. Postmerger, the name of the ESOP scheme has been changed to âTML ESOP B 2013â.
The erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Restricted Stock Units (ASOP - RSUs)â to be administered by the Administrator of the ASOP - RSUs, a committee appointed by the Board of Directors of the erstwhile Satyam in May 2000. Under the scheme, 1,529,412 equity shares (equivalent number of equity shares post-merger) are reserved to be issued to eligible associates at a price to be determined by the Administrator which shall not be less than the face value of the share. These RSUs vest over a period of 1 to 4 years from the date of the grant. The maximum time available to exercise the options upon vesting is five years from the date of each vesting. Post-merger, the name of the ESOP scheme has been changed to TML RSU.
Erstwhile Satyam had established an ESOP scheme viz., âAssociate Stock Option Plan - Aâ (ASOP - A) formulated prior to the SEBI Guidelines on ESOP and ESPS issued in 1999. This plan was administered through a Trust viz., Satyam Associates Trust (Satyam Trust). At the time the Scheme of Amalgamation and Arrangement became effective, the Satyam Trust was holding 2,055,320 shares of erstwhile Satyam, which post amalgamation were converted into 241,802 shares of the Company at the approved share exchange ratio and this scheme has been transitioned and renamed as ESOP-A. Satyam Trust grants warrants to the employees of the Company with an exercise price and terms of vesting advised by the Nomination and Remuneration Committee of the Company. Each warrant shall entitle the warrant holder to one equity share. The exercise period is 180 days from the date of each vesting.
Erstwhile MESL has established Employee Stock Option Scheme (ESOS) - ESOS for which 1,400,000 equity shares were earmarked. ESOS Scheme is administered through a Trust viz., MES Employees Stock Option Trust. The options under this Scheme vest over a period of 1 to 3 years from the date of the grant. Upon vesting, employees have 7 years to exercise the options. As on the effective date of amalgamation, 18,084 options were outstanding under ESOS, which were converted into equivalent 30,144 options of the Company giving effect to approved share exchange ratio, split and bonus.
x. The employee stock compensation cost for the Employee Stock Option Plan 2018, Employee Stock Option Plan 2010, Employee Stock Option Plan 2000, Employee Stock Option Plan- B 2013, ESOP-A, ESOP 2014 and TML-RSU schemes has been computed by reference to the fair value of share options granted and amortized over each vesting period. For the period ended March 31, 2023, the Company has accounted for employee stock compensation cost (equity settled) amounting to '' 677 Million (March 31, 2022: '' 712 Million). This amount is net of cost of options granted to employees of subsidiaries.
ii. The Company has not advanced or loaned or invested funds to any other person(s) or entities, including foreign entities (Intermediaries) with the understanding that the Intermediary shall: (a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or (b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
The Company has not received any fund from any person(s) or entities, including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall: (a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or (b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
iii. The Company does not have any transaction which is not recorded in the books of account that has been
surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.
iv. The Company has complied with the number of layers for its holding in downstream companies prescribed under clause (87) of section 2 of the Companies Act, 2013 read with the Companies (Restriction on number of Layers) Rules, 2017.
v. The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
vi. The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the
statutory period.
Mar 31, 2023
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 53 for details relating to stock options.
iii) On April 26, 2021 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 and shareholders at the Annual General Meeting held on July 30, 2021 approved the dividend amounting to '' 29,074 Million which is paid in the month of August 2021 . Further, special dividend of '' 15 per equity share was approved on October 25, 2021 and paid amounting to '' 14,550 Million. These amounts are recognized as distribution to equity shareholders.
On May 13, 2022 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31,2022 and shareholders at the Annual
General Meeting held on July 26, 2022 approved the dividend amounting to '' 29,183 Million which is paid in the month of August 2022.
The Board of directors of the Company have paid a special dividend of ''18 per share amounting to '' 17,522 Million in the month of November 2022.
On April 27, 2023 the Board of Directors of the Company had proposed a final dividend of ''32 per share in respect of year ended March 31, 2023 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 31,173 Million.â
iv) During the year ended March 31,2020, the Company bought back 20,585,000 equity shares for an aggregate amount of '' 19,556 Million. The equity shares bought back were extinguished.
v) The Company has increased the authorised share capital consequent to the approval of the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited with the Company.
vi) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
The estimated amount of contracts remaining to be executed on capital account (net of capital advances) as at March 31, 2023 is ''1,535 Million. (March 31, 2022: '' 2,598 Million).
Pursuant to a share purchase agreement, the Company acquired 100% stake in Thirdware Solution Limited on June 3, 2022 for a consideration of '' 7,838 Million out of which '' 6,708 Million was paid upfront and an earn out obligation linked to revenue of ''1,130 Million. During the year, Thirdware Solution Limited has paid a dividend of '' 4,912 Million out of which '' 4,700 Million has been adjusted against the value of the investments made as these repayments represents preacquisition profit. The Company has also agreed to pay the selling shareholders in three yearsâ time additional consideration of '' 1,130 Million based on certain revenue threshold for the FY2022- FY2024.The Company has included '' 983 Million as contingent consideration related to the additional consideration, which represents its fair value at the date of acquisition. The estimates are based on a discount rate of 23% and assumed probability-adjusted revenue over the next three years of acquired subsidiary between '' 5,822 Million and '' 9,266 Million. Out of the contractual obligation '' 395 Million has been paid during the year. As at March 31, 2023, contractual obligation towards the said acquisition amounts to '' 735 Million. Thirdware Solution Limited offers consulting, design, implementing, and support of enterprise applications services with a focus on the Automotive industry.
The acquisition will bolster Tech Mahindraâs digital solutions and services in automotive consulting, design, development, and implementation in areas like ERP (Enterprise Resource Planning), EPM (Enterprise Performance Management), RPA (Robotic Process Automation), and IIoT (Industrial Internet of Things). Thirdwareâs capability to provide end-to-end implementations and global rollouts of ERP solutions will give Tech Mahindra an edge in the manufacturing space.
The management has accounted for this Acquisition as per Provisional Purchase Price Allocation Details of Acquisition during the previous year:
i) Pursuant to a share purchase agreement, the Company acquired 100% stake in Allyis India Private Limited on December 31, 2021 for a consideration of USD 2.6 Million ('' 194 Million).
ii) Pursuant to a business purchase agreement, the Company acquired the business of M/s BrainScale on December 03, 2021 for a total consideration of '' 154 Million.
iii) Pursuant to a business purchase agreement, the Company acquired the business of Lodestone Software Services Private Limited on October 25, 2021 for a consideration of USD 6.7 Million ('' 497.5 million).
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011,
the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was compiled by erstwhile Satyam. The BG has been extended up to October 14, 2023.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
⢠In August 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,928 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: ''502 Million (March 31, 2022 '' 1,480 Million).
ii. Claims made on the Company not acknowledged as debt: ''301 Million (March 31, 2022''297 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Other contingencies '' 407 Million (March 31, 2022''407 Million).
32 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
35 MERGER/AMALGAMATION OF ENTITIES
The National Company Law Tribunal at Mumbai and Chennai Bench, respectively have, vide order dated January 5, 2023 and January 12, 2023 sanctioned Scheme of Merger by Absorption (âthe Scheme of Mergerâ) of Tech Mahindra Business Services Limited (TMBSL) and Born India Limited (Born) (Subsidiaries of Tech Mahindra Limited) with effective date as April 1, 2021. In accordance with the requirements of para 9(iii) of appendix C of Ind AS 103, the financial statements of the Company in respect of prior periods have been restated for all periods. Increase / (Decrease) in previous year numbers are as below.
Accounting treatment of the Scheme of Merger:
1. The aforesaid merger are accounted for as per Appendix C of Ind AS 103 - Business Combinations.
2. The identity of reserves as appearing in Born and TMBSL have been carried forward in these financial statements.
3. Intercompany balances have been eliminated on merger.
1. The financial statements in respect of March 31, 2022 is restated as if the business combination had occurred from the beginning of the preceding period in the financial statements. Accordingly, Scheme of Merger is accounted with effect from April 1, 2021.
2. The Company has recorded the asset and liabilities of TMBSL and Born vested in it pursuant to this Scheme at the respective book values appearing in the books of the Merged Undertakings.
3. The value of investment in Born ('' 873 Million) and TMBSL ('' 4,874 Million) in the books of the Company have been cancelled.
4. No adjustments are made to reflect fair values or recognise any new assets or liabilities.
5. The related disclosures have also been updated in these financial statements.
6. Goodwill as appearing in the consolidated financial statements with respect to Born and TMSBL, amounting to '' 2,886 Million has been recorded in the standalone financial statements as on March 31, 2022.
36 DIMINUTION IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2023.
Since the recoverable amount determined was lower than the carrying value of the respective investment, the Company has recognized an impairment loss of '' 5,508 Million for the year ended March 31, 2023 (March 31, 2022''4,669 Million).
At 31 March 2023, the recoverable amount of the investment was '' 2,761 Million.
The recoverable amount of this investment was based on its value in use, determined by discounting the future cash flows to be generated from the investment. The carrying amount of the investment was determined to be higher than its recoverable amount of '' 2,761 Million and an impairment loss of '' 5,508 Million during 2023 (2022: Nil) was recognised.
The key assumptions used in the estimation of the recoverable amount are: Terminal growth rate 2%, budgeted EBIDTA margin upto 12% over the budgeted cashflows. The values assigned to the key assumptions represent managementâs assessment of future trends in the relevant industries and have been based on historical data from both external and internal sources.
An analysis of the sensitivity of the computation of recoverable amount to a change in key parameters, based on reasonable assumptions, did not identify any probable scenario in which the recoverable amount of the investment would decrease below its carrying amount other than the amount already recognized in the books of account.
37 A. CERTAIN MATTERS RELATING TO ERSTWHILE SATYAM COMPUTER SERVICES LIMITED (ERSTWHILE SATYAM):
In the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtorâs position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
In 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realization, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD
39.2 Million; and
b) non-realization and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
Erstwhile Satyam had, in the past, received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed with legal notices claiming repayment of the alleged advances aggregating to '' 12,304 Million together with damages/compensation @ 18% per annum till the date of repayment. The erstwhile Satyam had not acknowledged any liability and replied to the legal notices stating that the claims are not legally tenable.
Subsequently, the 37 companies filed petitions for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court of Andhra Pradesh in its Order approving the merger of the erstwhile Satyam with the Company, held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in the names of the said 37 companies and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved. The matter is pending final adjudication.
Appeals were filed before the Division Bench of the Honâble High Court of Andhra Pradesh against the Order of the single judge of the Honâble High Court of Andhra Pradesh sanctioning the Scheme of merger of erstwhile Satyam with the Company w.e.f. April 1, 2011, which are yet to be heard.
Further, petition was filed by the 37 companies for winding-up of the erstwhile Satyam with the Honâble High Court of Andhra Pradesh which was subsequently rejected. One of the aforesaid companies also filed an appeal against the said order with the Division Bench of the Honâble High Court of Andhra Pradesh.
These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions.
In view of the aforesaid and based on an independent legal opinion, current legal status and lack of documentation to support the validity of the claim, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon will not be payable on final adjudication. As endorsed by the Honâble High Court in the scheme of merger, the said amount of '' 12,304 Million has been disclosed as "Amounts pending investigation suspense account (net)â ("Suspense Account (net)â), which override the relevant requirement of Conceptual Framework for Financial Reporting under Indian Accounting Standards (Ind AS). Accordingly, the amounts of these alleged advances are recorded separately from equity and liability of the Company in the books of account.
38 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honor the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
In the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order Before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
The company has not revalued its Property, Plant and Equipment (including Rightâ of use assets) or intangible assets or both during the current or previous year.
The Rental Income from investment property for the year is '' 103 million. The Direct Operating expenses to earn the income is not ascertainable.
40 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
41 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
43 DETAILS OF EMPLOYEE BENEFITS AS REQUIRED BY THE IND AS-19 - EMPLOYEE BENEFITS ARE AS UNDER:i. Defined Contribution Plans
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠''150 Million (March 31, 2022: '' 71 Million) for National Pension Scheme contributions.
⢠''823 Million (March 31, 2022: '' 461 Million) for Superannuation Fund contributions; and
⢠''5,552 Million (March 31, 2022: '' 4,312 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognized as of the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue. While disclosing the aggregate amount of transaction price yet to be recognized as revenue towards unsatisfied (or partially satisfied) performance obligations, along with the broad time band for the expected time to recognise those revenues, the Company has applied the practical expedient in Ind AS 115. Accordingly, the Company has not disclosed the aggregate transaction price allocated to unsatisfied (or partially satisfied) performance obligations which pertain to contracts where revenue recognised corresponds to the value transferred to customer typically involving time and materials. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
Based on the contract value agreed and committed with customers, the aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2023''385,998 Million. Out of this, the Company expects to recognise revenue of around 61% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
48 FINANCIAL RISK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''150,893 Million and '' 163,847 Million as of March 31,2023 and March 31, 2022 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2023 and March 31, 2022. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
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.
i. ESOP 2000 & ESOP 2010:
The Company has instituted âEmployee Stock Option Plan 2000â (ESOP 2000) and âEmployee Stock Option Plan 2010â (ESOP 2010) for eligible employees and Directors of the Company and its subsidiaries. The vesting pattern of the schemes has been provided below. The options can be exercised over a period of 5 years from the date of the grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Company at the time of grant for ESOP 2000 and exercise price as determined by the Nomination and remuneration Committee for ESOP 2010.
The Company has instituted âEmployee Stock Option Plan 2006â (ESOP 2006) ,âEmployee Stock Option Plan 2014â (ESOP 2014) and âEmployee Stock Option Plan 2018â (ESOP 2018) for eligible employees and Directors of the Company and its subsidiaries. In terms of the said plan, the Nomination and Remuneration Committee has granted options to the employees of the Company and its subsidiaries. The maximum exercise period is 7 years from the date of grant for ESOP 2006 and options can be exercised over a period of 5 years from the date of each grant for ESOP 2014 and ESOP 2018.
Erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Bâ (ASOP - B) under which 28,925,610 options were available for grant/exercise at the time the Scheme of Amalgamation became effective. Post-merger, these options were adjusted in terms of the approved Scheme of Amalgamation. Each option entitles the holder one equity share of the Company. These options vest over a period of 1 to 4 years from the date of the grant. Upon vesting, employees have 5 years to exercise the options. Postmerger, the name of the ESOP scheme has been changed to âTML ESOP B 2013â.
The erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Restricted Stock Units (ASOP - RSUs)â to be administered by the Administrator of the ASOP - RSUs, a committee appointed by the Board of Directors of the erstwhile Satyam in May 2000. Under the scheme, 1,529,412 equity shares (equivalent number of equity shares post-merger) are reserved to be issued to eligible associates at a price to be determined by the Administrator which shall not be less than the face value of the share. These RSUs vest over a period of 1 to 4 years from the date of the grant. The maximum time available to exercise the options upon vesting is five years from the date of each vesting. Post-merger, the name of the ESOP scheme has been changed to TML RSU.
Erstwhile Satyam had established an ESOP scheme viz., âAssociate Stock Option Plan - Aâ (ASOP - A) formulated prior to the SEBI Guidelines on ESOP and ESPS issued in 1999. This plan was administered through a Trust viz., Satyam Associates Trust (Satyam Trust). At the time the Scheme of Amalgamation and Arrangement became effective, the Satyam Trust was holding 2,055,320 shares of erstwhile Satyam, which post amalgamation were converted into 241,802 shares of the Company at the approved share exchange ratio and this scheme has been transitioned and renamed as ESOP-A. Satyam Trust grants warrants to the employees of the Company with an exercise price and terms of vesting advised by the Nomination and Remuneration Committee of the Company. Each warrant shall entitle the warrant holder to one equity share. The exercise period is 180 days from the date of each vesting.
Erstwhile MESL has established Employee Stock Option Scheme (ESOS) - ESOS for which 1,400,000 equity shares were earmarked. ESOS Scheme is administered through a Trust viz., MES Employees Stock Option Trust. The options under this Scheme vest over a period of 1 to 3 years from the date of the grant. Upon vesting, employees have 7 years to exercise the options. As on the effective date of amalgamation, 18,084 options were outstanding under ESOS, which were converted into equivalent 30,144 options of the Company giving effect to approved share exchange ratio, split and bonus.
x. The employee stock compensation cost for the Employee Stock Option Plan 2018, Employee Stock Option Plan 2010, Employee Stock Option Plan 2000, Employee Stock Option Plan- B 2013, ESOP-A, ESOP 2014 and TML-RSU schemes has been computed by reference to the fair value of share options granted and amortized over each vesting period. For the period ended March 31, 2023, the Company has accounted for employee stock compensation cost (equity settled) amounting to '' 677 Million (March 31, 2022: '' 712 Million). This amount is net of cost of options granted to employees of subsidiaries.
ii. The Company has not advanced or loaned or invested funds to any other person(s) or entities, including foreign entities (Intermediaries) with the understanding that the Intermediary shall: (a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or (b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
The Company has not received any fund from any person(s) or entities, including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall: (a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or (b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
iii. The Company does not have any transaction which is not recorded in the books of account that has been
surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.
iv. The Company has complied with the number of layers for its holding in downstream companies prescribed under clause (87) of section 2 of the Companies Act, 2013 read with the Companies (Restriction on number of Layers) Rules, 2017.
v. The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
vi. The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the
statutory period.
Mar 31, 2023
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 53 for details relating to stock options.
iii) On April 26, 2021 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 and shareholders at the Annual General Meeting held on July 30, 2021 approved the dividend amounting to '' 29,074 Million which is paid in the month of August 2021 . Further, special dividend of '' 15 per equity share was approved on October 25, 2021 and paid amounting to '' 14,550 Million. These amounts are recognized as distribution to equity shareholders.
On May 13, 2022 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31,2022 and shareholders at the Annual
General Meeting held on July 26, 2022 approved the dividend amounting to '' 29,183 Million which is paid in the month of August 2022.
The Board of directors of the Company have paid a special dividend of ''18 per share amounting to '' 17,522 Million in the month of November 2022.
On April 27, 2023 the Board of Directors of the Company had proposed a final dividend of ''32 per share in respect of year ended March 31, 2023 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 31,173 Million.â
iv) During the year ended March 31,2020, the Company bought back 20,585,000 equity shares for an aggregate amount of '' 19,556 Million. The equity shares bought back were extinguished.
v) The Company has increased the authorised share capital consequent to the approval of the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited with the Company.
vi) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
The estimated amount of contracts remaining to be executed on capital account (net of capital advances) as at March 31, 2023 is ''1,535 Million. (March 31, 2022: '' 2,598 Million).
Pursuant to a share purchase agreement, the Company acquired 100% stake in Thirdware Solution Limited on June 3, 2022 for a consideration of '' 7,838 Million out of which '' 6,708 Million was paid upfront and an earn out obligation linked to revenue of ''1,130 Million. During the year, Thirdware Solution Limited has paid a dividend of '' 4,912 Million out of which '' 4,700 Million has been adjusted against the value of the investments made as these repayments represents preacquisition profit. The Company has also agreed to pay the selling shareholders in three yearsâ time additional consideration of '' 1,130 Million based on certain revenue threshold for the FY2022- FY2024.The Company has included '' 983 Million as contingent consideration related to the additional consideration, which represents its fair value at the date of acquisition. The estimates are based on a discount rate of 23% and assumed probability-adjusted revenue over the next three years of acquired subsidiary between '' 5,822 Million and '' 9,266 Million. Out of the contractual obligation '' 395 Million has been paid during the year. As at March 31, 2023, contractual obligation towards the said acquisition amounts to '' 735 Million. Thirdware Solution Limited offers consulting, design, implementing, and support of enterprise applications services with a focus on the Automotive industry.
The acquisition will bolster Tech Mahindraâs digital solutions and services in automotive consulting, design, development, and implementation in areas like ERP (Enterprise Resource Planning), EPM (Enterprise Performance Management), RPA (Robotic Process Automation), and IIoT (Industrial Internet of Things). Thirdwareâs capability to provide end-to-end implementations and global rollouts of ERP solutions will give Tech Mahindra an edge in the manufacturing space.
The management has accounted for this Acquisition as per Provisional Purchase Price Allocation Details of Acquisition during the previous year:
i) Pursuant to a share purchase agreement, the Company acquired 100% stake in Allyis India Private Limited on December 31, 2021 for a consideration of USD 2.6 Million ('' 194 Million).
ii) Pursuant to a business purchase agreement, the Company acquired the business of M/s BrainScale on December 03, 2021 for a total consideration of '' 154 Million.
iii) Pursuant to a business purchase agreement, the Company acquired the business of Lodestone Software Services Private Limited on October 25, 2021 for a consideration of USD 6.7 Million ('' 497.5 million).
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011,
the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was compiled by erstwhile Satyam. The BG has been extended up to October 14, 2023.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
⢠In August 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,928 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: ''502 Million (March 31, 2022 '' 1,480 Million).
ii. Claims made on the Company not acknowledged as debt: ''301 Million (March 31, 2022''297 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Other contingencies '' 407 Million (March 31, 2022''407 Million).
32 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
35 MERGER/AMALGAMATION OF ENTITIES
The National Company Law Tribunal at Mumbai and Chennai Bench, respectively have, vide order dated January 5, 2023 and January 12, 2023 sanctioned Scheme of Merger by Absorption (âthe Scheme of Mergerâ) of Tech Mahindra Business Services Limited (TMBSL) and Born India Limited (Born) (Subsidiaries of Tech Mahindra Limited) with effective date as April 1, 2021. In accordance with the requirements of para 9(iii) of appendix C of Ind AS 103, the financial statements of the Company in respect of prior periods have been restated for all periods. Increase / (Decrease) in previous year numbers are as below.
Accounting treatment of the Scheme of Merger:
1. The aforesaid merger are accounted for as per Appendix C of Ind AS 103 - Business Combinations.
2. The identity of reserves as appearing in Born and TMBSL have been carried forward in these financial statements.
3. Intercompany balances have been eliminated on merger.
1. The financial statements in respect of March 31, 2022 is restated as if the business combination had occurred from the beginning of the preceding period in the financial statements. Accordingly, Scheme of Merger is accounted with effect from April 1, 2021.
2. The Company has recorded the asset and liabilities of TMBSL and Born vested in it pursuant to this Scheme at the respective book values appearing in the books of the Merged Undertakings.
3. The value of investment in Born ('' 873 Million) and TMBSL ('' 4,874 Million) in the books of the Company have been cancelled.
4. No adjustments are made to reflect fair values or recognise any new assets or liabilities.
5. The related disclosures have also been updated in these financial statements.
6. Goodwill as appearing in the consolidated financial statements with respect to Born and TMSBL, amounting to '' 2,886 Million has been recorded in the standalone financial statements as on March 31, 2022.
36 DIMINUTION IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2023.
Since the recoverable amount determined was lower than the carrying value of the respective investment, the Company has recognized an impairment loss of '' 5,508 Million for the year ended March 31, 2023 (March 31, 2022''4,669 Million).
At 31 March 2023, the recoverable amount of the investment was '' 2,761 Million.
The recoverable amount of this investment was based on its value in use, determined by discounting the future cash flows to be generated from the investment. The carrying amount of the investment was determined to be higher than its recoverable amount of '' 2,761 Million and an impairment loss of '' 5,508 Million during 2023 (2022: Nil) was recognised.
The key assumptions used in the estimation of the recoverable amount are: Terminal growth rate 2%, budgeted EBIDTA margin upto 12% over the budgeted cashflows. The values assigned to the key assumptions represent managementâs assessment of future trends in the relevant industries and have been based on historical data from both external and internal sources.
An analysis of the sensitivity of the computation of recoverable amount to a change in key parameters, based on reasonable assumptions, did not identify any probable scenario in which the recoverable amount of the investment would decrease below its carrying amount other than the amount already recognized in the books of account.
37 A. CERTAIN MATTERS RELATING TO ERSTWHILE SATYAM COMPUTER SERVICES LIMITED (ERSTWHILE SATYAM):
In the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtorâs position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
In 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realization, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD
39.2 Million; and
b) non-realization and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
Erstwhile Satyam had, in the past, received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed with legal notices claiming repayment of the alleged advances aggregating to '' 12,304 Million together with damages/compensation @ 18% per annum till the date of repayment. The erstwhile Satyam had not acknowledged any liability and replied to the legal notices stating that the claims are not legally tenable.
Subsequently, the 37 companies filed petitions for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court of Andhra Pradesh in its Order approving the merger of the erstwhile Satyam with the Company, held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in the names of the said 37 companies and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved. The matter is pending final adjudication.
Appeals were filed before the Division Bench of the Honâble High Court of Andhra Pradesh against the Order of the single judge of the Honâble High Court of Andhra Pradesh sanctioning the Scheme of merger of erstwhile Satyam with the Company w.e.f. April 1, 2011, which are yet to be heard.
Further, petition was filed by the 37 companies for winding-up of the erstwhile Satyam with the Honâble High Court of Andhra Pradesh which was subsequently rejected. One of the aforesaid companies also filed an appeal against the said order with the Division Bench of the Honâble High Court of Andhra Pradesh.
These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions.
In view of the aforesaid and based on an independent legal opinion, current legal status and lack of documentation to support the validity of the claim, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon will not be payable on final adjudication. As endorsed by the Honâble High Court in the scheme of merger, the said amount of '' 12,304 Million has been disclosed as "Amounts pending investigation suspense account (net)â ("Suspense Account (net)â), which override the relevant requirement of Conceptual Framework for Financial Reporting under Indian Accounting Standards (Ind AS). Accordingly, the amounts of these alleged advances are recorded separately from equity and liability of the Company in the books of account.
38 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honor the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
In the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order Before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
The company has not revalued its Property, Plant and Equipment (including Rightâ of use assets) or intangible assets or both during the current or previous year.
The Rental Income from investment property for the year is '' 103 million. The Direct Operating expenses to earn the income is not ascertainable.
40 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
41 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
43 DETAILS OF EMPLOYEE BENEFITS AS REQUIRED BY THE IND AS-19 - EMPLOYEE BENEFITS ARE AS UNDER:i. Defined Contribution Plans
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠''150 Million (March 31, 2022: '' 71 Million) for National Pension Scheme contributions.
⢠''823 Million (March 31, 2022: '' 461 Million) for Superannuation Fund contributions; and
⢠''5,552 Million (March 31, 2022: '' 4,312 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognized as of the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue. While disclosing the aggregate amount of transaction price yet to be recognized as revenue towards unsatisfied (or partially satisfied) performance obligations, along with the broad time band for the expected time to recognise those revenues, the Company has applied the practical expedient in Ind AS 115. Accordingly, the Company has not disclosed the aggregate transaction price allocated to unsatisfied (or partially satisfied) performance obligations which pertain to contracts where revenue recognised corresponds to the value transferred to customer typically involving time and materials. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
Based on the contract value agreed and committed with customers, the aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2023''385,998 Million. Out of this, the Company expects to recognise revenue of around 61% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
48 FINANCIAL RISK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''150,893 Million and '' 163,847 Million as of March 31,2023 and March 31, 2022 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2023 and March 31, 2022. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
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.
i. ESOP 2000 & ESOP 2010:
The Company has instituted âEmployee Stock Option Plan 2000â (ESOP 2000) and âEmployee Stock Option Plan 2010â (ESOP 2010) for eligible employees and Directors of the Company and its subsidiaries. The vesting pattern of the schemes has been provided below. The options can be exercised over a period of 5 years from the date of the grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Company at the time of grant for ESOP 2000 and exercise price as determined by the Nomination and remuneration Committee for ESOP 2010.
The Company has instituted âEmployee Stock Option Plan 2006â (ESOP 2006) ,âEmployee Stock Option Plan 2014â (ESOP 2014) and âEmployee Stock Option Plan 2018â (ESOP 2018) for eligible employees and Directors of the Company and its subsidiaries. In terms of the said plan, the Nomination and Remuneration Committee has granted options to the employees of the Company and its subsidiaries. The maximum exercise period is 7 years from the date of grant for ESOP 2006 and options can be exercised over a period of 5 years from the date of each grant for ESOP 2014 and ESOP 2018.
Erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Bâ (ASOP - B) under which 28,925,610 options were available for grant/exercise at the time the Scheme of Amalgamation became effective. Post-merger, these options were adjusted in terms of the approved Scheme of Amalgamation. Each option entitles the holder one equity share of the Company. These options vest over a period of 1 to 4 years from the date of the grant. Upon vesting, employees have 5 years to exercise the options. Postmerger, the name of the ESOP scheme has been changed to âTML ESOP B 2013â.
The erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Restricted Stock Units (ASOP - RSUs)â to be administered by the Administrator of the ASOP - RSUs, a committee appointed by the Board of Directors of the erstwhile Satyam in May 2000. Under the scheme, 1,529,412 equity shares (equivalent number of equity shares post-merger) are reserved to be issued to eligible associates at a price to be determined by the Administrator which shall not be less than the face value of the share. These RSUs vest over a period of 1 to 4 years from the date of the grant. The maximum time available to exercise the options upon vesting is five years from the date of each vesting. Post-merger, the name of the ESOP scheme has been changed to TML RSU.
Erstwhile Satyam had established an ESOP scheme viz., âAssociate Stock Option Plan - Aâ (ASOP - A) formulated prior to the SEBI Guidelines on ESOP and ESPS issued in 1999. This plan was administered through a Trust viz., Satyam Associates Trust (Satyam Trust). At the time the Scheme of Amalgamation and Arrangement became effective, the Satyam Trust was holding 2,055,320 shares of erstwhile Satyam, which post amalgamation were converted into 241,802 shares of the Company at the approved share exchange ratio and this scheme has been transitioned and renamed as ESOP-A. Satyam Trust grants warrants to the employees of the Company with an exercise price and terms of vesting advised by the Nomination and Remuneration Committee of the Company. Each warrant shall entitle the warrant holder to one equity share. The exercise period is 180 days from the date of each vesting.
Erstwhile MESL has established Employee Stock Option Scheme (ESOS) - ESOS for which 1,400,000 equity shares were earmarked. ESOS Scheme is administered through a Trust viz., MES Employees Stock Option Trust. The options under this Scheme vest over a period of 1 to 3 years from the date of the grant. Upon vesting, employees have 7 years to exercise the options. As on the effective date of amalgamation, 18,084 options were outstanding under ESOS, which were converted into equivalent 30,144 options of the Company giving effect to approved share exchange ratio, split and bonus.
x. The employee stock compensation cost for the Employee Stock Option Plan 2018, Employee Stock Option Plan 2010, Employee Stock Option Plan 2000, Employee Stock Option Plan- B 2013, ESOP-A, ESOP 2014 and TML-RSU schemes has been computed by reference to the fair value of share options granted and amortized over each vesting period. For the period ended March 31, 2023, the Company has accounted for employee stock compensation cost (equity settled) amounting to '' 677 Million (March 31, 2022: '' 712 Million). This amount is net of cost of options granted to employees of subsidiaries.
ii. The Company has not advanced or loaned or invested funds to any other person(s) or entities, including foreign entities (Intermediaries) with the understanding that the Intermediary shall: (a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or (b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
The Company has not received any fund from any person(s) or entities, including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall: (a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or (b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
iii. The Company does not have any transaction which is not recorded in the books of account that has been
surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.
iv. The Company has complied with the number of layers for its holding in downstream companies prescribed under clause (87) of section 2 of the Companies Act, 2013 read with the Companies (Restriction on number of Layers) Rules, 2017.
v. The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
vi. The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the
statutory period.
Mar 31, 2023
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 53 for details relating to stock options.
iii) On April 26, 2021 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 and shareholders at the Annual General Meeting held on July 30, 2021 approved the dividend amounting to '' 29,074 Million which is paid in the month of August 2021 . Further, special dividend of '' 15 per equity share was approved on October 25, 2021 and paid amounting to '' 14,550 Million. These amounts are recognized as distribution to equity shareholders.
On May 13, 2022 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31,2022 and shareholders at the Annual
General Meeting held on July 26, 2022 approved the dividend amounting to '' 29,183 Million which is paid in the month of August 2022.
The Board of directors of the Company have paid a special dividend of ''18 per share amounting to '' 17,522 Million in the month of November 2022.
On April 27, 2023 the Board of Directors of the Company had proposed a final dividend of ''32 per share in respect of year ended March 31, 2023 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 31,173 Million.â
iv) During the year ended March 31,2020, the Company bought back 20,585,000 equity shares for an aggregate amount of '' 19,556 Million. The equity shares bought back were extinguished.
v) The Company has increased the authorised share capital consequent to the approval of the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited with the Company.
vi) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
The estimated amount of contracts remaining to be executed on capital account (net of capital advances) as at March 31, 2023 is ''1,535 Million. (March 31, 2022: '' 2,598 Million).
Pursuant to a share purchase agreement, the Company acquired 100% stake in Thirdware Solution Limited on June 3, 2022 for a consideration of '' 7,838 Million out of which '' 6,708 Million was paid upfront and an earn out obligation linked to revenue of ''1,130 Million. During the year, Thirdware Solution Limited has paid a dividend of '' 4,912 Million out of which '' 4,700 Million has been adjusted against the value of the investments made as these repayments represents preacquisition profit. The Company has also agreed to pay the selling shareholders in three yearsâ time additional consideration of '' 1,130 Million based on certain revenue threshold for the FY2022- FY2024.The Company has included '' 983 Million as contingent consideration related to the additional consideration, which represents its fair value at the date of acquisition. The estimates are based on a discount rate of 23% and assumed probability-adjusted revenue over the next three years of acquired subsidiary between '' 5,822 Million and '' 9,266 Million. Out of the contractual obligation '' 395 Million has been paid during the year. As at March 31, 2023, contractual obligation towards the said acquisition amounts to '' 735 Million. Thirdware Solution Limited offers consulting, design, implementing, and support of enterprise applications services with a focus on the Automotive industry.
The acquisition will bolster Tech Mahindraâs digital solutions and services in automotive consulting, design, development, and implementation in areas like ERP (Enterprise Resource Planning), EPM (Enterprise Performance Management), RPA (Robotic Process Automation), and IIoT (Industrial Internet of Things). Thirdwareâs capability to provide end-to-end implementations and global rollouts of ERP solutions will give Tech Mahindra an edge in the manufacturing space.
The management has accounted for this Acquisition as per Provisional Purchase Price Allocation Details of Acquisition during the previous year:
i) Pursuant to a share purchase agreement, the Company acquired 100% stake in Allyis India Private Limited on December 31, 2021 for a consideration of USD 2.6 Million ('' 194 Million).
ii) Pursuant to a business purchase agreement, the Company acquired the business of M/s BrainScale on December 03, 2021 for a total consideration of '' 154 Million.
iii) Pursuant to a business purchase agreement, the Company acquired the business of Lodestone Software Services Private Limited on October 25, 2021 for a consideration of USD 6.7 Million ('' 497.5 million).
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011,
the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was compiled by erstwhile Satyam. The BG has been extended up to October 14, 2023.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
⢠In August 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,928 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: ''502 Million (March 31, 2022 '' 1,480 Million).
ii. Claims made on the Company not acknowledged as debt: ''301 Million (March 31, 2022''297 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Other contingencies '' 407 Million (March 31, 2022''407 Million).
32 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
35 MERGER/AMALGAMATION OF ENTITIES
The National Company Law Tribunal at Mumbai and Chennai Bench, respectively have, vide order dated January 5, 2023 and January 12, 2023 sanctioned Scheme of Merger by Absorption (âthe Scheme of Mergerâ) of Tech Mahindra Business Services Limited (TMBSL) and Born India Limited (Born) (Subsidiaries of Tech Mahindra Limited) with effective date as April 1, 2021. In accordance with the requirements of para 9(iii) of appendix C of Ind AS 103, the financial statements of the Company in respect of prior periods have been restated for all periods. Increase / (Decrease) in previous year numbers are as below.
Accounting treatment of the Scheme of Merger:
1. The aforesaid merger are accounted for as per Appendix C of Ind AS 103 - Business Combinations.
2. The identity of reserves as appearing in Born and TMBSL have been carried forward in these financial statements.
3. Intercompany balances have been eliminated on merger.
1. The financial statements in respect of March 31, 2022 is restated as if the business combination had occurred from the beginning of the preceding period in the financial statements. Accordingly, Scheme of Merger is accounted with effect from April 1, 2021.
2. The Company has recorded the asset and liabilities of TMBSL and Born vested in it pursuant to this Scheme at the respective book values appearing in the books of the Merged Undertakings.
3. The value of investment in Born ('' 873 Million) and TMBSL ('' 4,874 Million) in the books of the Company have been cancelled.
4. No adjustments are made to reflect fair values or recognise any new assets or liabilities.
5. The related disclosures have also been updated in these financial statements.
6. Goodwill as appearing in the consolidated financial statements with respect to Born and TMSBL, amounting to '' 2,886 Million has been recorded in the standalone financial statements as on March 31, 2022.
36 DIMINUTION IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2023.
Since the recoverable amount determined was lower than the carrying value of the respective investment, the Company has recognized an impairment loss of '' 5,508 Million for the year ended March 31, 2023 (March 31, 2022''4,669 Million).
At 31 March 2023, the recoverable amount of the investment was '' 2,761 Million.
The recoverable amount of this investment was based on its value in use, determined by discounting the future cash flows to be generated from the investment. The carrying amount of the investment was determined to be higher than its recoverable amount of '' 2,761 Million and an impairment loss of '' 5,508 Million during 2023 (2022: Nil) was recognised.
The key assumptions used in the estimation of the recoverable amount are: Terminal growth rate 2%, budgeted EBIDTA margin upto 12% over the budgeted cashflows. The values assigned to the key assumptions represent managementâs assessment of future trends in the relevant industries and have been based on historical data from both external and internal sources.
An analysis of the sensitivity of the computation of recoverable amount to a change in key parameters, based on reasonable assumptions, did not identify any probable scenario in which the recoverable amount of the investment would decrease below its carrying amount other than the amount already recognized in the books of account.
37 A. CERTAIN MATTERS RELATING TO ERSTWHILE SATYAM COMPUTER SERVICES LIMITED (ERSTWHILE SATYAM):
In the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtorâs position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
In 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realization, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD
39.2 Million; and
b) non-realization and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
Erstwhile Satyam had, in the past, received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed with legal notices claiming repayment of the alleged advances aggregating to '' 12,304 Million together with damages/compensation @ 18% per annum till the date of repayment. The erstwhile Satyam had not acknowledged any liability and replied to the legal notices stating that the claims are not legally tenable.
Subsequently, the 37 companies filed petitions for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court of Andhra Pradesh in its Order approving the merger of the erstwhile Satyam with the Company, held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in the names of the said 37 companies and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved. The matter is pending final adjudication.
Appeals were filed before the Division Bench of the Honâble High Court of Andhra Pradesh against the Order of the single judge of the Honâble High Court of Andhra Pradesh sanctioning the Scheme of merger of erstwhile Satyam with the Company w.e.f. April 1, 2011, which are yet to be heard.
Further, petition was filed by the 37 companies for winding-up of the erstwhile Satyam with the Honâble High Court of Andhra Pradesh which was subsequently rejected. One of the aforesaid companies also filed an appeal against the said order with the Division Bench of the Honâble High Court of Andhra Pradesh.
These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions.
In view of the aforesaid and based on an independent legal opinion, current legal status and lack of documentation to support the validity of the claim, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon will not be payable on final adjudication. As endorsed by the Honâble High Court in the scheme of merger, the said amount of '' 12,304 Million has been disclosed as "Amounts pending investigation suspense account (net)â ("Suspense Account (net)â), which override the relevant requirement of Conceptual Framework for Financial Reporting under Indian Accounting Standards (Ind AS). Accordingly, the amounts of these alleged advances are recorded separately from equity and liability of the Company in the books of account.
38 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honor the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
In the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order Before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
The company has not revalued its Property, Plant and Equipment (including Rightâ of use assets) or intangible assets or both during the current or previous year.
The Rental Income from investment property for the year is '' 103 million. The Direct Operating expenses to earn the income is not ascertainable.
40 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
41 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
43 DETAILS OF EMPLOYEE BENEFITS AS REQUIRED BY THE IND AS-19 - EMPLOYEE BENEFITS ARE AS UNDER:i. Defined Contribution Plans
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠''150 Million (March 31, 2022: '' 71 Million) for National Pension Scheme contributions.
⢠''823 Million (March 31, 2022: '' 461 Million) for Superannuation Fund contributions; and
⢠''5,552 Million (March 31, 2022: '' 4,312 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognized as of the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue. While disclosing the aggregate amount of transaction price yet to be recognized as revenue towards unsatisfied (or partially satisfied) performance obligations, along with the broad time band for the expected time to recognise those revenues, the Company has applied the practical expedient in Ind AS 115. Accordingly, the Company has not disclosed the aggregate transaction price allocated to unsatisfied (or partially satisfied) performance obligations which pertain to contracts where revenue recognised corresponds to the value transferred to customer typically involving time and materials. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
Based on the contract value agreed and committed with customers, the aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2023''385,998 Million. Out of this, the Company expects to recognise revenue of around 61% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
48 FINANCIAL RISK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''150,893 Million and '' 163,847 Million as of March 31,2023 and March 31, 2022 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2023 and March 31, 2022. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
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.
i. ESOP 2000 & ESOP 2010:
The Company has instituted âEmployee Stock Option Plan 2000â (ESOP 2000) and âEmployee Stock Option Plan 2010â (ESOP 2010) for eligible employees and Directors of the Company and its subsidiaries. The vesting pattern of the schemes has been provided below. The options can be exercised over a period of 5 years from the date of the grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Company at the time of grant for ESOP 2000 and exercise price as determined by the Nomination and remuneration Committee for ESOP 2010.
The Company has instituted âEmployee Stock Option Plan 2006â (ESOP 2006) ,âEmployee Stock Option Plan 2014â (ESOP 2014) and âEmployee Stock Option Plan 2018â (ESOP 2018) for eligible employees and Directors of the Company and its subsidiaries. In terms of the said plan, the Nomination and Remuneration Committee has granted options to the employees of the Company and its subsidiaries. The maximum exercise period is 7 years from the date of grant for ESOP 2006 and options can be exercised over a period of 5 years from the date of each grant for ESOP 2014 and ESOP 2018.
Erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Bâ (ASOP - B) under which 28,925,610 options were available for grant/exercise at the time the Scheme of Amalgamation became effective. Post-merger, these options were adjusted in terms of the approved Scheme of Amalgamation. Each option entitles the holder one equity share of the Company. These options vest over a period of 1 to 4 years from the date of the grant. Upon vesting, employees have 5 years to exercise the options. Postmerger, the name of the ESOP scheme has been changed to âTML ESOP B 2013â.
The erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Restricted Stock Units (ASOP - RSUs)â to be administered by the Administrator of the ASOP - RSUs, a committee appointed by the Board of Directors of the erstwhile Satyam in May 2000. Under the scheme, 1,529,412 equity shares (equivalent number of equity shares post-merger) are reserved to be issued to eligible associates at a price to be determined by the Administrator which shall not be less than the face value of the share. These RSUs vest over a period of 1 to 4 years from the date of the grant. The maximum time available to exercise the options upon vesting is five years from the date of each vesting. Post-merger, the name of the ESOP scheme has been changed to TML RSU.
Erstwhile Satyam had established an ESOP scheme viz., âAssociate Stock Option Plan - Aâ (ASOP - A) formulated prior to the SEBI Guidelines on ESOP and ESPS issued in 1999. This plan was administered through a Trust viz., Satyam Associates Trust (Satyam Trust). At the time the Scheme of Amalgamation and Arrangement became effective, the Satyam Trust was holding 2,055,320 shares of erstwhile Satyam, which post amalgamation were converted into 241,802 shares of the Company at the approved share exchange ratio and this scheme has been transitioned and renamed as ESOP-A. Satyam Trust grants warrants to the employees of the Company with an exercise price and terms of vesting advised by the Nomination and Remuneration Committee of the Company. Each warrant shall entitle the warrant holder to one equity share. The exercise period is 180 days from the date of each vesting.
Erstwhile MESL has established Employee Stock Option Scheme (ESOS) - ESOS for which 1,400,000 equity shares were earmarked. ESOS Scheme is administered through a Trust viz., MES Employees Stock Option Trust. The options under this Scheme vest over a period of 1 to 3 years from the date of the grant. Upon vesting, employees have 7 years to exercise the options. As on the effective date of amalgamation, 18,084 options were outstanding under ESOS, which were converted into equivalent 30,144 options of the Company giving effect to approved share exchange ratio, split and bonus.
x. The employee stock compensation cost for the Employee Stock Option Plan 2018, Employee Stock Option Plan 2010, Employee Stock Option Plan 2000, Employee Stock Option Plan- B 2013, ESOP-A, ESOP 2014 and TML-RSU schemes has been computed by reference to the fair value of share options granted and amortized over each vesting period. For the period ended March 31, 2023, the Company has accounted for employee stock compensation cost (equity settled) amounting to '' 677 Million (March 31, 2022: '' 712 Million). This amount is net of cost of options granted to employees of subsidiaries.
ii. The Company has not advanced or loaned or invested funds to any other person(s) or entities, including foreign entities (Intermediaries) with the understanding that the Intermediary shall: (a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or (b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
The Company has not received any fund from any person(s) or entities, including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall: (a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or (b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
iii. The Company does not have any transaction which is not recorded in the books of account that has been
surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.
iv. The Company has complied with the number of layers for its holding in downstream companies prescribed under clause (87) of section 2 of the Companies Act, 2013 read with the Companies (Restriction on number of Layers) Rules, 2017.
v. The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
vi. The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the
statutory period.
Mar 31, 2023
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 53 for details relating to stock options.
iii) On April 26, 2021 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 and shareholders at the Annual General Meeting held on July 30, 2021 approved the dividend amounting to '' 29,074 Million which is paid in the month of August 2021 . Further, special dividend of '' 15 per equity share was approved on October 25, 2021 and paid amounting to '' 14,550 Million. These amounts are recognized as distribution to equity shareholders.
On May 13, 2022 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31,2022 and shareholders at the Annual
General Meeting held on July 26, 2022 approved the dividend amounting to '' 29,183 Million which is paid in the month of August 2022.
The Board of directors of the Company have paid a special dividend of ''18 per share amounting to '' 17,522 Million in the month of November 2022.
On April 27, 2023 the Board of Directors of the Company had proposed a final dividend of ''32 per share in respect of year ended March 31, 2023 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 31,173 Million.â
iv) During the year ended March 31,2020, the Company bought back 20,585,000 equity shares for an aggregate amount of '' 19,556 Million. The equity shares bought back were extinguished.
v) The Company has increased the authorised share capital consequent to the approval of the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited with the Company.
vi) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
The estimated amount of contracts remaining to be executed on capital account (net of capital advances) as at March 31, 2023 is ''1,535 Million. (March 31, 2022: '' 2,598 Million).
Pursuant to a share purchase agreement, the Company acquired 100% stake in Thirdware Solution Limited on June 3, 2022 for a consideration of '' 7,838 Million out of which '' 6,708 Million was paid upfront and an earn out obligation linked to revenue of ''1,130 Million. During the year, Thirdware Solution Limited has paid a dividend of '' 4,912 Million out of which '' 4,700 Million has been adjusted against the value of the investments made as these repayments represents preacquisition profit. The Company has also agreed to pay the selling shareholders in three yearsâ time additional consideration of '' 1,130 Million based on certain revenue threshold for the FY2022- FY2024.The Company has included '' 983 Million as contingent consideration related to the additional consideration, which represents its fair value at the date of acquisition. The estimates are based on a discount rate of 23% and assumed probability-adjusted revenue over the next three years of acquired subsidiary between '' 5,822 Million and '' 9,266 Million. Out of the contractual obligation '' 395 Million has been paid during the year. As at March 31, 2023, contractual obligation towards the said acquisition amounts to '' 735 Million. Thirdware Solution Limited offers consulting, design, implementing, and support of enterprise applications services with a focus on the Automotive industry.
The acquisition will bolster Tech Mahindraâs digital solutions and services in automotive consulting, design, development, and implementation in areas like ERP (Enterprise Resource Planning), EPM (Enterprise Performance Management), RPA (Robotic Process Automation), and IIoT (Industrial Internet of Things). Thirdwareâs capability to provide end-to-end implementations and global rollouts of ERP solutions will give Tech Mahindra an edge in the manufacturing space.
The management has accounted for this Acquisition as per Provisional Purchase Price Allocation Details of Acquisition during the previous year:
i) Pursuant to a share purchase agreement, the Company acquired 100% stake in Allyis India Private Limited on December 31, 2021 for a consideration of USD 2.6 Million ('' 194 Million).
ii) Pursuant to a business purchase agreement, the Company acquired the business of M/s BrainScale on December 03, 2021 for a total consideration of '' 154 Million.
iii) Pursuant to a business purchase agreement, the Company acquired the business of Lodestone Software Services Private Limited on October 25, 2021 for a consideration of USD 6.7 Million ('' 497.5 million).
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011,
the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was compiled by erstwhile Satyam. The BG has been extended up to October 14, 2023.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
⢠In August 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,928 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: ''502 Million (March 31, 2022 '' 1,480 Million).
ii. Claims made on the Company not acknowledged as debt: ''301 Million (March 31, 2022''297 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Other contingencies '' 407 Million (March 31, 2022''407 Million).
32 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
35 MERGER/AMALGAMATION OF ENTITIES
The National Company Law Tribunal at Mumbai and Chennai Bench, respectively have, vide order dated January 5, 2023 and January 12, 2023 sanctioned Scheme of Merger by Absorption (âthe Scheme of Mergerâ) of Tech Mahindra Business Services Limited (TMBSL) and Born India Limited (Born) (Subsidiaries of Tech Mahindra Limited) with effective date as April 1, 2021. In accordance with the requirements of para 9(iii) of appendix C of Ind AS 103, the financial statements of the Company in respect of prior periods have been restated for all periods. Increase / (Decrease) in previous year numbers are as below.
Accounting treatment of the Scheme of Merger:
1. The aforesaid merger are accounted for as per Appendix C of Ind AS 103 - Business Combinations.
2. The identity of reserves as appearing in Born and TMBSL have been carried forward in these financial statements.
3. Intercompany balances have been eliminated on merger.
1. The financial statements in respect of March 31, 2022 is restated as if the business combination had occurred from the beginning of the preceding period in the financial statements. Accordingly, Scheme of Merger is accounted with effect from April 1, 2021.
2. The Company has recorded the asset and liabilities of TMBSL and Born vested in it pursuant to this Scheme at the respective book values appearing in the books of the Merged Undertakings.
3. The value of investment in Born ('' 873 Million) and TMBSL ('' 4,874 Million) in the books of the Company have been cancelled.
4. No adjustments are made to reflect fair values or recognise any new assets or liabilities.
5. The related disclosures have also been updated in these financial statements.
6. Goodwill as appearing in the consolidated financial statements with respect to Born and TMSBL, amounting to '' 2,886 Million has been recorded in the standalone financial statements as on March 31, 2022.
36 DIMINUTION IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2023.
Since the recoverable amount determined was lower than the carrying value of the respective investment, the Company has recognized an impairment loss of '' 5,508 Million for the year ended March 31, 2023 (March 31, 2022''4,669 Million).
At 31 March 2023, the recoverable amount of the investment was '' 2,761 Million.
The recoverable amount of this investment was based on its value in use, determined by discounting the future cash flows to be generated from the investment. The carrying amount of the investment was determined to be higher than its recoverable amount of '' 2,761 Million and an impairment loss of '' 5,508 Million during 2023 (2022: Nil) was recognised.
The key assumptions used in the estimation of the recoverable amount are: Terminal growth rate 2%, budgeted EBIDTA margin upto 12% over the budgeted cashflows. The values assigned to the key assumptions represent managementâs assessment of future trends in the relevant industries and have been based on historical data from both external and internal sources.
An analysis of the sensitivity of the computation of recoverable amount to a change in key parameters, based on reasonable assumptions, did not identify any probable scenario in which the recoverable amount of the investment would decrease below its carrying amount other than the amount already recognized in the books of account.
37 A. CERTAIN MATTERS RELATING TO ERSTWHILE SATYAM COMPUTER SERVICES LIMITED (ERSTWHILE SATYAM):
In the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtorâs position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
In 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realization, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD
39.2 Million; and
b) non-realization and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
Erstwhile Satyam had, in the past, received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed with legal notices claiming repayment of the alleged advances aggregating to '' 12,304 Million together with damages/compensation @ 18% per annum till the date of repayment. The erstwhile Satyam had not acknowledged any liability and replied to the legal notices stating that the claims are not legally tenable.
Subsequently, the 37 companies filed petitions for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court of Andhra Pradesh in its Order approving the merger of the erstwhile Satyam with the Company, held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in the names of the said 37 companies and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved. The matter is pending final adjudication.
Appeals were filed before the Division Bench of the Honâble High Court of Andhra Pradesh against the Order of the single judge of the Honâble High Court of Andhra Pradesh sanctioning the Scheme of merger of erstwhile Satyam with the Company w.e.f. April 1, 2011, which are yet to be heard.
Further, petition was filed by the 37 companies for winding-up of the erstwhile Satyam with the Honâble High Court of Andhra Pradesh which was subsequently rejected. One of the aforesaid companies also filed an appeal against the said order with the Division Bench of the Honâble High Court of Andhra Pradesh.
These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions.
In view of the aforesaid and based on an independent legal opinion, current legal status and lack of documentation to support the validity of the claim, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon will not be payable on final adjudication. As endorsed by the Honâble High Court in the scheme of merger, the said amount of '' 12,304 Million has been disclosed as "Amounts pending investigation suspense account (net)â ("Suspense Account (net)â), which override the relevant requirement of Conceptual Framework for Financial Reporting under Indian Accounting Standards (Ind AS). Accordingly, the amounts of these alleged advances are recorded separately from equity and liability of the Company in the books of account.
38 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honor the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
In the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order Before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
The company has not revalued its Property, Plant and Equipment (including Rightâ of use assets) or intangible assets or both during the current or previous year.
The Rental Income from investment property for the year is '' 103 million. The Direct Operating expenses to earn the income is not ascertainable.
40 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
41 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
43 DETAILS OF EMPLOYEE BENEFITS AS REQUIRED BY THE IND AS-19 - EMPLOYEE BENEFITS ARE AS UNDER:i. Defined Contribution Plans
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠''150 Million (March 31, 2022: '' 71 Million) for National Pension Scheme contributions.
⢠''823 Million (March 31, 2022: '' 461 Million) for Superannuation Fund contributions; and
⢠''5,552 Million (March 31, 2022: '' 4,312 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognized as of the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue. While disclosing the aggregate amount of transaction price yet to be recognized as revenue towards unsatisfied (or partially satisfied) performance obligations, along with the broad time band for the expected time to recognise those revenues, the Company has applied the practical expedient in Ind AS 115. Accordingly, the Company has not disclosed the aggregate transaction price allocated to unsatisfied (or partially satisfied) performance obligations which pertain to contracts where revenue recognised corresponds to the value transferred to customer typically involving time and materials. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
Based on the contract value agreed and committed with customers, the aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2023''385,998 Million. Out of this, the Company expects to recognise revenue of around 61% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
48 FINANCIAL RISK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''150,893 Million and '' 163,847 Million as of March 31,2023 and March 31, 2022 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2023 and March 31, 2022. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
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.
i. ESOP 2000 & ESOP 2010:
The Company has instituted âEmployee Stock Option Plan 2000â (ESOP 2000) and âEmployee Stock Option Plan 2010â (ESOP 2010) for eligible employees and Directors of the Company and its subsidiaries. The vesting pattern of the schemes has been provided below. The options can be exercised over a period of 5 years from the date of the grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Company at the time of grant for ESOP 2000 and exercise price as determined by the Nomination and remuneration Committee for ESOP 2010.
The Company has instituted âEmployee Stock Option Plan 2006â (ESOP 2006) ,âEmployee Stock Option Plan 2014â (ESOP 2014) and âEmployee Stock Option Plan 2018â (ESOP 2018) for eligible employees and Directors of the Company and its subsidiaries. In terms of the said plan, the Nomination and Remuneration Committee has granted options to the employees of the Company and its subsidiaries. The maximum exercise period is 7 years from the date of grant for ESOP 2006 and options can be exercised over a period of 5 years from the date of each grant for ESOP 2014 and ESOP 2018.
Erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Bâ (ASOP - B) under which 28,925,610 options were available for grant/exercise at the time the Scheme of Amalgamation became effective. Post-merger, these options were adjusted in terms of the approved Scheme of Amalgamation. Each option entitles the holder one equity share of the Company. These options vest over a period of 1 to 4 years from the date of the grant. Upon vesting, employees have 5 years to exercise the options. Postmerger, the name of the ESOP scheme has been changed to âTML ESOP B 2013â.
The erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Restricted Stock Units (ASOP - RSUs)â to be administered by the Administrator of the ASOP - RSUs, a committee appointed by the Board of Directors of the erstwhile Satyam in May 2000. Under the scheme, 1,529,412 equity shares (equivalent number of equity shares post-merger) are reserved to be issued to eligible associates at a price to be determined by the Administrator which shall not be less than the face value of the share. These RSUs vest over a period of 1 to 4 years from the date of the grant. The maximum time available to exercise the options upon vesting is five years from the date of each vesting. Post-merger, the name of the ESOP scheme has been changed to TML RSU.
Erstwhile Satyam had established an ESOP scheme viz., âAssociate Stock Option Plan - Aâ (ASOP - A) formulated prior to the SEBI Guidelines on ESOP and ESPS issued in 1999. This plan was administered through a Trust viz., Satyam Associates Trust (Satyam Trust). At the time the Scheme of Amalgamation and Arrangement became effective, the Satyam Trust was holding 2,055,320 shares of erstwhile Satyam, which post amalgamation were converted into 241,802 shares of the Company at the approved share exchange ratio and this scheme has been transitioned and renamed as ESOP-A. Satyam Trust grants warrants to the employees of the Company with an exercise price and terms of vesting advised by the Nomination and Remuneration Committee of the Company. Each warrant shall entitle the warrant holder to one equity share. The exercise period is 180 days from the date of each vesting.
Erstwhile MESL has established Employee Stock Option Scheme (ESOS) - ESOS for which 1,400,000 equity shares were earmarked. ESOS Scheme is administered through a Trust viz., MES Employees Stock Option Trust. The options under this Scheme vest over a period of 1 to 3 years from the date of the grant. Upon vesting, employees have 7 years to exercise the options. As on the effective date of amalgamation, 18,084 options were outstanding under ESOS, which were converted into equivalent 30,144 options of the Company giving effect to approved share exchange ratio, split and bonus.
x. The employee stock compensation cost for the Employee Stock Option Plan 2018, Employee Stock Option Plan 2010, Employee Stock Option Plan 2000, Employee Stock Option Plan- B 2013, ESOP-A, ESOP 2014 and TML-RSU schemes has been computed by reference to the fair value of share options granted and amortized over each vesting period. For the period ended March 31, 2023, the Company has accounted for employee stock compensation cost (equity settled) amounting to '' 677 Million (March 31, 2022: '' 712 Million). This amount is net of cost of options granted to employees of subsidiaries.
ii. The Company has not advanced or loaned or invested funds to any other person(s) or entities, including foreign entities (Intermediaries) with the understanding that the Intermediary shall: (a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or (b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
The Company has not received any fund from any person(s) or entities, including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall: (a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or (b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
iii. The Company does not have any transaction which is not recorded in the books of account that has been
surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.
iv. The Company has complied with the number of layers for its holding in downstream companies prescribed under clause (87) of section 2 of the Companies Act, 2013 read with the Companies (Restriction on number of Layers) Rules, 2017.
v. The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
vi. The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the
statutory period.
Mar 31, 2022
Note: For the purposes of impairment assessment, goodwill is allocated to the operating divisions which represent the lowest level within the Company at which goodwill is monitored for internal management purposes, which is not higher than the operating segments. The recoverable amount of the unit is determined based on discounted cash flows and the key assumptions used are discount rate, budgeted growth rates and terminal value growth rate. The estimated recoverable amount of the unit exceeds the carrying amount of goodwill for the respective cash generating units. Refer note 32.2 for details of the respective cash generating units.
Note :
i) I nvestment in these entities is not denominated in number of shares as per laws of country of incorporation i.e. The Peopleâs Republic of China and Vietnam.
ii) The number of shares held in Tech Mahindra De Mexico, S.DE R.L.DE C.V. comprise 1 share (March 31, 2021- 1) each of Peso 2,999 and Peso 1; fully paid up of Series A (fixed capital) and 1 share (March 31, 2021 - 1) of Peso 12,931,770 fully paid up of Series B (variable capital).
iii) The number of shares held in Sofgen Holdings Limited comprise 13,739,910 Ordinary shares (March 31, 2021 -5,362,910) and 27,062 shares of Class A (March 31, 2021 - 27,062).
iv) The number of shares held in The Bio Agency Limited comprise 1 Class A Ordinary shares (March 31, 2021 - 102,000) and 1 Class B Ordinary shares (March 31, 2021 - 18,000)
v) As per the Scheme of merger of the Company with Mahindra Satyam Computer Services Limited with effect from June 24, 2013, the Company had created TML Benefit Trust (Trust) as per the merger order. As per the scheme, the Company transferred, out of its total holding in Satyam as on April 1, 2011; 204 Million equity shares to the Trust, to hold the shares and any additions thereto exclusively for the benefit of the Company. Post-merger with the Company these shares were converted into Tech Mahindra Limitedâs shares in the ratio of 2: 17. As of date, post bonus and split approved by the shareholders from time to time by the Company; the Trust holds 94,235,629 (March 2021: 94,235,629) shares of the Company.
vi) During the year, Tech Mahindra London Limited has converted Preference shares 46,961,578 into 46,961,578 Ordinary shares.
vii) Amounts less than '' 0.5 Million are reported as â0â
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 54 for details relating to stock options.
iii) On April 26, 2021 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 and shareholders at the Annual General Meeting held on 30 July 2021 approved the dividend amounting to '' 29,074 Million which is paid in the month of August 2021 . Further, special dividend of '' 15 per equity share which was approved on 25 October 2021 and paid in the month of December 2021 amounting to '' 14,550 Million. The amount is recognized as distribution to equity shareholders.
On May 13, 2022 the Board of Directors of the Company have proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2022 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 29,155 Million
iv) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
The estimated amount of contracts remaining to be executed on capital account (net of capital advances)
as at March 31, 2022 is '' 2,318 Million. (March 31, 2021: '' 2,050 Million).
i) Pursuant to a share purchase agreement, the Company acquired 51% stake in Cerium Systems Private Limited ("Ceriumâ) on April 9, 2020 for a total consideration of '' 1,454 Million, out of which '' 916 Million was paid upfront. Further, the Company has entered into an agreement to purchase the remaining 49% stake over a period of three-year, ending March 31, 2023.
Subsequently, the Company paid '' 1,061 Million for acquiring 20% stake and earnout payment for first tranche. As at March 31, 2022, the contractual obligation towards the acquisition amounts to '' 3,320 Million. (March 31,2021, '' 1,957 Million)
ii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Zen3 Infosolutions Private Limited on April 9, 2020 for a consideration of '' 141 Million.
iii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Perigord Premedia (India) Private Limited and Perigord Data Solutions (India) Private Limited on March 15, 2021 for a consideration of '' 133 million and '' 101 million, respectively.
iv) Pursuant to a business purchase agreement, the Company acquired the business of TransSys Technologies Solutions LLC and its group companies ("TransSys Groupâ) in October 2020 for a consideration of USD 4.84 million ('' 354 million) (upfront consideration of USD 3.9 million ('' 291 Million) and contingent consideration linked to financial performance).
v) Pursuant to a share purchase agreement, the Company acquired 100% stake in Allyis India Private Limited on December 31, 2021 for a consideration of USD 2.6 Million ('' 194 Million).
vi) Pursuant to a business purchase agreement, the Company acquired the business of M/s BrainScale on December 03, 2021 for a total consideration of '' 154 Million.
vii) Pursuant to a business purchase agreement, the Company acquired the business of Lodestone Software Services Private Limited on October 25, 2021 for a consideration of USD 6.7 Million ('' 497.5 million).
i. Bank Guarantees outstanding as at March 31,2022: '' 22,504 Million (March 31, 2021: '' 22,811 Million).
ii. Letters of support/letters of comfort of USD 94 Million: ''7,162 Million (March 31, 2021: USD 94 Million, '' 6,836 Million) to banks for loans availed by step down subsidiaries of the Company.
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011, the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was compiled by erstwhile Satyam. The BG has been extended up to October 14, 2022.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
⢠In August 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,928 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: '' 1,480 Million (March 31, 2021 '' 1,458 Million).
ii. Claims made on the Company not acknowledged as debt: '' 297 Million (March 31,2021 '' 231 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Other contingencies '' 407 Million (March 31, 2021 '' 407 Million).
33 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
36 MERGER/AMALGAMATION OF ENTITIES
The Board of Directors of the Company at its meeting held on January 29, 2021 have approved the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited, two wholly owned subsidiaries with the Company. Subsequently, the Company has filed the application with Honâble jurisdictional National Company Law Board Tribunal ("the NCLTâ). As on the date of the standalone financial statements, the Company is awaiting the order from the NCLT.
37 DIMINUTIO N IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2022.
Since the recoverable amount determined was lower than the carrying value ofthe respective investment, the Company has recognized an impairment loss of '' 4,669 Million for the year ended March 31, 2022 (March 31, 2021 '' 1,439 Million). Details of these investments are:
Estimates of future cash flows used in the value-in-use calculation are specific to the entity based on business plans. The future cash flows consider potential risks given the current economic environment and key assumptions, such as volume forecasts and margins. The discount rate used in the calculation reflects marketâs assessment of the risks specific to the asset as well as time value of money.
The financial projections and future cash flows basis which investments have been tested for impairment consider the present economic situation which includes reassessment of the discount rates, revisiting the growth rates factored while arriving at terminal value and subjecting these variables to sensitivity analysis.
38 A. CERTAIN MATTERS RELATING TO ERSTWHILE SATYAM COMPUTER SERVICES LIMITED (ERSTWHILE SATYAM):
I n the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtors position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
I n 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD
39.2 Million; and
b) non-realisation and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
B. Proceedings in relation to âAlleged Advancesâ
Erstwhile Satyam had, in the past, received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed with legal notices claiming repayment of the alleged advances aggregating to '' 12,304 Million together with damages/compensation @ 18% per annum till the date of repayment. The erstwhile Satyam had not acknowledged any liability and replied to the legal notices stating that the claims are not legally tenable.
Subsequently, the 37 companies filed petitions for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court of Andhra Pradesh in its Order approving the merger of the erstwhile Satyam with the Company, held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile
Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in the names of the said 37 companies and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved. The matter is pending final adjudication.
Appeals were filed before the Division Bench of the Honâble High Court of Andhra Pradesh against the Order of the single judge of the Honâble High Court of Andhra Pradesh sanctioning the Scheme of merger of erstwhile Satyam with the Company w.e.f. April 1, 2011, which are yet to be heard.
Further, petition was filed by the 37 companies for winding-up of the erstwhile Satyam with the Honâble High Court of Andhra Pradesh which was subsequently rejected. One of the aforesaid companies also filed an appeal against the said order with the Division Bench of the Honâble High Court of Andhra Pradesh.
These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions.
In view of the aforesaid and based on an independent legal opinion, current legal status and lack of documentation to support the validity of the claim, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon will not be payable on final adjudication. As endorsed by the Honâble High Court in the scheme of merger, the said amount of '' 12,304 Million has been disclosed as "Amounts pending investigation suspense account (net)â ("Suspense Account (net)â), which override the relevant requirement of Conceptual Framework for Financial Reporting under Indian Accounting Standards (Ind AS). Accordingly, the amounts of these alleged advances are recorded separately from equity and liability of the Company in the books of account.
39 CLAIMS BY CERTAIN SHAREHOLDERS OF ERSTWHILE SATYAM
In terms of the Settlement of claims made by Aberdeen Asset Management PLC., UK and Aberdeen Claims Administration Inc., USA, (together referred to as âAberdeenâ) the erstwhile Satyam had deposited a total amount of USD 80.16 Million towards the Settlement Amount and interest in an Escrow Account during the financial year ended March 31, 2013.
I n the meanwhile, Commissioner of Income Tax Mumbai has filed two writ petitions before the Honâble High Court of Bombay, seeking to set aside the orders of Authority for Advance Ruling dated February 15, 2016, which ruled that no withholding tax is applicable for remittance of Settlement Amount. The above writ petitions have been disposed off by the Prothonotary authority of non-removal of office objections.
Considering the disposal of writs filed by the Commissioner of Income Tax Mumbai and no subsequent action being taken by the Income tax department to restore such writs / file fresh writ petitions before the Honâble High Court of Bombay, the Company have obtained letters of indemnity from the claimants, indemnifying the Company in regard to future actions by Indian Income tax department in the current year and consequently remitted the Settlement amounts to Aberdeen trusts.
40 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honor the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
I n the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order Before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
The company has not revalued any Property, Plant and Equipment, Investment Property and intangible property during the year.
42 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
43 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
45 DETAILS OF EMPLOYEE BENEFITS AS REQUIRED BY THE IND AS-19 - EMPLOYEE BENEFITS ARE AS UNDER:i. Defined Contribution Plans
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠'' 71 Million (March 31, 2021: '' 38 Million) for National Pension Scheme contributions.
⢠'' 461 Million (March 31, 2021: '' 357 Million) for Superannuation Fund contributions; and
⢠'' 4053 Million (March 31, 2021: '' 2,771 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognised as of the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation for contracts where the entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entityâs performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2022 other than those meeting the exclusion criteria mentioned above, is '' 358,110 Million. Out of this, the Company expects to recognise revenue of around 54% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
Changes in the contract assets balances during the year ended March 31, 2022 and March 31, 2021 are as follows:
Reconciliation of revenue recognised in the statement of profit and loss with the contracted price:
The Company has recognized revenue of '' 347,261 Million (March 31, 2021 '' 296,409 Million) which is adjusted by discounts of ''9,619 Million (March 31, 2021 '' 12,555 Million) for the year ended March 31, 2022.
The total cash outflow for leases is ''1,199 Million (March 31, 2021 '' 1,262 Million) for the year ended March 31, 2022, including cash outflow for short term and low value leases.
The Company has given land and building on operating lease. The rental income recognized in the Statement of Profit and Loss for the year ended March 31, 2022 is ''349 Million (year ended March 31, 2021: '' 306 Million). The future lease rentals receivable on such non-cancellable operating leases are as follows:
50 FINANCIAL RISK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
*The fair value of cash and cash equivalents, other balances with bank, trade receivables, unbilled receivables, loans, trade payables, borrowings, lease liabilities and certain other financial assets and liabilities approximate their carrying amount largely due to the short term nature of these instruments.
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''158,353 and '' 189,975 Million as of March 31, 2022 and March 31, 2021 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2022 and March 31, 2021. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The carrying amounts of the Companyâs foreign currency denominated monetary assets and monetary liabilities at the end of the year are as follows:
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
The following are the principal amounts of outstanding foreign currency exchange forward and option contracts entered into by the Company which have been designated as Cash Flow Hedges:
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.
There are bank guarantee/corporate guarantee contracts, letters of support/letters of comfort issued on behalf of related parties amounting to '' '' 22,068 Million (March 31, 2021: '' 22,035 Million).
Amounts less than '' 0.5 Million are reported as "0â
Refer Note 8 for closing balance of investment. The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017
Note: Disclosure of entity wise balances are given for material transactions within each category.
i. ESOP 2000 & ESOP 2010:
The Company has instituted âEmployee Stock Option Plan 2000â (ESOP 2000) and âEmployee Stock Option Plan 2010â (ESOP 2010) for eligible employees and Directors of the Company and its subsidiaries. The vesting pattern of the schemes has been provided below. The options can be exercised over a period of 5 years from the date of the grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Company at the time of grant for ESOP 2000 and exercise price as determined by the Nomination and remuneration Committee for ESOP 2010.
The Company has instituted âEmployee Stock Option Plan 2006â (ESOP 2006) ,âEmployee Stock Option Plan 2014â (ESOP 2014) and âEmployee Stock Option Plan 2018â (ESOP 2018) for eligible employees and Directors of the Company and its subsidiaries. In terms of the said plan, the Nomination and Remuneration Committee has granted options to the employees of the Company and its subsidiaries. The maximum exercise period is 7 years from the date of grant for ESOP 2006 and options can be exercised over a period of 5 years from the date of each grant for ESOP 2014 and ESOP 2018.
iii. TML ESOP - B 2013:
Erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Bâ (ASOP - B) under which 28,925,610 options were available for grant/exercise at the time the Scheme of Amalgamation became effective. Post-merger, these options were adjusted in terms of the approved Scheme of Amalgamation. Each option entitles the holder one equity share of the Company. These options vest over a period of 1 to 4 years from the date of the grant. Upon vesting, employees have 5 years to exercise the options. Postmerger, the name of the ESOP scheme has been changed to âTML ESOP B 2013â.
The erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Restricted Stock Units (ASOP - RSUs)â to be administered by the Administrator of the ASOP - RSUs, a committee appointed by the Board of Directors of the erstwhile Satyam in May 2000. Under the scheme, 1,529,412 equity shares (equivalent number of equity shares post-merger) are reserved to be issued to eligible associates at a
price to be determined by the Administrator which shall not be less than the face value of the share. These RSUs vest over a period of 1 to 4 years from the date of the grant. The maximum time available to exercise the options upon vesting is five years from the date of each vesting. Post-merger, the name of the ESOP scheme has been changed to TML RSU.
Erstwhile Satyam had established an ESOP scheme viz., âAssociate Stock Option Plan - Aâ (ASOP - A) formulated prior to the SEBI Guidelines on ESOP and ESPS issued in 1999. This plan was administered through a Trust viz., Satyam Associates Trust (Satyam Trust). At the time the Scheme of Amalgamation and Arrangement became effective, the Satyam Trust was holding 2,055,320 shares of erstwhile Satyam, which post amalgamation were converted into 241,802 shares of the Company at the approved share exchange ratio and this scheme has been transitioned and renamed as ESOP-A. Satyam Trust grants warrants to the employees of the Company with an exercise price and terms of vesting advised by the Nomination and Remuneration Committee of the Company. Each warrant shall entitle the warrant holder to one equity share. The exercise period is 180 days from the date of each vesting.
Erstwhile MESL has established Employee Stock Option Scheme (ESOS) - ESOS for which 1,400,000 equity shares were earmarked. ESOS Scheme is administered through a Trust viz., MES Employees Stock Option Trust. The options under this Scheme vest over a period of 1 to 3 years from the date of the grant. Upon vesting, employees have 7 years to exercise the options. As on the effective date of amalgamation, 18,084 options were outstanding under ESOS, which were converted into equivalent 30,144 options of the Company giving effect to approved share exchange ratio, split and bonus.
x. The employee stock compensation cost for the Employee Stock Option Plan 2018, Employee Stock Option Plan 2010, Employee Stock Option Plan 2000, Employee Stock Option Plan- B 2013, ESOP-A, ESOP 2014 and TML-RSU schemes has been computed by reference to the fair value of share options granted and amortized over each vesting period. For the period ended March 31, 2022, the Company has accounted for employee stock compensation cost (equity settled) amounting to '' 712 Million (March 31, 2021: '' 1,039 Million). This amount is net of cost of options granted to employees of subsidiaries.
Mar 31, 2022
Note: For the purposes of impairment assessment, goodwill is allocated to the operating divisions which represent the lowest level within the Company at which goodwill is monitored for internal management purposes, which is not higher than the operating segments. The recoverable amount of the unit is determined based on discounted cash flows and the key assumptions used are discount rate, budgeted growth rates and terminal value growth rate. The estimated recoverable amount of the unit exceeds the carrying amount of goodwill for the respective cash generating units. Refer note 32.2 for details of the respective cash generating units.
Note :
i) I nvestment in these entities is not denominated in number of shares as per laws of country of incorporation i.e. The Peopleâs Republic of China and Vietnam.
ii) The number of shares held in Tech Mahindra De Mexico, S.DE R.L.DE C.V. comprise 1 share (March 31, 2021- 1) each of Peso 2,999 and Peso 1; fully paid up of Series A (fixed capital) and 1 share (March 31, 2021 - 1) of Peso 12,931,770 fully paid up of Series B (variable capital).
iii) The number of shares held in Sofgen Holdings Limited comprise 13,739,910 Ordinary shares (March 31, 2021 -5,362,910) and 27,062 shares of Class A (March 31, 2021 - 27,062).
iv) The number of shares held in The Bio Agency Limited comprise 1 Class A Ordinary shares (March 31, 2021 - 102,000) and 1 Class B Ordinary shares (March 31, 2021 - 18,000)
v) As per the Scheme of merger of the Company with Mahindra Satyam Computer Services Limited with effect from June 24, 2013, the Company had created TML Benefit Trust (Trust) as per the merger order. As per the scheme, the Company transferred, out of its total holding in Satyam as on April 1, 2011; 204 Million equity shares to the Trust, to hold the shares and any additions thereto exclusively for the benefit of the Company. Post-merger with the Company these shares were converted into Tech Mahindra Limitedâs shares in the ratio of 2: 17. As of date, post bonus and split approved by the shareholders from time to time by the Company; the Trust holds 94,235,629 (March 2021: 94,235,629) shares of the Company.
vi) During the year, Tech Mahindra London Limited has converted Preference shares 46,961,578 into 46,961,578 Ordinary shares.
vii) Amounts less than '' 0.5 Million are reported as â0â
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 54 for details relating to stock options.
iii) On April 26, 2021 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 and shareholders at the Annual General Meeting held on 30 July 2021 approved the dividend amounting to '' 29,074 Million which is paid in the month of August 2021 . Further, special dividend of '' 15 per equity share which was approved on 25 October 2021 and paid in the month of December 2021 amounting to '' 14,550 Million. The amount is recognized as distribution to equity shareholders.
On May 13, 2022 the Board of Directors of the Company have proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2022 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 29,155 Million
iv) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
The estimated amount of contracts remaining to be executed on capital account (net of capital advances)
as at March 31, 2022 is '' 2,318 Million. (March 31, 2021: '' 2,050 Million).
i) Pursuant to a share purchase agreement, the Company acquired 51% stake in Cerium Systems Private Limited ("Ceriumâ) on April 9, 2020 for a total consideration of '' 1,454 Million, out of which '' 916 Million was paid upfront. Further, the Company has entered into an agreement to purchase the remaining 49% stake over a period of three-year, ending March 31, 2023.
Subsequently, the Company paid '' 1,061 Million for acquiring 20% stake and earnout payment for first tranche. As at March 31, 2022, the contractual obligation towards the acquisition amounts to '' 3,320 Million. (March 31,2021, '' 1,957 Million)
ii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Zen3 Infosolutions Private Limited on April 9, 2020 for a consideration of '' 141 Million.
iii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Perigord Premedia (India) Private Limited and Perigord Data Solutions (India) Private Limited on March 15, 2021 for a consideration of '' 133 million and '' 101 million, respectively.
iv) Pursuant to a business purchase agreement, the Company acquired the business of TransSys Technologies Solutions LLC and its group companies ("TransSys Groupâ) in October 2020 for a consideration of USD 4.84 million ('' 354 million) (upfront consideration of USD 3.9 million ('' 291 Million) and contingent consideration linked to financial performance).
v) Pursuant to a share purchase agreement, the Company acquired 100% stake in Allyis India Private Limited on December 31, 2021 for a consideration of USD 2.6 Million ('' 194 Million).
vi) Pursuant to a business purchase agreement, the Company acquired the business of M/s BrainScale on December 03, 2021 for a total consideration of '' 154 Million.
vii) Pursuant to a business purchase agreement, the Company acquired the business of Lodestone Software Services Private Limited on October 25, 2021 for a consideration of USD 6.7 Million ('' 497.5 million).
i. Bank Guarantees outstanding as at March 31,2022: '' 22,504 Million (March 31, 2021: '' 22,811 Million).
ii. Letters of support/letters of comfort of USD 94 Million: ''7,162 Million (March 31, 2021: USD 94 Million, '' 6,836 Million) to banks for loans availed by step down subsidiaries of the Company.
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011, the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was compiled by erstwhile Satyam. The BG has been extended up to October 14, 2022.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
⢠In August 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,928 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: '' 1,480 Million (March 31, 2021 '' 1,458 Million).
ii. Claims made on the Company not acknowledged as debt: '' 297 Million (March 31,2021 '' 231 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Other contingencies '' 407 Million (March 31, 2021 '' 407 Million).
33 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
36 MERGER/AMALGAMATION OF ENTITIES
The Board of Directors of the Company at its meeting held on January 29, 2021 have approved the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited, two wholly owned subsidiaries with the Company. Subsequently, the Company has filed the application with Honâble jurisdictional National Company Law Board Tribunal ("the NCLTâ). As on the date of the standalone financial statements, the Company is awaiting the order from the NCLT.
37 DIMINUTIO N IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2022.
Since the recoverable amount determined was lower than the carrying value ofthe respective investment, the Company has recognized an impairment loss of '' 4,669 Million for the year ended March 31, 2022 (March 31, 2021 '' 1,439 Million). Details of these investments are:
Estimates of future cash flows used in the value-in-use calculation are specific to the entity based on business plans. The future cash flows consider potential risks given the current economic environment and key assumptions, such as volume forecasts and margins. The discount rate used in the calculation reflects marketâs assessment of the risks specific to the asset as well as time value of money.
The financial projections and future cash flows basis which investments have been tested for impairment consider the present economic situation which includes reassessment of the discount rates, revisiting the growth rates factored while arriving at terminal value and subjecting these variables to sensitivity analysis.
38 A. CERTAIN MATTERS RELATING TO ERSTWHILE SATYAM COMPUTER SERVICES LIMITED (ERSTWHILE SATYAM):
I n the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtors position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
I n 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD
39.2 Million; and
b) non-realisation and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
B. Proceedings in relation to âAlleged Advancesâ
Erstwhile Satyam had, in the past, received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed with legal notices claiming repayment of the alleged advances aggregating to '' 12,304 Million together with damages/compensation @ 18% per annum till the date of repayment. The erstwhile Satyam had not acknowledged any liability and replied to the legal notices stating that the claims are not legally tenable.
Subsequently, the 37 companies filed petitions for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court of Andhra Pradesh in its Order approving the merger of the erstwhile Satyam with the Company, held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile
Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in the names of the said 37 companies and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved. The matter is pending final adjudication.
Appeals were filed before the Division Bench of the Honâble High Court of Andhra Pradesh against the Order of the single judge of the Honâble High Court of Andhra Pradesh sanctioning the Scheme of merger of erstwhile Satyam with the Company w.e.f. April 1, 2011, which are yet to be heard.
Further, petition was filed by the 37 companies for winding-up of the erstwhile Satyam with the Honâble High Court of Andhra Pradesh which was subsequently rejected. One of the aforesaid companies also filed an appeal against the said order with the Division Bench of the Honâble High Court of Andhra Pradesh.
These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions.
In view of the aforesaid and based on an independent legal opinion, current legal status and lack of documentation to support the validity of the claim, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon will not be payable on final adjudication. As endorsed by the Honâble High Court in the scheme of merger, the said amount of '' 12,304 Million has been disclosed as "Amounts pending investigation suspense account (net)â ("Suspense Account (net)â), which override the relevant requirement of Conceptual Framework for Financial Reporting under Indian Accounting Standards (Ind AS). Accordingly, the amounts of these alleged advances are recorded separately from equity and liability of the Company in the books of account.
39 CLAIMS BY CERTAIN SHAREHOLDERS OF ERSTWHILE SATYAM
In terms of the Settlement of claims made by Aberdeen Asset Management PLC., UK and Aberdeen Claims Administration Inc., USA, (together referred to as âAberdeenâ) the erstwhile Satyam had deposited a total amount of USD 80.16 Million towards the Settlement Amount and interest in an Escrow Account during the financial year ended March 31, 2013.
I n the meanwhile, Commissioner of Income Tax Mumbai has filed two writ petitions before the Honâble High Court of Bombay, seeking to set aside the orders of Authority for Advance Ruling dated February 15, 2016, which ruled that no withholding tax is applicable for remittance of Settlement Amount. The above writ petitions have been disposed off by the Prothonotary authority of non-removal of office objections.
Considering the disposal of writs filed by the Commissioner of Income Tax Mumbai and no subsequent action being taken by the Income tax department to restore such writs / file fresh writ petitions before the Honâble High Court of Bombay, the Company have obtained letters of indemnity from the claimants, indemnifying the Company in regard to future actions by Indian Income tax department in the current year and consequently remitted the Settlement amounts to Aberdeen trusts.
40 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honor the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
I n the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order Before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
The company has not revalued any Property, Plant and Equipment, Investment Property and intangible property during the year.
42 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
43 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
45 DETAILS OF EMPLOYEE BENEFITS AS REQUIRED BY THE IND AS-19 - EMPLOYEE BENEFITS ARE AS UNDER:i. Defined Contribution Plans
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠'' 71 Million (March 31, 2021: '' 38 Million) for National Pension Scheme contributions.
⢠'' 461 Million (March 31, 2021: '' 357 Million) for Superannuation Fund contributions; and
⢠'' 4053 Million (March 31, 2021: '' 2,771 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognised as of the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation for contracts where the entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entityâs performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2022 other than those meeting the exclusion criteria mentioned above, is '' 358,110 Million. Out of this, the Company expects to recognise revenue of around 54% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
Changes in the contract assets balances during the year ended March 31, 2022 and March 31, 2021 are as follows:
Reconciliation of revenue recognised in the statement of profit and loss with the contracted price:
The Company has recognized revenue of '' 347,261 Million (March 31, 2021 '' 296,409 Million) which is adjusted by discounts of ''9,619 Million (March 31, 2021 '' 12,555 Million) for the year ended March 31, 2022.
The total cash outflow for leases is ''1,199 Million (March 31, 2021 '' 1,262 Million) for the year ended March 31, 2022, including cash outflow for short term and low value leases.
The Company has given land and building on operating lease. The rental income recognized in the Statement of Profit and Loss for the year ended March 31, 2022 is ''349 Million (year ended March 31, 2021: '' 306 Million). The future lease rentals receivable on such non-cancellable operating leases are as follows:
50 FINANCIAL RISK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
*The fair value of cash and cash equivalents, other balances with bank, trade receivables, unbilled receivables, loans, trade payables, borrowings, lease liabilities and certain other financial assets and liabilities approximate their carrying amount largely due to the short term nature of these instruments.
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''158,353 and '' 189,975 Million as of March 31, 2022 and March 31, 2021 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2022 and March 31, 2021. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The carrying amounts of the Companyâs foreign currency denominated monetary assets and monetary liabilities at the end of the year are as follows:
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
The following are the principal amounts of outstanding foreign currency exchange forward and option contracts entered into by the Company which have been designated as Cash Flow Hedges:
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.
There are bank guarantee/corporate guarantee contracts, letters of support/letters of comfort issued on behalf of related parties amounting to '' '' 22,068 Million (March 31, 2021: '' 22,035 Million).
Amounts less than '' 0.5 Million are reported as "0â
Refer Note 8 for closing balance of investment. The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017
Note: Disclosure of entity wise balances are given for material transactions within each category.
i. ESOP 2000 & ESOP 2010:
The Company has instituted âEmployee Stock Option Plan 2000â (ESOP 2000) and âEmployee Stock Option Plan 2010â (ESOP 2010) for eligible employees and Directors of the Company and its subsidiaries. The vesting pattern of the schemes has been provided below. The options can be exercised over a period of 5 years from the date of the grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Company at the time of grant for ESOP 2000 and exercise price as determined by the Nomination and remuneration Committee for ESOP 2010.
The Company has instituted âEmployee Stock Option Plan 2006â (ESOP 2006) ,âEmployee Stock Option Plan 2014â (ESOP 2014) and âEmployee Stock Option Plan 2018â (ESOP 2018) for eligible employees and Directors of the Company and its subsidiaries. In terms of the said plan, the Nomination and Remuneration Committee has granted options to the employees of the Company and its subsidiaries. The maximum exercise period is 7 years from the date of grant for ESOP 2006 and options can be exercised over a period of 5 years from the date of each grant for ESOP 2014 and ESOP 2018.
iii. TML ESOP - B 2013:
Erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Bâ (ASOP - B) under which 28,925,610 options were available for grant/exercise at the time the Scheme of Amalgamation became effective. Post-merger, these options were adjusted in terms of the approved Scheme of Amalgamation. Each option entitles the holder one equity share of the Company. These options vest over a period of 1 to 4 years from the date of the grant. Upon vesting, employees have 5 years to exercise the options. Postmerger, the name of the ESOP scheme has been changed to âTML ESOP B 2013â.
The erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Restricted Stock Units (ASOP - RSUs)â to be administered by the Administrator of the ASOP - RSUs, a committee appointed by the Board of Directors of the erstwhile Satyam in May 2000. Under the scheme, 1,529,412 equity shares (equivalent number of equity shares post-merger) are reserved to be issued to eligible associates at a
price to be determined by the Administrator which shall not be less than the face value of the share. These RSUs vest over a period of 1 to 4 years from the date of the grant. The maximum time available to exercise the options upon vesting is five years from the date of each vesting. Post-merger, the name of the ESOP scheme has been changed to TML RSU.
Erstwhile Satyam had established an ESOP scheme viz., âAssociate Stock Option Plan - Aâ (ASOP - A) formulated prior to the SEBI Guidelines on ESOP and ESPS issued in 1999. This plan was administered through a Trust viz., Satyam Associates Trust (Satyam Trust). At the time the Scheme of Amalgamation and Arrangement became effective, the Satyam Trust was holding 2,055,320 shares of erstwhile Satyam, which post amalgamation were converted into 241,802 shares of the Company at the approved share exchange ratio and this scheme has been transitioned and renamed as ESOP-A. Satyam Trust grants warrants to the employees of the Company with an exercise price and terms of vesting advised by the Nomination and Remuneration Committee of the Company. Each warrant shall entitle the warrant holder to one equity share. The exercise period is 180 days from the date of each vesting.
Erstwhile MESL has established Employee Stock Option Scheme (ESOS) - ESOS for which 1,400,000 equity shares were earmarked. ESOS Scheme is administered through a Trust viz., MES Employees Stock Option Trust. The options under this Scheme vest over a period of 1 to 3 years from the date of the grant. Upon vesting, employees have 7 years to exercise the options. As on the effective date of amalgamation, 18,084 options were outstanding under ESOS, which were converted into equivalent 30,144 options of the Company giving effect to approved share exchange ratio, split and bonus.
x. The employee stock compensation cost for the Employee Stock Option Plan 2018, Employee Stock Option Plan 2010, Employee Stock Option Plan 2000, Employee Stock Option Plan- B 2013, ESOP-A, ESOP 2014 and TML-RSU schemes has been computed by reference to the fair value of share options granted and amortized over each vesting period. For the period ended March 31, 2022, the Company has accounted for employee stock compensation cost (equity settled) amounting to '' 712 Million (March 31, 2021: '' 1,039 Million). This amount is net of cost of options granted to employees of subsidiaries.
Mar 31, 2022
Note: For the purposes of impairment assessment, goodwill is allocated to the operating divisions which represent the lowest level within the Company at which goodwill is monitored for internal management purposes, which is not higher than the operating segments. The recoverable amount of the unit is determined based on discounted cash flows and the key assumptions used are discount rate, budgeted growth rates and terminal value growth rate. The estimated recoverable amount of the unit exceeds the carrying amount of goodwill for the respective cash generating units. Refer note 32.2 for details of the respective cash generating units.
Note :
i) I nvestment in these entities is not denominated in number of shares as per laws of country of incorporation i.e. The Peopleâs Republic of China and Vietnam.
ii) The number of shares held in Tech Mahindra De Mexico, S.DE R.L.DE C.V. comprise 1 share (March 31, 2021- 1) each of Peso 2,999 and Peso 1; fully paid up of Series A (fixed capital) and 1 share (March 31, 2021 - 1) of Peso 12,931,770 fully paid up of Series B (variable capital).
iii) The number of shares held in Sofgen Holdings Limited comprise 13,739,910 Ordinary shares (March 31, 2021 -5,362,910) and 27,062 shares of Class A (March 31, 2021 - 27,062).
iv) The number of shares held in The Bio Agency Limited comprise 1 Class A Ordinary shares (March 31, 2021 - 102,000) and 1 Class B Ordinary shares (March 31, 2021 - 18,000)
v) As per the Scheme of merger of the Company with Mahindra Satyam Computer Services Limited with effect from June 24, 2013, the Company had created TML Benefit Trust (Trust) as per the merger order. As per the scheme, the Company transferred, out of its total holding in Satyam as on April 1, 2011; 204 Million equity shares to the Trust, to hold the shares and any additions thereto exclusively for the benefit of the Company. Post-merger with the Company these shares were converted into Tech Mahindra Limitedâs shares in the ratio of 2: 17. As of date, post bonus and split approved by the shareholders from time to time by the Company; the Trust holds 94,235,629 (March 2021: 94,235,629) shares of the Company.
vi) During the year, Tech Mahindra London Limited has converted Preference shares 46,961,578 into 46,961,578 Ordinary shares.
vii) Amounts less than '' 0.5 Million are reported as â0â
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 54 for details relating to stock options.
iii) On April 26, 2021 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 and shareholders at the Annual General Meeting held on 30 July 2021 approved the dividend amounting to '' 29,074 Million which is paid in the month of August 2021 . Further, special dividend of '' 15 per equity share which was approved on 25 October 2021 and paid in the month of December 2021 amounting to '' 14,550 Million. The amount is recognized as distribution to equity shareholders.
On May 13, 2022 the Board of Directors of the Company have proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2022 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 29,155 Million
iv) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
The estimated amount of contracts remaining to be executed on capital account (net of capital advances)
as at March 31, 2022 is '' 2,318 Million. (March 31, 2021: '' 2,050 Million).
i) Pursuant to a share purchase agreement, the Company acquired 51% stake in Cerium Systems Private Limited ("Ceriumâ) on April 9, 2020 for a total consideration of '' 1,454 Million, out of which '' 916 Million was paid upfront. Further, the Company has entered into an agreement to purchase the remaining 49% stake over a period of three-year, ending March 31, 2023.
Subsequently, the Company paid '' 1,061 Million for acquiring 20% stake and earnout payment for first tranche. As at March 31, 2022, the contractual obligation towards the acquisition amounts to '' 3,320 Million. (March 31,2021, '' 1,957 Million)
ii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Zen3 Infosolutions Private Limited on April 9, 2020 for a consideration of '' 141 Million.
iii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Perigord Premedia (India) Private Limited and Perigord Data Solutions (India) Private Limited on March 15, 2021 for a consideration of '' 133 million and '' 101 million, respectively.
iv) Pursuant to a business purchase agreement, the Company acquired the business of TransSys Technologies Solutions LLC and its group companies ("TransSys Groupâ) in October 2020 for a consideration of USD 4.84 million ('' 354 million) (upfront consideration of USD 3.9 million ('' 291 Million) and contingent consideration linked to financial performance).
v) Pursuant to a share purchase agreement, the Company acquired 100% stake in Allyis India Private Limited on December 31, 2021 for a consideration of USD 2.6 Million ('' 194 Million).
vi) Pursuant to a business purchase agreement, the Company acquired the business of M/s BrainScale on December 03, 2021 for a total consideration of '' 154 Million.
vii) Pursuant to a business purchase agreement, the Company acquired the business of Lodestone Software Services Private Limited on October 25, 2021 for a consideration of USD 6.7 Million ('' 497.5 million).
i. Bank Guarantees outstanding as at March 31,2022: '' 22,504 Million (March 31, 2021: '' 22,811 Million).
ii. Letters of support/letters of comfort of USD 94 Million: ''7,162 Million (March 31, 2021: USD 94 Million, '' 6,836 Million) to banks for loans availed by step down subsidiaries of the Company.
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011, the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was compiled by erstwhile Satyam. The BG has been extended up to October 14, 2022.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
⢠In August 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,928 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: '' 1,480 Million (March 31, 2021 '' 1,458 Million).
ii. Claims made on the Company not acknowledged as debt: '' 297 Million (March 31,2021 '' 231 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Other contingencies '' 407 Million (March 31, 2021 '' 407 Million).
33 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
36 MERGER/AMALGAMATION OF ENTITIES
The Board of Directors of the Company at its meeting held on January 29, 2021 have approved the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited, two wholly owned subsidiaries with the Company. Subsequently, the Company has filed the application with Honâble jurisdictional National Company Law Board Tribunal ("the NCLTâ). As on the date of the standalone financial statements, the Company is awaiting the order from the NCLT.
37 DIMINUTIO N IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2022.
Since the recoverable amount determined was lower than the carrying value ofthe respective investment, the Company has recognized an impairment loss of '' 4,669 Million for the year ended March 31, 2022 (March 31, 2021 '' 1,439 Million). Details of these investments are:
Estimates of future cash flows used in the value-in-use calculation are specific to the entity based on business plans. The future cash flows consider potential risks given the current economic environment and key assumptions, such as volume forecasts and margins. The discount rate used in the calculation reflects marketâs assessment of the risks specific to the asset as well as time value of money.
The financial projections and future cash flows basis which investments have been tested for impairment consider the present economic situation which includes reassessment of the discount rates, revisiting the growth rates factored while arriving at terminal value and subjecting these variables to sensitivity analysis.
38 A. CERTAIN MATTERS RELATING TO ERSTWHILE SATYAM COMPUTER SERVICES LIMITED (ERSTWHILE SATYAM):
I n the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtors position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
I n 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD
39.2 Million; and
b) non-realisation and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
B. Proceedings in relation to âAlleged Advancesâ
Erstwhile Satyam had, in the past, received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed with legal notices claiming repayment of the alleged advances aggregating to '' 12,304 Million together with damages/compensation @ 18% per annum till the date of repayment. The erstwhile Satyam had not acknowledged any liability and replied to the legal notices stating that the claims are not legally tenable.
Subsequently, the 37 companies filed petitions for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court of Andhra Pradesh in its Order approving the merger of the erstwhile Satyam with the Company, held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile
Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in the names of the said 37 companies and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved. The matter is pending final adjudication.
Appeals were filed before the Division Bench of the Honâble High Court of Andhra Pradesh against the Order of the single judge of the Honâble High Court of Andhra Pradesh sanctioning the Scheme of merger of erstwhile Satyam with the Company w.e.f. April 1, 2011, which are yet to be heard.
Further, petition was filed by the 37 companies for winding-up of the erstwhile Satyam with the Honâble High Court of Andhra Pradesh which was subsequently rejected. One of the aforesaid companies also filed an appeal against the said order with the Division Bench of the Honâble High Court of Andhra Pradesh.
These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions.
In view of the aforesaid and based on an independent legal opinion, current legal status and lack of documentation to support the validity of the claim, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon will not be payable on final adjudication. As endorsed by the Honâble High Court in the scheme of merger, the said amount of '' 12,304 Million has been disclosed as "Amounts pending investigation suspense account (net)â ("Suspense Account (net)â), which override the relevant requirement of Conceptual Framework for Financial Reporting under Indian Accounting Standards (Ind AS). Accordingly, the amounts of these alleged advances are recorded separately from equity and liability of the Company in the books of account.
39 CLAIMS BY CERTAIN SHAREHOLDERS OF ERSTWHILE SATYAM
In terms of the Settlement of claims made by Aberdeen Asset Management PLC., UK and Aberdeen Claims Administration Inc., USA, (together referred to as âAberdeenâ) the erstwhile Satyam had deposited a total amount of USD 80.16 Million towards the Settlement Amount and interest in an Escrow Account during the financial year ended March 31, 2013.
I n the meanwhile, Commissioner of Income Tax Mumbai has filed two writ petitions before the Honâble High Court of Bombay, seeking to set aside the orders of Authority for Advance Ruling dated February 15, 2016, which ruled that no withholding tax is applicable for remittance of Settlement Amount. The above writ petitions have been disposed off by the Prothonotary authority of non-removal of office objections.
Considering the disposal of writs filed by the Commissioner of Income Tax Mumbai and no subsequent action being taken by the Income tax department to restore such writs / file fresh writ petitions before the Honâble High Court of Bombay, the Company have obtained letters of indemnity from the claimants, indemnifying the Company in regard to future actions by Indian Income tax department in the current year and consequently remitted the Settlement amounts to Aberdeen trusts.
40 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honor the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
I n the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order Before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
The company has not revalued any Property, Plant and Equipment, Investment Property and intangible property during the year.
42 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
43 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
45 DETAILS OF EMPLOYEE BENEFITS AS REQUIRED BY THE IND AS-19 - EMPLOYEE BENEFITS ARE AS UNDER:i. Defined Contribution Plans
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠'' 71 Million (March 31, 2021: '' 38 Million) for National Pension Scheme contributions.
⢠'' 461 Million (March 31, 2021: '' 357 Million) for Superannuation Fund contributions; and
⢠'' 4053 Million (March 31, 2021: '' 2,771 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognised as of the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation for contracts where the entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entityâs performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2022 other than those meeting the exclusion criteria mentioned above, is '' 358,110 Million. Out of this, the Company expects to recognise revenue of around 54% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
Changes in the contract assets balances during the year ended March 31, 2022 and March 31, 2021 are as follows:
Reconciliation of revenue recognised in the statement of profit and loss with the contracted price:
The Company has recognized revenue of '' 347,261 Million (March 31, 2021 '' 296,409 Million) which is adjusted by discounts of ''9,619 Million (March 31, 2021 '' 12,555 Million) for the year ended March 31, 2022.
The total cash outflow for leases is ''1,199 Million (March 31, 2021 '' 1,262 Million) for the year ended March 31, 2022, including cash outflow for short term and low value leases.
The Company has given land and building on operating lease. The rental income recognized in the Statement of Profit and Loss for the year ended March 31, 2022 is ''349 Million (year ended March 31, 2021: '' 306 Million). The future lease rentals receivable on such non-cancellable operating leases are as follows:
50 FINANCIAL RISK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
*The fair value of cash and cash equivalents, other balances with bank, trade receivables, unbilled receivables, loans, trade payables, borrowings, lease liabilities and certain other financial assets and liabilities approximate their carrying amount largely due to the short term nature of these instruments.
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''158,353 and '' 189,975 Million as of March 31, 2022 and March 31, 2021 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2022 and March 31, 2021. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The carrying amounts of the Companyâs foreign currency denominated monetary assets and monetary liabilities at the end of the year are as follows:
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
The following are the principal amounts of outstanding foreign currency exchange forward and option contracts entered into by the Company which have been designated as Cash Flow Hedges:
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.
There are bank guarantee/corporate guarantee contracts, letters of support/letters of comfort issued on behalf of related parties amounting to '' '' 22,068 Million (March 31, 2021: '' 22,035 Million).
Amounts less than '' 0.5 Million are reported as "0â
Refer Note 8 for closing balance of investment. The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017
Note: Disclosure of entity wise balances are given for material transactions within each category.
i. ESOP 2000 & ESOP 2010:
The Company has instituted âEmployee Stock Option Plan 2000â (ESOP 2000) and âEmployee Stock Option Plan 2010â (ESOP 2010) for eligible employees and Directors of the Company and its subsidiaries. The vesting pattern of the schemes has been provided below. The options can be exercised over a period of 5 years from the date of the grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Company at the time of grant for ESOP 2000 and exercise price as determined by the Nomination and remuneration Committee for ESOP 2010.
The Company has instituted âEmployee Stock Option Plan 2006â (ESOP 2006) ,âEmployee Stock Option Plan 2014â (ESOP 2014) and âEmployee Stock Option Plan 2018â (ESOP 2018) for eligible employees and Directors of the Company and its subsidiaries. In terms of the said plan, the Nomination and Remuneration Committee has granted options to the employees of the Company and its subsidiaries. The maximum exercise period is 7 years from the date of grant for ESOP 2006 and options can be exercised over a period of 5 years from the date of each grant for ESOP 2014 and ESOP 2018.
iii. TML ESOP - B 2013:
Erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Bâ (ASOP - B) under which 28,925,610 options were available for grant/exercise at the time the Scheme of Amalgamation became effective. Post-merger, these options were adjusted in terms of the approved Scheme of Amalgamation. Each option entitles the holder one equity share of the Company. These options vest over a period of 1 to 4 years from the date of the grant. Upon vesting, employees have 5 years to exercise the options. Postmerger, the name of the ESOP scheme has been changed to âTML ESOP B 2013â.
The erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Restricted Stock Units (ASOP - RSUs)â to be administered by the Administrator of the ASOP - RSUs, a committee appointed by the Board of Directors of the erstwhile Satyam in May 2000. Under the scheme, 1,529,412 equity shares (equivalent number of equity shares post-merger) are reserved to be issued to eligible associates at a
price to be determined by the Administrator which shall not be less than the face value of the share. These RSUs vest over a period of 1 to 4 years from the date of the grant. The maximum time available to exercise the options upon vesting is five years from the date of each vesting. Post-merger, the name of the ESOP scheme has been changed to TML RSU.
Erstwhile Satyam had established an ESOP scheme viz., âAssociate Stock Option Plan - Aâ (ASOP - A) formulated prior to the SEBI Guidelines on ESOP and ESPS issued in 1999. This plan was administered through a Trust viz., Satyam Associates Trust (Satyam Trust). At the time the Scheme of Amalgamation and Arrangement became effective, the Satyam Trust was holding 2,055,320 shares of erstwhile Satyam, which post amalgamation were converted into 241,802 shares of the Company at the approved share exchange ratio and this scheme has been transitioned and renamed as ESOP-A. Satyam Trust grants warrants to the employees of the Company with an exercise price and terms of vesting advised by the Nomination and Remuneration Committee of the Company. Each warrant shall entitle the warrant holder to one equity share. The exercise period is 180 days from the date of each vesting.
Erstwhile MESL has established Employee Stock Option Scheme (ESOS) - ESOS for which 1,400,000 equity shares were earmarked. ESOS Scheme is administered through a Trust viz., MES Employees Stock Option Trust. The options under this Scheme vest over a period of 1 to 3 years from the date of the grant. Upon vesting, employees have 7 years to exercise the options. As on the effective date of amalgamation, 18,084 options were outstanding under ESOS, which were converted into equivalent 30,144 options of the Company giving effect to approved share exchange ratio, split and bonus.
x. The employee stock compensation cost for the Employee Stock Option Plan 2018, Employee Stock Option Plan 2010, Employee Stock Option Plan 2000, Employee Stock Option Plan- B 2013, ESOP-A, ESOP 2014 and TML-RSU schemes has been computed by reference to the fair value of share options granted and amortized over each vesting period. For the period ended March 31, 2022, the Company has accounted for employee stock compensation cost (equity settled) amounting to '' 712 Million (March 31, 2021: '' 1,039 Million). This amount is net of cost of options granted to employees of subsidiaries.
Mar 31, 2022
Note: For the purposes of impairment assessment, goodwill is allocated to the operating divisions which represent the lowest level within the Company at which goodwill is monitored for internal management purposes, which is not higher than the operating segments. The recoverable amount of the unit is determined based on discounted cash flows and the key assumptions used are discount rate, budgeted growth rates and terminal value growth rate. The estimated recoverable amount of the unit exceeds the carrying amount of goodwill for the respective cash generating units. Refer note 32.2 for details of the respective cash generating units.
Note :
i) I nvestment in these entities is not denominated in number of shares as per laws of country of incorporation i.e. The Peopleâs Republic of China and Vietnam.
ii) The number of shares held in Tech Mahindra De Mexico, S.DE R.L.DE C.V. comprise 1 share (March 31, 2021- 1) each of Peso 2,999 and Peso 1; fully paid up of Series A (fixed capital) and 1 share (March 31, 2021 - 1) of Peso 12,931,770 fully paid up of Series B (variable capital).
iii) The number of shares held in Sofgen Holdings Limited comprise 13,739,910 Ordinary shares (March 31, 2021 -5,362,910) and 27,062 shares of Class A (March 31, 2021 - 27,062).
iv) The number of shares held in The Bio Agency Limited comprise 1 Class A Ordinary shares (March 31, 2021 - 102,000) and 1 Class B Ordinary shares (March 31, 2021 - 18,000)
v) As per the Scheme of merger of the Company with Mahindra Satyam Computer Services Limited with effect from June 24, 2013, the Company had created TML Benefit Trust (Trust) as per the merger order. As per the scheme, the Company transferred, out of its total holding in Satyam as on April 1, 2011; 204 Million equity shares to the Trust, to hold the shares and any additions thereto exclusively for the benefit of the Company. Post-merger with the Company these shares were converted into Tech Mahindra Limitedâs shares in the ratio of 2: 17. As of date, post bonus and split approved by the shareholders from time to time by the Company; the Trust holds 94,235,629 (March 2021: 94,235,629) shares of the Company.
vi) During the year, Tech Mahindra London Limited has converted Preference shares 46,961,578 into 46,961,578 Ordinary shares.
vii) Amounts less than '' 0.5 Million are reported as â0â
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 54 for details relating to stock options.
iii) On April 26, 2021 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 and shareholders at the Annual General Meeting held on 30 July 2021 approved the dividend amounting to '' 29,074 Million which is paid in the month of August 2021 . Further, special dividend of '' 15 per equity share which was approved on 25 October 2021 and paid in the month of December 2021 amounting to '' 14,550 Million. The amount is recognized as distribution to equity shareholders.
On May 13, 2022 the Board of Directors of the Company have proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2022 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 29,155 Million
iv) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
The estimated amount of contracts remaining to be executed on capital account (net of capital advances)
as at March 31, 2022 is '' 2,318 Million. (March 31, 2021: '' 2,050 Million).
i) Pursuant to a share purchase agreement, the Company acquired 51% stake in Cerium Systems Private Limited ("Ceriumâ) on April 9, 2020 for a total consideration of '' 1,454 Million, out of which '' 916 Million was paid upfront. Further, the Company has entered into an agreement to purchase the remaining 49% stake over a period of three-year, ending March 31, 2023.
Subsequently, the Company paid '' 1,061 Million for acquiring 20% stake and earnout payment for first tranche. As at March 31, 2022, the contractual obligation towards the acquisition amounts to '' 3,320 Million. (March 31,2021, '' 1,957 Million)
ii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Zen3 Infosolutions Private Limited on April 9, 2020 for a consideration of '' 141 Million.
iii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Perigord Premedia (India) Private Limited and Perigord Data Solutions (India) Private Limited on March 15, 2021 for a consideration of '' 133 million and '' 101 million, respectively.
iv) Pursuant to a business purchase agreement, the Company acquired the business of TransSys Technologies Solutions LLC and its group companies ("TransSys Groupâ) in October 2020 for a consideration of USD 4.84 million ('' 354 million) (upfront consideration of USD 3.9 million ('' 291 Million) and contingent consideration linked to financial performance).
v) Pursuant to a share purchase agreement, the Company acquired 100% stake in Allyis India Private Limited on December 31, 2021 for a consideration of USD 2.6 Million ('' 194 Million).
vi) Pursuant to a business purchase agreement, the Company acquired the business of M/s BrainScale on December 03, 2021 for a total consideration of '' 154 Million.
vii) Pursuant to a business purchase agreement, the Company acquired the business of Lodestone Software Services Private Limited on October 25, 2021 for a consideration of USD 6.7 Million ('' 497.5 million).
i. Bank Guarantees outstanding as at March 31,2022: '' 22,504 Million (March 31, 2021: '' 22,811 Million).
ii. Letters of support/letters of comfort of USD 94 Million: ''7,162 Million (March 31, 2021: USD 94 Million, '' 6,836 Million) to banks for loans availed by step down subsidiaries of the Company.
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011, the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was compiled by erstwhile Satyam. The BG has been extended up to October 14, 2022.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
⢠In August 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,928 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: '' 1,480 Million (March 31, 2021 '' 1,458 Million).
ii. Claims made on the Company not acknowledged as debt: '' 297 Million (March 31,2021 '' 231 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Other contingencies '' 407 Million (March 31, 2021 '' 407 Million).
33 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
36 MERGER/AMALGAMATION OF ENTITIES
The Board of Directors of the Company at its meeting held on January 29, 2021 have approved the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited, two wholly owned subsidiaries with the Company. Subsequently, the Company has filed the application with Honâble jurisdictional National Company Law Board Tribunal ("the NCLTâ). As on the date of the standalone financial statements, the Company is awaiting the order from the NCLT.
37 DIMINUTIO N IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2022.
Since the recoverable amount determined was lower than the carrying value ofthe respective investment, the Company has recognized an impairment loss of '' 4,669 Million for the year ended March 31, 2022 (March 31, 2021 '' 1,439 Million). Details of these investments are:
Estimates of future cash flows used in the value-in-use calculation are specific to the entity based on business plans. The future cash flows consider potential risks given the current economic environment and key assumptions, such as volume forecasts and margins. The discount rate used in the calculation reflects marketâs assessment of the risks specific to the asset as well as time value of money.
The financial projections and future cash flows basis which investments have been tested for impairment consider the present economic situation which includes reassessment of the discount rates, revisiting the growth rates factored while arriving at terminal value and subjecting these variables to sensitivity analysis.
38 A. CERTAIN MATTERS RELATING TO ERSTWHILE SATYAM COMPUTER SERVICES LIMITED (ERSTWHILE SATYAM):
I n the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtors position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
I n 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD
39.2 Million; and
b) non-realisation and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
B. Proceedings in relation to âAlleged Advancesâ
Erstwhile Satyam had, in the past, received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed with legal notices claiming repayment of the alleged advances aggregating to '' 12,304 Million together with damages/compensation @ 18% per annum till the date of repayment. The erstwhile Satyam had not acknowledged any liability and replied to the legal notices stating that the claims are not legally tenable.
Subsequently, the 37 companies filed petitions for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court of Andhra Pradesh in its Order approving the merger of the erstwhile Satyam with the Company, held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile
Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in the names of the said 37 companies and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved. The matter is pending final adjudication.
Appeals were filed before the Division Bench of the Honâble High Court of Andhra Pradesh against the Order of the single judge of the Honâble High Court of Andhra Pradesh sanctioning the Scheme of merger of erstwhile Satyam with the Company w.e.f. April 1, 2011, which are yet to be heard.
Further, petition was filed by the 37 companies for winding-up of the erstwhile Satyam with the Honâble High Court of Andhra Pradesh which was subsequently rejected. One of the aforesaid companies also filed an appeal against the said order with the Division Bench of the Honâble High Court of Andhra Pradesh.
These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions.
In view of the aforesaid and based on an independent legal opinion, current legal status and lack of documentation to support the validity of the claim, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon will not be payable on final adjudication. As endorsed by the Honâble High Court in the scheme of merger, the said amount of '' 12,304 Million has been disclosed as "Amounts pending investigation suspense account (net)â ("Suspense Account (net)â), which override the relevant requirement of Conceptual Framework for Financial Reporting under Indian Accounting Standards (Ind AS). Accordingly, the amounts of these alleged advances are recorded separately from equity and liability of the Company in the books of account.
39 CLAIMS BY CERTAIN SHAREHOLDERS OF ERSTWHILE SATYAM
In terms of the Settlement of claims made by Aberdeen Asset Management PLC., UK and Aberdeen Claims Administration Inc., USA, (together referred to as âAberdeenâ) the erstwhile Satyam had deposited a total amount of USD 80.16 Million towards the Settlement Amount and interest in an Escrow Account during the financial year ended March 31, 2013.
I n the meanwhile, Commissioner of Income Tax Mumbai has filed two writ petitions before the Honâble High Court of Bombay, seeking to set aside the orders of Authority for Advance Ruling dated February 15, 2016, which ruled that no withholding tax is applicable for remittance of Settlement Amount. The above writ petitions have been disposed off by the Prothonotary authority of non-removal of office objections.
Considering the disposal of writs filed by the Commissioner of Income Tax Mumbai and no subsequent action being taken by the Income tax department to restore such writs / file fresh writ petitions before the Honâble High Court of Bombay, the Company have obtained letters of indemnity from the claimants, indemnifying the Company in regard to future actions by Indian Income tax department in the current year and consequently remitted the Settlement amounts to Aberdeen trusts.
40 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honor the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
I n the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order Before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
The company has not revalued any Property, Plant and Equipment, Investment Property and intangible property during the year.
42 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
43 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
45 DETAILS OF EMPLOYEE BENEFITS AS REQUIRED BY THE IND AS-19 - EMPLOYEE BENEFITS ARE AS UNDER:i. Defined Contribution Plans
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠'' 71 Million (March 31, 2021: '' 38 Million) for National Pension Scheme contributions.
⢠'' 461 Million (March 31, 2021: '' 357 Million) for Superannuation Fund contributions; and
⢠'' 4053 Million (March 31, 2021: '' 2,771 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognised as of the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation for contracts where the entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entityâs performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2022 other than those meeting the exclusion criteria mentioned above, is '' 358,110 Million. Out of this, the Company expects to recognise revenue of around 54% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
Changes in the contract assets balances during the year ended March 31, 2022 and March 31, 2021 are as follows:
Reconciliation of revenue recognised in the statement of profit and loss with the contracted price:
The Company has recognized revenue of '' 347,261 Million (March 31, 2021 '' 296,409 Million) which is adjusted by discounts of ''9,619 Million (March 31, 2021 '' 12,555 Million) for the year ended March 31, 2022.
The total cash outflow for leases is ''1,199 Million (March 31, 2021 '' 1,262 Million) for the year ended March 31, 2022, including cash outflow for short term and low value leases.
The Company has given land and building on operating lease. The rental income recognized in the Statement of Profit and Loss for the year ended March 31, 2022 is ''349 Million (year ended March 31, 2021: '' 306 Million). The future lease rentals receivable on such non-cancellable operating leases are as follows:
50 FINANCIAL RISK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
*The fair value of cash and cash equivalents, other balances with bank, trade receivables, unbilled receivables, loans, trade payables, borrowings, lease liabilities and certain other financial assets and liabilities approximate their carrying amount largely due to the short term nature of these instruments.
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''158,353 and '' 189,975 Million as of March 31, 2022 and March 31, 2021 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2022 and March 31, 2021. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The carrying amounts of the Companyâs foreign currency denominated monetary assets and monetary liabilities at the end of the year are as follows:
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
The following are the principal amounts of outstanding foreign currency exchange forward and option contracts entered into by the Company which have been designated as Cash Flow Hedges:
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.
There are bank guarantee/corporate guarantee contracts, letters of support/letters of comfort issued on behalf of related parties amounting to '' '' 22,068 Million (March 31, 2021: '' 22,035 Million).
Amounts less than '' 0.5 Million are reported as "0â
Refer Note 8 for closing balance of investment. The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017
Note: Disclosure of entity wise balances are given for material transactions within each category.
i. ESOP 2000 & ESOP 2010:
The Company has instituted âEmployee Stock Option Plan 2000â (ESOP 2000) and âEmployee Stock Option Plan 2010â (ESOP 2010) for eligible employees and Directors of the Company and its subsidiaries. The vesting pattern of the schemes has been provided below. The options can be exercised over a period of 5 years from the date of the grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Company at the time of grant for ESOP 2000 and exercise price as determined by the Nomination and remuneration Committee for ESOP 2010.
The Company has instituted âEmployee Stock Option Plan 2006â (ESOP 2006) ,âEmployee Stock Option Plan 2014â (ESOP 2014) and âEmployee Stock Option Plan 2018â (ESOP 2018) for eligible employees and Directors of the Company and its subsidiaries. In terms of the said plan, the Nomination and Remuneration Committee has granted options to the employees of the Company and its subsidiaries. The maximum exercise period is 7 years from the date of grant for ESOP 2006 and options can be exercised over a period of 5 years from the date of each grant for ESOP 2014 and ESOP 2018.
iii. TML ESOP - B 2013:
Erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Bâ (ASOP - B) under which 28,925,610 options were available for grant/exercise at the time the Scheme of Amalgamation became effective. Post-merger, these options were adjusted in terms of the approved Scheme of Amalgamation. Each option entitles the holder one equity share of the Company. These options vest over a period of 1 to 4 years from the date of the grant. Upon vesting, employees have 5 years to exercise the options. Postmerger, the name of the ESOP scheme has been changed to âTML ESOP B 2013â.
The erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Restricted Stock Units (ASOP - RSUs)â to be administered by the Administrator of the ASOP - RSUs, a committee appointed by the Board of Directors of the erstwhile Satyam in May 2000. Under the scheme, 1,529,412 equity shares (equivalent number of equity shares post-merger) are reserved to be issued to eligible associates at a
price to be determined by the Administrator which shall not be less than the face value of the share. These RSUs vest over a period of 1 to 4 years from the date of the grant. The maximum time available to exercise the options upon vesting is five years from the date of each vesting. Post-merger, the name of the ESOP scheme has been changed to TML RSU.
Erstwhile Satyam had established an ESOP scheme viz., âAssociate Stock Option Plan - Aâ (ASOP - A) formulated prior to the SEBI Guidelines on ESOP and ESPS issued in 1999. This plan was administered through a Trust viz., Satyam Associates Trust (Satyam Trust). At the time the Scheme of Amalgamation and Arrangement became effective, the Satyam Trust was holding 2,055,320 shares of erstwhile Satyam, which post amalgamation were converted into 241,802 shares of the Company at the approved share exchange ratio and this scheme has been transitioned and renamed as ESOP-A. Satyam Trust grants warrants to the employees of the Company with an exercise price and terms of vesting advised by the Nomination and Remuneration Committee of the Company. Each warrant shall entitle the warrant holder to one equity share. The exercise period is 180 days from the date of each vesting.
Erstwhile MESL has established Employee Stock Option Scheme (ESOS) - ESOS for which 1,400,000 equity shares were earmarked. ESOS Scheme is administered through a Trust viz., MES Employees Stock Option Trust. The options under this Scheme vest over a period of 1 to 3 years from the date of the grant. Upon vesting, employees have 7 years to exercise the options. As on the effective date of amalgamation, 18,084 options were outstanding under ESOS, which were converted into equivalent 30,144 options of the Company giving effect to approved share exchange ratio, split and bonus.
x. The employee stock compensation cost for the Employee Stock Option Plan 2018, Employee Stock Option Plan 2010, Employee Stock Option Plan 2000, Employee Stock Option Plan- B 2013, ESOP-A, ESOP 2014 and TML-RSU schemes has been computed by reference to the fair value of share options granted and amortized over each vesting period. For the period ended March 31, 2022, the Company has accounted for employee stock compensation cost (equity settled) amounting to '' 712 Million (March 31, 2021: '' 1,039 Million). This amount is net of cost of options granted to employees of subsidiaries.
Mar 31, 2022
Note: For the purposes of impairment assessment, goodwill is allocated to the operating divisions which represent the lowest level within the Company at which goodwill is monitored for internal management purposes, which is not higher than the operating segments. The recoverable amount of the unit is determined based on discounted cash flows and the key assumptions used are discount rate, budgeted growth rates and terminal value growth rate. The estimated recoverable amount of the unit exceeds the carrying amount of goodwill for the respective cash generating units. Refer note 32.2 for details of the respective cash generating units.
Note :
i) I nvestment in these entities is not denominated in number of shares as per laws of country of incorporation i.e. The Peopleâs Republic of China and Vietnam.
ii) The number of shares held in Tech Mahindra De Mexico, S.DE R.L.DE C.V. comprise 1 share (March 31, 2021- 1) each of Peso 2,999 and Peso 1; fully paid up of Series A (fixed capital) and 1 share (March 31, 2021 - 1) of Peso 12,931,770 fully paid up of Series B (variable capital).
iii) The number of shares held in Sofgen Holdings Limited comprise 13,739,910 Ordinary shares (March 31, 2021 -5,362,910) and 27,062 shares of Class A (March 31, 2021 - 27,062).
iv) The number of shares held in The Bio Agency Limited comprise 1 Class A Ordinary shares (March 31, 2021 - 102,000) and 1 Class B Ordinary shares (March 31, 2021 - 18,000)
v) As per the Scheme of merger of the Company with Mahindra Satyam Computer Services Limited with effect from June 24, 2013, the Company had created TML Benefit Trust (Trust) as per the merger order. As per the scheme, the Company transferred, out of its total holding in Satyam as on April 1, 2011; 204 Million equity shares to the Trust, to hold the shares and any additions thereto exclusively for the benefit of the Company. Post-merger with the Company these shares were converted into Tech Mahindra Limitedâs shares in the ratio of 2: 17. As of date, post bonus and split approved by the shareholders from time to time by the Company; the Trust holds 94,235,629 (March 2021: 94,235,629) shares of the Company.
vi) During the year, Tech Mahindra London Limited has converted Preference shares 46,961,578 into 46,961,578 Ordinary shares.
vii) Amounts less than '' 0.5 Million are reported as â0â
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 54 for details relating to stock options.
iii) On April 26, 2021 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 and shareholders at the Annual General Meeting held on 30 July 2021 approved the dividend amounting to '' 29,074 Million which is paid in the month of August 2021 . Further, special dividend of '' 15 per equity share which was approved on 25 October 2021 and paid in the month of December 2021 amounting to '' 14,550 Million. The amount is recognized as distribution to equity shareholders.
On May 13, 2022 the Board of Directors of the Company have proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2022 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 29,155 Million
iv) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
The estimated amount of contracts remaining to be executed on capital account (net of capital advances)
as at March 31, 2022 is '' 2,318 Million. (March 31, 2021: '' 2,050 Million).
i) Pursuant to a share purchase agreement, the Company acquired 51% stake in Cerium Systems Private Limited ("Ceriumâ) on April 9, 2020 for a total consideration of '' 1,454 Million, out of which '' 916 Million was paid upfront. Further, the Company has entered into an agreement to purchase the remaining 49% stake over a period of three-year, ending March 31, 2023.
Subsequently, the Company paid '' 1,061 Million for acquiring 20% stake and earnout payment for first tranche. As at March 31, 2022, the contractual obligation towards the acquisition amounts to '' 3,320 Million. (March 31,2021, '' 1,957 Million)
ii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Zen3 Infosolutions Private Limited on April 9, 2020 for a consideration of '' 141 Million.
iii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Perigord Premedia (India) Private Limited and Perigord Data Solutions (India) Private Limited on March 15, 2021 for a consideration of '' 133 million and '' 101 million, respectively.
iv) Pursuant to a business purchase agreement, the Company acquired the business of TransSys Technologies Solutions LLC and its group companies ("TransSys Groupâ) in October 2020 for a consideration of USD 4.84 million ('' 354 million) (upfront consideration of USD 3.9 million ('' 291 Million) and contingent consideration linked to financial performance).
v) Pursuant to a share purchase agreement, the Company acquired 100% stake in Allyis India Private Limited on December 31, 2021 for a consideration of USD 2.6 Million ('' 194 Million).
vi) Pursuant to a business purchase agreement, the Company acquired the business of M/s BrainScale on December 03, 2021 for a total consideration of '' 154 Million.
vii) Pursuant to a business purchase agreement, the Company acquired the business of Lodestone Software Services Private Limited on October 25, 2021 for a consideration of USD 6.7 Million ('' 497.5 million).
i. Bank Guarantees outstanding as at March 31,2022: '' 22,504 Million (March 31, 2021: '' 22,811 Million).
ii. Letters of support/letters of comfort of USD 94 Million: ''7,162 Million (March 31, 2021: USD 94 Million, '' 6,836 Million) to banks for loans availed by step down subsidiaries of the Company.
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011, the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was compiled by erstwhile Satyam. The BG has been extended up to October 14, 2022.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
⢠In August 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,928 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: '' 1,480 Million (March 31, 2021 '' 1,458 Million).
ii. Claims made on the Company not acknowledged as debt: '' 297 Million (March 31,2021 '' 231 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Other contingencies '' 407 Million (March 31, 2021 '' 407 Million).
33 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
36 MERGER/AMALGAMATION OF ENTITIES
The Board of Directors of the Company at its meeting held on January 29, 2021 have approved the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited, two wholly owned subsidiaries with the Company. Subsequently, the Company has filed the application with Honâble jurisdictional National Company Law Board Tribunal ("the NCLTâ). As on the date of the standalone financial statements, the Company is awaiting the order from the NCLT.
37 DIMINUTIO N IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2022.
Since the recoverable amount determined was lower than the carrying value ofthe respective investment, the Company has recognized an impairment loss of '' 4,669 Million for the year ended March 31, 2022 (March 31, 2021 '' 1,439 Million). Details of these investments are:
Estimates of future cash flows used in the value-in-use calculation are specific to the entity based on business plans. The future cash flows consider potential risks given the current economic environment and key assumptions, such as volume forecasts and margins. The discount rate used in the calculation reflects marketâs assessment of the risks specific to the asset as well as time value of money.
The financial projections and future cash flows basis which investments have been tested for impairment consider the present economic situation which includes reassessment of the discount rates, revisiting the growth rates factored while arriving at terminal value and subjecting these variables to sensitivity analysis.
38 A. CERTAIN MATTERS RELATING TO ERSTWHILE SATYAM COMPUTER SERVICES LIMITED (ERSTWHILE SATYAM):
I n the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtors position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
I n 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD
39.2 Million; and
b) non-realisation and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
B. Proceedings in relation to âAlleged Advancesâ
Erstwhile Satyam had, in the past, received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed with legal notices claiming repayment of the alleged advances aggregating to '' 12,304 Million together with damages/compensation @ 18% per annum till the date of repayment. The erstwhile Satyam had not acknowledged any liability and replied to the legal notices stating that the claims are not legally tenable.
Subsequently, the 37 companies filed petitions for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court of Andhra Pradesh in its Order approving the merger of the erstwhile Satyam with the Company, held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile
Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in the names of the said 37 companies and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved. The matter is pending final adjudication.
Appeals were filed before the Division Bench of the Honâble High Court of Andhra Pradesh against the Order of the single judge of the Honâble High Court of Andhra Pradesh sanctioning the Scheme of merger of erstwhile Satyam with the Company w.e.f. April 1, 2011, which are yet to be heard.
Further, petition was filed by the 37 companies for winding-up of the erstwhile Satyam with the Honâble High Court of Andhra Pradesh which was subsequently rejected. One of the aforesaid companies also filed an appeal against the said order with the Division Bench of the Honâble High Court of Andhra Pradesh.
These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions.
In view of the aforesaid and based on an independent legal opinion, current legal status and lack of documentation to support the validity of the claim, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon will not be payable on final adjudication. As endorsed by the Honâble High Court in the scheme of merger, the said amount of '' 12,304 Million has been disclosed as "Amounts pending investigation suspense account (net)â ("Suspense Account (net)â), which override the relevant requirement of Conceptual Framework for Financial Reporting under Indian Accounting Standards (Ind AS). Accordingly, the amounts of these alleged advances are recorded separately from equity and liability of the Company in the books of account.
39 CLAIMS BY CERTAIN SHAREHOLDERS OF ERSTWHILE SATYAM
In terms of the Settlement of claims made by Aberdeen Asset Management PLC., UK and Aberdeen Claims Administration Inc., USA, (together referred to as âAberdeenâ) the erstwhile Satyam had deposited a total amount of USD 80.16 Million towards the Settlement Amount and interest in an Escrow Account during the financial year ended March 31, 2013.
I n the meanwhile, Commissioner of Income Tax Mumbai has filed two writ petitions before the Honâble High Court of Bombay, seeking to set aside the orders of Authority for Advance Ruling dated February 15, 2016, which ruled that no withholding tax is applicable for remittance of Settlement Amount. The above writ petitions have been disposed off by the Prothonotary authority of non-removal of office objections.
Considering the disposal of writs filed by the Commissioner of Income Tax Mumbai and no subsequent action being taken by the Income tax department to restore such writs / file fresh writ petitions before the Honâble High Court of Bombay, the Company have obtained letters of indemnity from the claimants, indemnifying the Company in regard to future actions by Indian Income tax department in the current year and consequently remitted the Settlement amounts to Aberdeen trusts.
40 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honor the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
I n the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order Before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
The company has not revalued any Property, Plant and Equipment, Investment Property and intangible property during the year.
42 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
43 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
45 DETAILS OF EMPLOYEE BENEFITS AS REQUIRED BY THE IND AS-19 - EMPLOYEE BENEFITS ARE AS UNDER:i. Defined Contribution Plans
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠'' 71 Million (March 31, 2021: '' 38 Million) for National Pension Scheme contributions.
⢠'' 461 Million (March 31, 2021: '' 357 Million) for Superannuation Fund contributions; and
⢠'' 4053 Million (March 31, 2021: '' 2,771 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognised as of the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation for contracts where the entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entityâs performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2022 other than those meeting the exclusion criteria mentioned above, is '' 358,110 Million. Out of this, the Company expects to recognise revenue of around 54% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
Changes in the contract assets balances during the year ended March 31, 2022 and March 31, 2021 are as follows:
Reconciliation of revenue recognised in the statement of profit and loss with the contracted price:
The Company has recognized revenue of '' 347,261 Million (March 31, 2021 '' 296,409 Million) which is adjusted by discounts of ''9,619 Million (March 31, 2021 '' 12,555 Million) for the year ended March 31, 2022.
The total cash outflow for leases is ''1,199 Million (March 31, 2021 '' 1,262 Million) for the year ended March 31, 2022, including cash outflow for short term and low value leases.
The Company has given land and building on operating lease. The rental income recognized in the Statement of Profit and Loss for the year ended March 31, 2022 is ''349 Million (year ended March 31, 2021: '' 306 Million). The future lease rentals receivable on such non-cancellable operating leases are as follows:
50 FINANCIAL RISK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
*The fair value of cash and cash equivalents, other balances with bank, trade receivables, unbilled receivables, loans, trade payables, borrowings, lease liabilities and certain other financial assets and liabilities approximate their carrying amount largely due to the short term nature of these instruments.
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''158,353 and '' 189,975 Million as of March 31, 2022 and March 31, 2021 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2022 and March 31, 2021. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The carrying amounts of the Companyâs foreign currency denominated monetary assets and monetary liabilities at the end of the year are as follows:
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
The following are the principal amounts of outstanding foreign currency exchange forward and option contracts entered into by the Company which have been designated as Cash Flow Hedges:
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.
There are bank guarantee/corporate guarantee contracts, letters of support/letters of comfort issued on behalf of related parties amounting to '' '' 22,068 Million (March 31, 2021: '' 22,035 Million).
Amounts less than '' 0.5 Million are reported as "0â
Refer Note 8 for closing balance of investment. The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017
Note: Disclosure of entity wise balances are given for material transactions within each category.
i. ESOP 2000 & ESOP 2010:
The Company has instituted âEmployee Stock Option Plan 2000â (ESOP 2000) and âEmployee Stock Option Plan 2010â (ESOP 2010) for eligible employees and Directors of the Company and its subsidiaries. The vesting pattern of the schemes has been provided below. The options can be exercised over a period of 5 years from the date of the grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Company at the time of grant for ESOP 2000 and exercise price as determined by the Nomination and remuneration Committee for ESOP 2010.
The Company has instituted âEmployee Stock Option Plan 2006â (ESOP 2006) ,âEmployee Stock Option Plan 2014â (ESOP 2014) and âEmployee Stock Option Plan 2018â (ESOP 2018) for eligible employees and Directors of the Company and its subsidiaries. In terms of the said plan, the Nomination and Remuneration Committee has granted options to the employees of the Company and its subsidiaries. The maximum exercise period is 7 years from the date of grant for ESOP 2006 and options can be exercised over a period of 5 years from the date of each grant for ESOP 2014 and ESOP 2018.
iii. TML ESOP - B 2013:
Erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Bâ (ASOP - B) under which 28,925,610 options were available for grant/exercise at the time the Scheme of Amalgamation became effective. Post-merger, these options were adjusted in terms of the approved Scheme of Amalgamation. Each option entitles the holder one equity share of the Company. These options vest over a period of 1 to 4 years from the date of the grant. Upon vesting, employees have 5 years to exercise the options. Postmerger, the name of the ESOP scheme has been changed to âTML ESOP B 2013â.
The erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Restricted Stock Units (ASOP - RSUs)â to be administered by the Administrator of the ASOP - RSUs, a committee appointed by the Board of Directors of the erstwhile Satyam in May 2000. Under the scheme, 1,529,412 equity shares (equivalent number of equity shares post-merger) are reserved to be issued to eligible associates at a
price to be determined by the Administrator which shall not be less than the face value of the share. These RSUs vest over a period of 1 to 4 years from the date of the grant. The maximum time available to exercise the options upon vesting is five years from the date of each vesting. Post-merger, the name of the ESOP scheme has been changed to TML RSU.
Erstwhile Satyam had established an ESOP scheme viz., âAssociate Stock Option Plan - Aâ (ASOP - A) formulated prior to the SEBI Guidelines on ESOP and ESPS issued in 1999. This plan was administered through a Trust viz., Satyam Associates Trust (Satyam Trust). At the time the Scheme of Amalgamation and Arrangement became effective, the Satyam Trust was holding 2,055,320 shares of erstwhile Satyam, which post amalgamation were converted into 241,802 shares of the Company at the approved share exchange ratio and this scheme has been transitioned and renamed as ESOP-A. Satyam Trust grants warrants to the employees of the Company with an exercise price and terms of vesting advised by the Nomination and Remuneration Committee of the Company. Each warrant shall entitle the warrant holder to one equity share. The exercise period is 180 days from the date of each vesting.
Erstwhile MESL has established Employee Stock Option Scheme (ESOS) - ESOS for which 1,400,000 equity shares were earmarked. ESOS Scheme is administered through a Trust viz., MES Employees Stock Option Trust. The options under this Scheme vest over a period of 1 to 3 years from the date of the grant. Upon vesting, employees have 7 years to exercise the options. As on the effective date of amalgamation, 18,084 options were outstanding under ESOS, which were converted into equivalent 30,144 options of the Company giving effect to approved share exchange ratio, split and bonus.
x. The employee stock compensation cost for the Employee Stock Option Plan 2018, Employee Stock Option Plan 2010, Employee Stock Option Plan 2000, Employee Stock Option Plan- B 2013, ESOP-A, ESOP 2014 and TML-RSU schemes has been computed by reference to the fair value of share options granted and amortized over each vesting period. For the period ended March 31, 2022, the Company has accounted for employee stock compensation cost (equity settled) amounting to '' 712 Million (March 31, 2021: '' 1,039 Million). This amount is net of cost of options granted to employees of subsidiaries.
Mar 31, 2022
Note: For the purposes of impairment assessment, goodwill is allocated to the operating divisions which represent the lowest level within the Company at which goodwill is monitored for internal management purposes, which is not higher than the operating segments. The recoverable amount of the unit is determined based on discounted cash flows and the key assumptions used are discount rate, budgeted growth rates and terminal value growth rate. The estimated recoverable amount of the unit exceeds the carrying amount of goodwill for the respective cash generating units. Refer note 32.2 for details of the respective cash generating units.
Note :
i) I nvestment in these entities is not denominated in number of shares as per laws of country of incorporation i.e. The Peopleâs Republic of China and Vietnam.
ii) The number of shares held in Tech Mahindra De Mexico, S.DE R.L.DE C.V. comprise 1 share (March 31, 2021- 1) each of Peso 2,999 and Peso 1; fully paid up of Series A (fixed capital) and 1 share (March 31, 2021 - 1) of Peso 12,931,770 fully paid up of Series B (variable capital).
iii) The number of shares held in Sofgen Holdings Limited comprise 13,739,910 Ordinary shares (March 31, 2021 -5,362,910) and 27,062 shares of Class A (March 31, 2021 - 27,062).
iv) The number of shares held in The Bio Agency Limited comprise 1 Class A Ordinary shares (March 31, 2021 - 102,000) and 1 Class B Ordinary shares (March 31, 2021 - 18,000)
v) As per the Scheme of merger of the Company with Mahindra Satyam Computer Services Limited with effect from June 24, 2013, the Company had created TML Benefit Trust (Trust) as per the merger order. As per the scheme, the Company transferred, out of its total holding in Satyam as on April 1, 2011; 204 Million equity shares to the Trust, to hold the shares and any additions thereto exclusively for the benefit of the Company. Post-merger with the Company these shares were converted into Tech Mahindra Limitedâs shares in the ratio of 2: 17. As of date, post bonus and split approved by the shareholders from time to time by the Company; the Trust holds 94,235,629 (March 2021: 94,235,629) shares of the Company.
vi) During the year, Tech Mahindra London Limited has converted Preference shares 46,961,578 into 46,961,578 Ordinary shares.
vii) Amounts less than '' 0.5 Million are reported as â0â
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 54 for details relating to stock options.
iii) On April 26, 2021 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 and shareholders at the Annual General Meeting held on 30 July 2021 approved the dividend amounting to '' 29,074 Million which is paid in the month of August 2021 . Further, special dividend of '' 15 per equity share which was approved on 25 October 2021 and paid in the month of December 2021 amounting to '' 14,550 Million. The amount is recognized as distribution to equity shareholders.
On May 13, 2022 the Board of Directors of the Company have proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2022 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 29,155 Million
iv) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
The estimated amount of contracts remaining to be executed on capital account (net of capital advances)
as at March 31, 2022 is '' 2,318 Million. (March 31, 2021: '' 2,050 Million).
i) Pursuant to a share purchase agreement, the Company acquired 51% stake in Cerium Systems Private Limited ("Ceriumâ) on April 9, 2020 for a total consideration of '' 1,454 Million, out of which '' 916 Million was paid upfront. Further, the Company has entered into an agreement to purchase the remaining 49% stake over a period of three-year, ending March 31, 2023.
Subsequently, the Company paid '' 1,061 Million for acquiring 20% stake and earnout payment for first tranche. As at March 31, 2022, the contractual obligation towards the acquisition amounts to '' 3,320 Million. (March 31,2021, '' 1,957 Million)
ii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Zen3 Infosolutions Private Limited on April 9, 2020 for a consideration of '' 141 Million.
iii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Perigord Premedia (India) Private Limited and Perigord Data Solutions (India) Private Limited on March 15, 2021 for a consideration of '' 133 million and '' 101 million, respectively.
iv) Pursuant to a business purchase agreement, the Company acquired the business of TransSys Technologies Solutions LLC and its group companies ("TransSys Groupâ) in October 2020 for a consideration of USD 4.84 million ('' 354 million) (upfront consideration of USD 3.9 million ('' 291 Million) and contingent consideration linked to financial performance).
v) Pursuant to a share purchase agreement, the Company acquired 100% stake in Allyis India Private Limited on December 31, 2021 for a consideration of USD 2.6 Million ('' 194 Million).
vi) Pursuant to a business purchase agreement, the Company acquired the business of M/s BrainScale on December 03, 2021 for a total consideration of '' 154 Million.
vii) Pursuant to a business purchase agreement, the Company acquired the business of Lodestone Software Services Private Limited on October 25, 2021 for a consideration of USD 6.7 Million ('' 497.5 million).
i. Bank Guarantees outstanding as at March 31,2022: '' 22,504 Million (March 31, 2021: '' 22,811 Million).
ii. Letters of support/letters of comfort of USD 94 Million: ''7,162 Million (March 31, 2021: USD 94 Million, '' 6,836 Million) to banks for loans availed by step down subsidiaries of the Company.
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011, the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was compiled by erstwhile Satyam. The BG has been extended up to October 14, 2022.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
⢠In August 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,928 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: '' 1,480 Million (March 31, 2021 '' 1,458 Million).
ii. Claims made on the Company not acknowledged as debt: '' 297 Million (March 31,2021 '' 231 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Other contingencies '' 407 Million (March 31, 2021 '' 407 Million).
33 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
36 MERGER/AMALGAMATION OF ENTITIES
The Board of Directors of the Company at its meeting held on January 29, 2021 have approved the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited, two wholly owned subsidiaries with the Company. Subsequently, the Company has filed the application with Honâble jurisdictional National Company Law Board Tribunal ("the NCLTâ). As on the date of the standalone financial statements, the Company is awaiting the order from the NCLT.
37 DIMINUTIO N IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2022.
Since the recoverable amount determined was lower than the carrying value ofthe respective investment, the Company has recognized an impairment loss of '' 4,669 Million for the year ended March 31, 2022 (March 31, 2021 '' 1,439 Million). Details of these investments are:
Estimates of future cash flows used in the value-in-use calculation are specific to the entity based on business plans. The future cash flows consider potential risks given the current economic environment and key assumptions, such as volume forecasts and margins. The discount rate used in the calculation reflects marketâs assessment of the risks specific to the asset as well as time value of money.
The financial projections and future cash flows basis which investments have been tested for impairment consider the present economic situation which includes reassessment of the discount rates, revisiting the growth rates factored while arriving at terminal value and subjecting these variables to sensitivity analysis.
38 A. CERTAIN MATTERS RELATING TO ERSTWHILE SATYAM COMPUTER SERVICES LIMITED (ERSTWHILE SATYAM):
I n the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtors position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
I n 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD
39.2 Million; and
b) non-realisation and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
B. Proceedings in relation to âAlleged Advancesâ
Erstwhile Satyam had, in the past, received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed with legal notices claiming repayment of the alleged advances aggregating to '' 12,304 Million together with damages/compensation @ 18% per annum till the date of repayment. The erstwhile Satyam had not acknowledged any liability and replied to the legal notices stating that the claims are not legally tenable.
Subsequently, the 37 companies filed petitions for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court of Andhra Pradesh in its Order approving the merger of the erstwhile Satyam with the Company, held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile
Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in the names of the said 37 companies and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved. The matter is pending final adjudication.
Appeals were filed before the Division Bench of the Honâble High Court of Andhra Pradesh against the Order of the single judge of the Honâble High Court of Andhra Pradesh sanctioning the Scheme of merger of erstwhile Satyam with the Company w.e.f. April 1, 2011, which are yet to be heard.
Further, petition was filed by the 37 companies for winding-up of the erstwhile Satyam with the Honâble High Court of Andhra Pradesh which was subsequently rejected. One of the aforesaid companies also filed an appeal against the said order with the Division Bench of the Honâble High Court of Andhra Pradesh.
These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions.
In view of the aforesaid and based on an independent legal opinion, current legal status and lack of documentation to support the validity of the claim, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon will not be payable on final adjudication. As endorsed by the Honâble High Court in the scheme of merger, the said amount of '' 12,304 Million has been disclosed as "Amounts pending investigation suspense account (net)â ("Suspense Account (net)â), which override the relevant requirement of Conceptual Framework for Financial Reporting under Indian Accounting Standards (Ind AS). Accordingly, the amounts of these alleged advances are recorded separately from equity and liability of the Company in the books of account.
39 CLAIMS BY CERTAIN SHAREHOLDERS OF ERSTWHILE SATYAM
In terms of the Settlement of claims made by Aberdeen Asset Management PLC., UK and Aberdeen Claims Administration Inc., USA, (together referred to as âAberdeenâ) the erstwhile Satyam had deposited a total amount of USD 80.16 Million towards the Settlement Amount and interest in an Escrow Account during the financial year ended March 31, 2013.
I n the meanwhile, Commissioner of Income Tax Mumbai has filed two writ petitions before the Honâble High Court of Bombay, seeking to set aside the orders of Authority for Advance Ruling dated February 15, 2016, which ruled that no withholding tax is applicable for remittance of Settlement Amount. The above writ petitions have been disposed off by the Prothonotary authority of non-removal of office objections.
Considering the disposal of writs filed by the Commissioner of Income Tax Mumbai and no subsequent action being taken by the Income tax department to restore such writs / file fresh writ petitions before the Honâble High Court of Bombay, the Company have obtained letters of indemnity from the claimants, indemnifying the Company in regard to future actions by Indian Income tax department in the current year and consequently remitted the Settlement amounts to Aberdeen trusts.
40 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honor the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
I n the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order Before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
The company has not revalued any Property, Plant and Equipment, Investment Property and intangible property during the year.
42 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
43 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
45 DETAILS OF EMPLOYEE BENEFITS AS REQUIRED BY THE IND AS-19 - EMPLOYEE BENEFITS ARE AS UNDER:i. Defined Contribution Plans
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠'' 71 Million (March 31, 2021: '' 38 Million) for National Pension Scheme contributions.
⢠'' 461 Million (March 31, 2021: '' 357 Million) for Superannuation Fund contributions; and
⢠'' 4053 Million (March 31, 2021: '' 2,771 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognised as of the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation for contracts where the entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entityâs performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2022 other than those meeting the exclusion criteria mentioned above, is '' 358,110 Million. Out of this, the Company expects to recognise revenue of around 54% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
Changes in the contract assets balances during the year ended March 31, 2022 and March 31, 2021 are as follows:
Reconciliation of revenue recognised in the statement of profit and loss with the contracted price:
The Company has recognized revenue of '' 347,261 Million (March 31, 2021 '' 296,409 Million) which is adjusted by discounts of ''9,619 Million (March 31, 2021 '' 12,555 Million) for the year ended March 31, 2022.
The total cash outflow for leases is ''1,199 Million (March 31, 2021 '' 1,262 Million) for the year ended March 31, 2022, including cash outflow for short term and low value leases.
The Company has given land and building on operating lease. The rental income recognized in the Statement of Profit and Loss for the year ended March 31, 2022 is ''349 Million (year ended March 31, 2021: '' 306 Million). The future lease rentals receivable on such non-cancellable operating leases are as follows:
50 FINANCIAL RISK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
*The fair value of cash and cash equivalents, other balances with bank, trade receivables, unbilled receivables, loans, trade payables, borrowings, lease liabilities and certain other financial assets and liabilities approximate their carrying amount largely due to the short term nature of these instruments.
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''158,353 and '' 189,975 Million as of March 31, 2022 and March 31, 2021 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2022 and March 31, 2021. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The carrying amounts of the Companyâs foreign currency denominated monetary assets and monetary liabilities at the end of the year are as follows:
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
The following are the principal amounts of outstanding foreign currency exchange forward and option contracts entered into by the Company which have been designated as Cash Flow Hedges:
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.
There are bank guarantee/corporate guarantee contracts, letters of support/letters of comfort issued on behalf of related parties amounting to '' '' 22,068 Million (March 31, 2021: '' 22,035 Million).
Amounts less than '' 0.5 Million are reported as "0â
Refer Note 8 for closing balance of investment. The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017
Note: Disclosure of entity wise balances are given for material transactions within each category.
i. ESOP 2000 & ESOP 2010:
The Company has instituted âEmployee Stock Option Plan 2000â (ESOP 2000) and âEmployee Stock Option Plan 2010â (ESOP 2010) for eligible employees and Directors of the Company and its subsidiaries. The vesting pattern of the schemes has been provided below. The options can be exercised over a period of 5 years from the date of the grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Company at the time of grant for ESOP 2000 and exercise price as determined by the Nomination and remuneration Committee for ESOP 2010.
The Company has instituted âEmployee Stock Option Plan 2006â (ESOP 2006) ,âEmployee Stock Option Plan 2014â (ESOP 2014) and âEmployee Stock Option Plan 2018â (ESOP 2018) for eligible employees and Directors of the Company and its subsidiaries. In terms of the said plan, the Nomination and Remuneration Committee has granted options to the employees of the Company and its subsidiaries. The maximum exercise period is 7 years from the date of grant for ESOP 2006 and options can be exercised over a period of 5 years from the date of each grant for ESOP 2014 and ESOP 2018.
iii. TML ESOP - B 2013:
Erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Bâ (ASOP - B) under which 28,925,610 options were available for grant/exercise at the time the Scheme of Amalgamation became effective. Post-merger, these options were adjusted in terms of the approved Scheme of Amalgamation. Each option entitles the holder one equity share of the Company. These options vest over a period of 1 to 4 years from the date of the grant. Upon vesting, employees have 5 years to exercise the options. Postmerger, the name of the ESOP scheme has been changed to âTML ESOP B 2013â.
The erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Restricted Stock Units (ASOP - RSUs)â to be administered by the Administrator of the ASOP - RSUs, a committee appointed by the Board of Directors of the erstwhile Satyam in May 2000. Under the scheme, 1,529,412 equity shares (equivalent number of equity shares post-merger) are reserved to be issued to eligible associates at a
price to be determined by the Administrator which shall not be less than the face value of the share. These RSUs vest over a period of 1 to 4 years from the date of the grant. The maximum time available to exercise the options upon vesting is five years from the date of each vesting. Post-merger, the name of the ESOP scheme has been changed to TML RSU.
Erstwhile Satyam had established an ESOP scheme viz., âAssociate Stock Option Plan - Aâ (ASOP - A) formulated prior to the SEBI Guidelines on ESOP and ESPS issued in 1999. This plan was administered through a Trust viz., Satyam Associates Trust (Satyam Trust). At the time the Scheme of Amalgamation and Arrangement became effective, the Satyam Trust was holding 2,055,320 shares of erstwhile Satyam, which post amalgamation were converted into 241,802 shares of the Company at the approved share exchange ratio and this scheme has been transitioned and renamed as ESOP-A. Satyam Trust grants warrants to the employees of the Company with an exercise price and terms of vesting advised by the Nomination and Remuneration Committee of the Company. Each warrant shall entitle the warrant holder to one equity share. The exercise period is 180 days from the date of each vesting.
Erstwhile MESL has established Employee Stock Option Scheme (ESOS) - ESOS for which 1,400,000 equity shares were earmarked. ESOS Scheme is administered through a Trust viz., MES Employees Stock Option Trust. The options under this Scheme vest over a period of 1 to 3 years from the date of the grant. Upon vesting, employees have 7 years to exercise the options. As on the effective date of amalgamation, 18,084 options were outstanding under ESOS, which were converted into equivalent 30,144 options of the Company giving effect to approved share exchange ratio, split and bonus.
x. The employee stock compensation cost for the Employee Stock Option Plan 2018, Employee Stock Option Plan 2010, Employee Stock Option Plan 2000, Employee Stock Option Plan- B 2013, ESOP-A, ESOP 2014 and TML-RSU schemes has been computed by reference to the fair value of share options granted and amortized over each vesting period. For the period ended March 31, 2022, the Company has accounted for employee stock compensation cost (equity settled) amounting to '' 712 Million (March 31, 2021: '' 1,039 Million). This amount is net of cost of options granted to employees of subsidiaries.
Mar 31, 2022
Note: For the purposes of impairment assessment, goodwill is allocated to the operating divisions which represent the lowest level within the Company at which goodwill is monitored for internal management purposes, which is not higher than the operating segments. The recoverable amount of the unit is determined based on discounted cash flows and the key assumptions used are discount rate, budgeted growth rates and terminal value growth rate. The estimated recoverable amount of the unit exceeds the carrying amount of goodwill for the respective cash generating units. Refer note 32.2 for details of the respective cash generating units.
Note :
i) I nvestment in these entities is not denominated in number of shares as per laws of country of incorporation i.e. The Peopleâs Republic of China and Vietnam.
ii) The number of shares held in Tech Mahindra De Mexico, S.DE R.L.DE C.V. comprise 1 share (March 31, 2021- 1) each of Peso 2,999 and Peso 1; fully paid up of Series A (fixed capital) and 1 share (March 31, 2021 - 1) of Peso 12,931,770 fully paid up of Series B (variable capital).
iii) The number of shares held in Sofgen Holdings Limited comprise 13,739,910 Ordinary shares (March 31, 2021 -5,362,910) and 27,062 shares of Class A (March 31, 2021 - 27,062).
iv) The number of shares held in The Bio Agency Limited comprise 1 Class A Ordinary shares (March 31, 2021 - 102,000) and 1 Class B Ordinary shares (March 31, 2021 - 18,000)
v) As per the Scheme of merger of the Company with Mahindra Satyam Computer Services Limited with effect from June 24, 2013, the Company had created TML Benefit Trust (Trust) as per the merger order. As per the scheme, the Company transferred, out of its total holding in Satyam as on April 1, 2011; 204 Million equity shares to the Trust, to hold the shares and any additions thereto exclusively for the benefit of the Company. Post-merger with the Company these shares were converted into Tech Mahindra Limitedâs shares in the ratio of 2: 17. As of date, post bonus and split approved by the shareholders from time to time by the Company; the Trust holds 94,235,629 (March 2021: 94,235,629) shares of the Company.
vi) During the year, Tech Mahindra London Limited has converted Preference shares 46,961,578 into 46,961,578 Ordinary shares.
vii) Amounts less than '' 0.5 Million are reported as â0â
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 54 for details relating to stock options.
iii) On April 26, 2021 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 and shareholders at the Annual General Meeting held on 30 July 2021 approved the dividend amounting to '' 29,074 Million which is paid in the month of August 2021 . Further, special dividend of '' 15 per equity share which was approved on 25 October 2021 and paid in the month of December 2021 amounting to '' 14,550 Million. The amount is recognized as distribution to equity shareholders.
On May 13, 2022 the Board of Directors of the Company have proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2022 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 29,155 Million
iv) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
The estimated amount of contracts remaining to be executed on capital account (net of capital advances)
as at March 31, 2022 is '' 2,318 Million. (March 31, 2021: '' 2,050 Million).
i) Pursuant to a share purchase agreement, the Company acquired 51% stake in Cerium Systems Private Limited ("Ceriumâ) on April 9, 2020 for a total consideration of '' 1,454 Million, out of which '' 916 Million was paid upfront. Further, the Company has entered into an agreement to purchase the remaining 49% stake over a period of three-year, ending March 31, 2023.
Subsequently, the Company paid '' 1,061 Million for acquiring 20% stake and earnout payment for first tranche. As at March 31, 2022, the contractual obligation towards the acquisition amounts to '' 3,320 Million. (March 31,2021, '' 1,957 Million)
ii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Zen3 Infosolutions Private Limited on April 9, 2020 for a consideration of '' 141 Million.
iii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Perigord Premedia (India) Private Limited and Perigord Data Solutions (India) Private Limited on March 15, 2021 for a consideration of '' 133 million and '' 101 million, respectively.
iv) Pursuant to a business purchase agreement, the Company acquired the business of TransSys Technologies Solutions LLC and its group companies ("TransSys Groupâ) in October 2020 for a consideration of USD 4.84 million ('' 354 million) (upfront consideration of USD 3.9 million ('' 291 Million) and contingent consideration linked to financial performance).
v) Pursuant to a share purchase agreement, the Company acquired 100% stake in Allyis India Private Limited on December 31, 2021 for a consideration of USD 2.6 Million ('' 194 Million).
vi) Pursuant to a business purchase agreement, the Company acquired the business of M/s BrainScale on December 03, 2021 for a total consideration of '' 154 Million.
vii) Pursuant to a business purchase agreement, the Company acquired the business of Lodestone Software Services Private Limited on October 25, 2021 for a consideration of USD 6.7 Million ('' 497.5 million).
i. Bank Guarantees outstanding as at March 31,2022: '' 22,504 Million (March 31, 2021: '' 22,811 Million).
ii. Letters of support/letters of comfort of USD 94 Million: ''7,162 Million (March 31, 2021: USD 94 Million, '' 6,836 Million) to banks for loans availed by step down subsidiaries of the Company.
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011, the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was compiled by erstwhile Satyam. The BG has been extended up to October 14, 2022.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
⢠In August 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,928 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: '' 1,480 Million (March 31, 2021 '' 1,458 Million).
ii. Claims made on the Company not acknowledged as debt: '' 297 Million (March 31,2021 '' 231 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Other contingencies '' 407 Million (March 31, 2021 '' 407 Million).
33 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
36 MERGER/AMALGAMATION OF ENTITIES
The Board of Directors of the Company at its meeting held on January 29, 2021 have approved the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited, two wholly owned subsidiaries with the Company. Subsequently, the Company has filed the application with Honâble jurisdictional National Company Law Board Tribunal ("the NCLTâ). As on the date of the standalone financial statements, the Company is awaiting the order from the NCLT.
37 DIMINUTIO N IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2022.
Since the recoverable amount determined was lower than the carrying value ofthe respective investment, the Company has recognized an impairment loss of '' 4,669 Million for the year ended March 31, 2022 (March 31, 2021 '' 1,439 Million). Details of these investments are:
Estimates of future cash flows used in the value-in-use calculation are specific to the entity based on business plans. The future cash flows consider potential risks given the current economic environment and key assumptions, such as volume forecasts and margins. The discount rate used in the calculation reflects marketâs assessment of the risks specific to the asset as well as time value of money.
The financial projections and future cash flows basis which investments have been tested for impairment consider the present economic situation which includes reassessment of the discount rates, revisiting the growth rates factored while arriving at terminal value and subjecting these variables to sensitivity analysis.
38 A. CERTAIN MATTERS RELATING TO ERSTWHILE SATYAM COMPUTER SERVICES LIMITED (ERSTWHILE SATYAM):
I n the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtors position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
I n 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD
39.2 Million; and
b) non-realisation and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
B. Proceedings in relation to âAlleged Advancesâ
Erstwhile Satyam had, in the past, received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed with legal notices claiming repayment of the alleged advances aggregating to '' 12,304 Million together with damages/compensation @ 18% per annum till the date of repayment. The erstwhile Satyam had not acknowledged any liability and replied to the legal notices stating that the claims are not legally tenable.
Subsequently, the 37 companies filed petitions for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court of Andhra Pradesh in its Order approving the merger of the erstwhile Satyam with the Company, held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile
Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in the names of the said 37 companies and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved. The matter is pending final adjudication.
Appeals were filed before the Division Bench of the Honâble High Court of Andhra Pradesh against the Order of the single judge of the Honâble High Court of Andhra Pradesh sanctioning the Scheme of merger of erstwhile Satyam with the Company w.e.f. April 1, 2011, which are yet to be heard.
Further, petition was filed by the 37 companies for winding-up of the erstwhile Satyam with the Honâble High Court of Andhra Pradesh which was subsequently rejected. One of the aforesaid companies also filed an appeal against the said order with the Division Bench of the Honâble High Court of Andhra Pradesh.
These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions.
In view of the aforesaid and based on an independent legal opinion, current legal status and lack of documentation to support the validity of the claim, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon will not be payable on final adjudication. As endorsed by the Honâble High Court in the scheme of merger, the said amount of '' 12,304 Million has been disclosed as "Amounts pending investigation suspense account (net)â ("Suspense Account (net)â), which override the relevant requirement of Conceptual Framework for Financial Reporting under Indian Accounting Standards (Ind AS). Accordingly, the amounts of these alleged advances are recorded separately from equity and liability of the Company in the books of account.
39 CLAIMS BY CERTAIN SHAREHOLDERS OF ERSTWHILE SATYAM
In terms of the Settlement of claims made by Aberdeen Asset Management PLC., UK and Aberdeen Claims Administration Inc., USA, (together referred to as âAberdeenâ) the erstwhile Satyam had deposited a total amount of USD 80.16 Million towards the Settlement Amount and interest in an Escrow Account during the financial year ended March 31, 2013.
I n the meanwhile, Commissioner of Income Tax Mumbai has filed two writ petitions before the Honâble High Court of Bombay, seeking to set aside the orders of Authority for Advance Ruling dated February 15, 2016, which ruled that no withholding tax is applicable for remittance of Settlement Amount. The above writ petitions have been disposed off by the Prothonotary authority of non-removal of office objections.
Considering the disposal of writs filed by the Commissioner of Income Tax Mumbai and no subsequent action being taken by the Income tax department to restore such writs / file fresh writ petitions before the Honâble High Court of Bombay, the Company have obtained letters of indemnity from the claimants, indemnifying the Company in regard to future actions by Indian Income tax department in the current year and consequently remitted the Settlement amounts to Aberdeen trusts.
40 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honor the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
I n the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order Before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
The company has not revalued any Property, Plant and Equipment, Investment Property and intangible property during the year.
42 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
43 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
45 DETAILS OF EMPLOYEE BENEFITS AS REQUIRED BY THE IND AS-19 - EMPLOYEE BENEFITS ARE AS UNDER:i. Defined Contribution Plans
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠'' 71 Million (March 31, 2021: '' 38 Million) for National Pension Scheme contributions.
⢠'' 461 Million (March 31, 2021: '' 357 Million) for Superannuation Fund contributions; and
⢠'' 4053 Million (March 31, 2021: '' 2,771 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognised as of the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation for contracts where the entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entityâs performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2022 other than those meeting the exclusion criteria mentioned above, is '' 358,110 Million. Out of this, the Company expects to recognise revenue of around 54% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
Changes in the contract assets balances during the year ended March 31, 2022 and March 31, 2021 are as follows:
Reconciliation of revenue recognised in the statement of profit and loss with the contracted price:
The Company has recognized revenue of '' 347,261 Million (March 31, 2021 '' 296,409 Million) which is adjusted by discounts of ''9,619 Million (March 31, 2021 '' 12,555 Million) for the year ended March 31, 2022.
The total cash outflow for leases is ''1,199 Million (March 31, 2021 '' 1,262 Million) for the year ended March 31, 2022, including cash outflow for short term and low value leases.
The Company has given land and building on operating lease. The rental income recognized in the Statement of Profit and Loss for the year ended March 31, 2022 is ''349 Million (year ended March 31, 2021: '' 306 Million). The future lease rentals receivable on such non-cancellable operating leases are as follows:
50 FINANCIAL RISK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
*The fair value of cash and cash equivalents, other balances with bank, trade receivables, unbilled receivables, loans, trade payables, borrowings, lease liabilities and certain other financial assets and liabilities approximate their carrying amount largely due to the short term nature of these instruments.
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''158,353 and '' 189,975 Million as of March 31, 2022 and March 31, 2021 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2022 and March 31, 2021. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The carrying amounts of the Companyâs foreign currency denominated monetary assets and monetary liabilities at the end of the year are as follows:
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
The following are the principal amounts of outstanding foreign currency exchange forward and option contracts entered into by the Company which have been designated as Cash Flow Hedges:
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.
There are bank guarantee/corporate guarantee contracts, letters of support/letters of comfort issued on behalf of related parties amounting to '' '' 22,068 Million (March 31, 2021: '' 22,035 Million).
Amounts less than '' 0.5 Million are reported as "0â
Refer Note 8 for closing balance of investment. The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017
Note: Disclosure of entity wise balances are given for material transactions within each category.
i. ESOP 2000 & ESOP 2010:
The Company has instituted âEmployee Stock Option Plan 2000â (ESOP 2000) and âEmployee Stock Option Plan 2010â (ESOP 2010) for eligible employees and Directors of the Company and its subsidiaries. The vesting pattern of the schemes has been provided below. The options can be exercised over a period of 5 years from the date of the grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Company at the time of grant for ESOP 2000 and exercise price as determined by the Nomination and remuneration Committee for ESOP 2010.
The Company has instituted âEmployee Stock Option Plan 2006â (ESOP 2006) ,âEmployee Stock Option Plan 2014â (ESOP 2014) and âEmployee Stock Option Plan 2018â (ESOP 2018) for eligible employees and Directors of the Company and its subsidiaries. In terms of the said plan, the Nomination and Remuneration Committee has granted options to the employees of the Company and its subsidiaries. The maximum exercise period is 7 years from the date of grant for ESOP 2006 and options can be exercised over a period of 5 years from the date of each grant for ESOP 2014 and ESOP 2018.
iii. TML ESOP - B 2013:
Erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Bâ (ASOP - B) under which 28,925,610 options were available for grant/exercise at the time the Scheme of Amalgamation became effective. Post-merger, these options were adjusted in terms of the approved Scheme of Amalgamation. Each option entitles the holder one equity share of the Company. These options vest over a period of 1 to 4 years from the date of the grant. Upon vesting, employees have 5 years to exercise the options. Postmerger, the name of the ESOP scheme has been changed to âTML ESOP B 2013â.
The erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Restricted Stock Units (ASOP - RSUs)â to be administered by the Administrator of the ASOP - RSUs, a committee appointed by the Board of Directors of the erstwhile Satyam in May 2000. Under the scheme, 1,529,412 equity shares (equivalent number of equity shares post-merger) are reserved to be issued to eligible associates at a
price to be determined by the Administrator which shall not be less than the face value of the share. These RSUs vest over a period of 1 to 4 years from the date of the grant. The maximum time available to exercise the options upon vesting is five years from the date of each vesting. Post-merger, the name of the ESOP scheme has been changed to TML RSU.
Erstwhile Satyam had established an ESOP scheme viz., âAssociate Stock Option Plan - Aâ (ASOP - A) formulated prior to the SEBI Guidelines on ESOP and ESPS issued in 1999. This plan was administered through a Trust viz., Satyam Associates Trust (Satyam Trust). At the time the Scheme of Amalgamation and Arrangement became effective, the Satyam Trust was holding 2,055,320 shares of erstwhile Satyam, which post amalgamation were converted into 241,802 shares of the Company at the approved share exchange ratio and this scheme has been transitioned and renamed as ESOP-A. Satyam Trust grants warrants to the employees of the Company with an exercise price and terms of vesting advised by the Nomination and Remuneration Committee of the Company. Each warrant shall entitle the warrant holder to one equity share. The exercise period is 180 days from the date of each vesting.
Erstwhile MESL has established Employee Stock Option Scheme (ESOS) - ESOS for which 1,400,000 equity shares were earmarked. ESOS Scheme is administered through a Trust viz., MES Employees Stock Option Trust. The options under this Scheme vest over a period of 1 to 3 years from the date of the grant. Upon vesting, employees have 7 years to exercise the options. As on the effective date of amalgamation, 18,084 options were outstanding under ESOS, which were converted into equivalent 30,144 options of the Company giving effect to approved share exchange ratio, split and bonus.
x. The employee stock compensation cost for the Employee Stock Option Plan 2018, Employee Stock Option Plan 2010, Employee Stock Option Plan 2000, Employee Stock Option Plan- B 2013, ESOP-A, ESOP 2014 and TML-RSU schemes has been computed by reference to the fair value of share options granted and amortized over each vesting period. For the period ended March 31, 2022, the Company has accounted for employee stock compensation cost (equity settled) amounting to '' 712 Million (March 31, 2021: '' 1,039 Million). This amount is net of cost of options granted to employees of subsidiaries.
Mar 31, 2022
# The Company and the debentures holders have call and put option respectively to redeem, in part or in full, the debentures on 8th June, 2023 and 8th June, 2024.
(b) Term Loan from Banks:
The Company has Unsecured Term Loan from banks which are repayable over a period of maximum five years upto August 2025 and carry interest rates which are linked to Repo rate with spread ranging from 2.15% p.a.p.m. to 2.35% p.a.p.m. Certain loans have floor rate and ceiling rate defined such that the effective interest rate would range between 5.50% p.a.p.m. to 7.95% p.a.p.m.
(c) Other loans comprise deferred sales tax loans which are interest free and repayable in five equal installments after ten years from the year of availment of respective loan.
f) Nature of CSR Activities: Driven by the core purpose and in line with CSR vision, the Company has invested CSR Funds to support the constituencies of girls, youth & farmers by innovatively supporting them through programmes designed in the domains of Education, Skill Development, and Environment. By applying a gender lens across all programmes, the Company has ensured that majority of beneficiaries are girls and women.
On 31st March 2020, the Company donated Rs. 20.00 crores to the PM CARES Fund for COVID-19 in advance against the CSR spend requirement of the financial year 2020-21. As confirmed by Ministry of Corporate Affairs vide Circular dated 20th May 2021 allowing set off of the same against the spend requirement of financial year 2020-21 subject to meeting of certain conditions, the Company has complied with those conditions and accordingly considered the amount donated to PM CARES fund as amount spent towards the spend requirement of the previous year 2020-21.
Amount recognised as expense in profit or loss is Rs. 97.08 crores (2021: 104.39 crores).
33. Exceptional Items (net)
The Company classifies items of income and expense within profit or loss from ordinary activities as exceptional items when they are of such size, nature or incidence that their disclosure is relevant to explain the performance for the period.
Impairment loss on certain investments in subsidiaries and joint ventures has been recognised considering the performance of these companies and their future projections.
The Company has long-term investments in subsidiaries, associates and joint ventures which are measured at cost less impairment or at fair value through profit or loss. The management assesses the performance of these entities including the future projections and relevant economic and market conditions in which they operate to identify if there is any indicator of impairment in the carrying value of the investments. In case indicators of impairment exist, the impairment loss is measured by estimating the recoverable amounts based on the higher of (i) ''fair value less cost of disposal'' determined using market price information, where available, and (ii) ''value-in-use'' estimates determined using discounted cash flow projections, where available. The fair value less costs of disposal is determined using the market approach. The future cash flow projections are specific to the entity based on its business plan and may not be the same as those of market participants. The future cash flows consider key assumptions such as volume projections, margins, terminal growth rates, etc. with due consideration for the potential risks given the current economic environment in which the entity operates. The discount rates used are pre-tax rates based on weighted average cost of capital and reflects market''s assessment of the risks specific to the asset as well as time value of money. The recoverable amount estimates are based on judgments, estimates, assumptions and market data as on reporting date and ignore subsequent changes in the economic and market conditions.
During the year ended 31st March 2022, the performance of certain subsidiaries, associates and joint ventures along with the relevant economic and market indicators including the impact of certain capital allocation changes and uncertainties arising from continued impact of Covid-19, supply chain challenges and unprecedented rise in commodity prices resulted in indicators of impairment in respect of certain entities. Accordingly, the Company determined the recoverable amounts of the long term assets and other exposures related to these entities and recorded a provision of Rs. 813.06 crores (2021: Rs. 3,927.13 crores) for the year ended 31st March 2022. The value-in-use calculation use discount rates ranging from 11.0% - 24.0% and the terminal growth rates ranging from 2.0% - 7.0%.
35. Employee Benefits
General description of defined benefit plans:
Gratuity
The Company operates a gratuity plan covering qualifying employees. The benefit payable is the greater of the amount calculated as per the Payment of Gratuity Act or the Company scheme applicable to the employee. The benefit vests upon completion of five years of continuous service and once vested it is payable to employees on retirement or on termination of employment. In case of death while in service, the gratuity is payable irrespective of vesting. The Company makes annual contribution to the group gratuity scheme administered by the Life Insurance Corporation of India through its Gratuity Trust Fund.
Post - retirement medical
The Company provides post retirement medical cover to select grade of employees to cover the retiring employee and their spouse upto a specified age through mediclaim policy on which the premiums are paid by the Company. The eligibility of the employee for the benefit as well as the amount of medical cover purchased is determined by the grade of the employee at the time of retirement.
Post - retirement housing allowance
The Company operates a post retirement benefit scheme for a certain grade of employees in which a monthly allowance determined on the basis of the last drawn basic salary at the time of retirement, is paid to the retiring employee in lieu of housing.
Though its defined benefit plans the Company is exposed to a number of risks, the most significant of which are detailed below:
Asset Volatility
The plan liabilities are calculated using a discount rate set with references to government bond yields; if plan assets underperform compared to this yield, this will create or increase a deficit. The defined benefit plans may hold equity type assets, which may carry volatility and associated risk.
Changes in bond yields
A decrease in government bond yields will increase plan liabilities, although this is expected to be partially offset by an increase in the value of the plans'' investment in debt instruments.
Inflation risk
The present value of some of the defined benefit plan obligations are calculated with reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan''s liability. The post retirement medical benefit obligation is sensitive to medical inflation and accordingly, an increase in medical inflation rate would increase the plan''s liability.
Life expectancy
The present value of defined benefit plan obligation is calculated by reference to the best estimate of the mortality of plan participants, both during and after the employment. An increase in the life expectancy of the plan participants will increase the plan''s liability.
During the year the Company has recognised an obligation of Rs. Nil (2021: Rs. 66.61 crores) to fund the shortfall on account of interest rate guarantee. The Company has paid Rs. Nil (2021: 54.32) to the Provident Fund Trust in respect of previous year shortfall.
The plan assets have been primarily invested in government securities and corporate bonds.
The Company''s contribution to Provident Fund and Superannuation fund aggregating Rs. 165.14 crores (2021: Rs. 165.38 crores) has been recognised in Profit or Loss under the head Employee Benefits Expense.
36. Employee Stock Option Plan
The Company has allotted 55,24,219 Ordinary (Equity) Shares of Rs. 10 each, 10,00,000 Ordinary (Equity) Shares of Rs. 10 each, 1,73,53,034 Ordinary (Equity) Shares of Rs. 5 each, 19,11,628 Ordinary (Equity) Shares of Rs. 5 each and 52,00,000 Ordinary (Equity) Shares of Rs. 5 each in the years ended 31st March, 2002, 31st March, 2010, 31st March, 2011, 31st March 2014 and 31st March, 2015 respectively to the Mahindra & Mahindra Employees'' Stock Option Trust (âM&M ESOP Trust") set up by the Company. The Trust holds these shares for the benefit of the employees and issues them to the eligible employees as per the recommendations of the Compensation Committee.
Options granted under Mahindra & Mahindra Limited Employees Stock Option Scheme - 2000 (â2000 Scheme") vest in 4 equal instalments on the expiry of 12 months, 24 months, 36 months and 48 months from the date of grant. The options may be exercised on any day over a period of five years from the date of vesting. Number of vested options exercisable is subject to a minimum of 50 or number of options vested whichever is lower.
Options granted under Mahindra & Mahindra Limited Employees Stock Option Scheme - 2010 (â2010 Scheme") vest in
i) 5 equal instalments on the expiry of 12 months, 24 months, 36 months, 48 months and 60 months or
ii) 5 equal instalments on the expiry of 36 months, 48 months, 60 months, 72 months and 84 months or
iii) 4 instalments bifurcated as 20% on the expiry of 18 months, 20% on the expiry of 30 months, 30% on the expiry of 42 months and 30%
on the expiry of 54 months or
iv) 4 equal instalments on the expiry of 12 months, 24 months, 36 months and 48 months or
v) 3 instalments bifurcated as 33.33% on the expiry of 12 months, 33.33% on the expiry of 24 months and 33.34% on the expiry of
36 months or
In respect of Options granted under the Employee Stock Option Plan the accounting is done as per requirements of Ind AS 102. Consequently, salaries, wages, bonus etc. includes Rs. 81.08 crores (2021: Rs. 95.02 crores) being expenses on account of share based payments, after adjusting for reversals on account of options forfeited. The amount excludes Rs. 5.40 crores (2021: Rs. 2.19 crores) charged to its subsidiaries for options issued to their employees.
37. Capital Management
The Company''s capital management strategy is to effectively determine, raise and deploy capital so as to create value for its shareholders. The same is done through a mix of either equity and/or preference and/or convertible and/or combination of short term/long term debt as may be appropriate.
The Company determines the amount of capital required on the basis of its product, capital expenditure, operations and strategic investment plans. The same is funded through a combination of capital sources be it either equity and/or preference and/or convertible and/or combination of short term/long term debt as may be appropriate.
The capital structure is monitored on the basis of net debt to equity and maturity profile of overall debt portfolio of the Company.
Net Debt and Equity is given in the table below:
38. Financial instruments
Financial Risk Management Framework
I n the course of its business, the Company is exposed to certain financial risks namely credit risk, interest risk, currency risk & liquidity risk. The Company''s primary focus is to achieve better predictability of financial markets and seek to minimize potential adverse effects on its financial performance.
The financial risks are managed in accordance with the Company''s risk management policy which has been approved by its Board of Directors. 1. Market Risk Management
Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates etc. could affect the Company''s income or the value of its holdings of financial instruments including cash flow. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while maximising the return.
(a) Currency Risk
The Company''s exposure to currency risk relates primarily to the Company''s operating activities including anticipated sales, purchases and borrowings where the transactions are denominated in a currency other than the Company''s functional currency.
The Company''s foreign currency exposures are managed in accordance with its Foreign Exchange Risk Management Policy which has been approved by its Board of Directors. The Company hedges its foreign currency risk mainly by way of Forward Covers. Other derivative instruments may be used if deemed appropriate.
(b) Interest Rate Risk
The Company uses a mix of cash and borrowings to manage the liquidity & fund requirements of its day-to-day operations. Further, certain interest bearing liabilities carry variable interest rates.
Interest Rate risk on variable rate borrowings is managed by way of interest rate swaps.
Hedge Accounting: Interest Rate Swaps
I nterest Rate Swaps entered into by the Company meet the requirements for hedge accounting under Ind AS 109 - Financial Instruments, and thus are accounted as such.
(ii) Interest Rate sensitivity
The sensitivity analyses below have been determined based on exposure to interest rate for both derivative and non-derivative instruments at the end of reporting period. For floating rate liabilities, analysis is prepared assuming the amount of liability outstanding at the end of the reporting period, was outstanding for the whole year.
2. Credit Risk Management
Credit Risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Company''s exposure are continuously monitored.
(b) Trade Receivables
The Company applies the simplified approach to provide for expected credit losses prescribed by Ind AS 109, which permits the use of the lifetime expected loss provision for all trade receivables. The Company has computed expected credit losses based on a provision matrix which uses historical credit loss experience of the Company. Forward-looking information (including macroeconomic information) has been incorporated into the determination of expected credit losses. The Company has taken dealer deposits, bank guarantees etc. which are considered as collateral and these are considered in determination of expected credit losses, where applicable.
The Company''s maximum exposure to credit risk in respect of Financial Guarantee contracts are disclosed in Note 38 - 3(a).
In respect of other financial assets, the maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets.
The amounts included above for financial guarantee contracts are the maximum amounts the Company could be forced to settle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty to the guarantee. Based on expectations at the end of the reporting period, the Company considers that it is more likely than not that such an amount will not be payable under the arrangement.
(b) Maturity profile of derivative financial liabilities
The following table details the Company''s liquidity analysis for its derivative financial liabilities other than derivatives on Interest in Subsidiaries, Associates and Joint Ventures. When the amount payable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves at the end of the reporting period.
4. Offsetting of balances: The Company has not offset financial assets and financial liabilities.
5. Collaterals
The Company has availed working capital facilities and other non-fund based facilities viz. bank guarantees and letters of credit, some of which are secured by hypothecation of book debts, receivables, outstanding monies and all other current assets. The company has also availed secured short term loan facilities backed by lien on non-callable fixed deposits against which there was no outstanding as on 31st March 2022.
42. Segment information (contd.)
Revenue from type of products and services
The operating segments are primarily based on nature of products and services and hence the Revenue from external customers of each segment is representative of revenue based on products and services.
Domestic includes sales to customers located in India and service income accrued in India.
Overseas includes sales and services rendered to customers located outside India.
Information about major customers
During the years ended 31st March 2022 and 31st March, 2021 no revenues from transactions with a single external customer amount to 10% or more of the Company''s revenues from external customers.
43. Contingent Liability & Commitments:
(A) Contingent Liability:
(a) Claims against the Company not acknowledged as debts comprise of:
(i) Excise Duty, Sales Tax and Service Tax claims disputed by the Company relating to issues of applicability and classification aggregating Rs. 1,256.99 crores (2021: Rs. 2,306.22 crores) before tax.
(ii) Other matters (excluding claims where amounts are not ascertainable): Rs. 146.58 crores (2021: Rs. 101.79 crores) before tax.
(b) Taxation matters:
(i) Demands against the Company not acknowledged as debts and not provided for, in respect of which the Company is in appeal and exclusive of the effect of similar matters in respect of assessments remaining to be completed:
- Income-tax: Rs. 547.40 crores (2021: Rs. 757.30 crores) net off MAT credit.
(ii) Items in respect of which the Company has succeeded in appeal, but the Income-tax Department is pursuing/likely to pursue in appeal/reference and exclusive of the effect of similar matters in respect of assessments remaining to be completed:
- Income-tax matters: Rs. 412.03 crores (2021: Rs. 185.32 crores).
(c) I n respect of (a) & (b) above, it is not practicable for the Company to estimate the closure of these issues and the consequential timings of cash flows, if any.
(d) Financial guarantee given on behalf of Subsidiaries/Associates/Joint Ventures companies [Refer Note 38 (2) (a)].
(B) Commitments:
The estimated amount of contracts remaining to be executed on capital account and not provided for as at 31st March, 2022 is Rs. 1,697.17 crores (2021: Rs. 1,901.60 crores) and other commitment as at 31st March, 2022 is Rs. 6.90 crores (2021: Rs. 0.26 crores).
44. Other information:
(A) Research and Development expenditure
(a) In recognised Research and Development units:
(i) Expensed to Profit or Loss, including certain expenditure based on allocations made by the Company, aggregate
Rs. 745.21 crores (2021: Rs. 778.64 crores) [excluding depreciation and amortisation of Rs. 942.34 crores (2021: Rs. 987.22 crores)].
(ii) Development expenditure incurred during the year Rs. 1302.51 crores (2021: Rs. 967.73 crores).
(iii) Capitalisation of assets Rs. 456.05 crores (2021: Rs. 97.26 crores).
(b) In other units:
(i) Expensed to Profit or Loss, including certain expenditure based on allocations made by the Company, aggregate
Rs. 123.56 crores (2021: Rs. 78.00 crores) [excluding depreciation and amortisation of Rs. 133.49 crores (2021: Rs. 116.13 crores)].
(ii) Development expenditure incurred during the year Rs. 80.10 crores (2021: Rs. 176.88 crores).
(iii) Capitalisation of assets Rs. 8.83 crores (2021: Rs. 55.12 crores).
44. Other information: (contd.)
(B) (i) The Scheme of Merger by Absorption of Mahindra Vehicle Manufacturers Limited (MVML) with the Company and their respective Shareholders (âthe Scheme") has been approved by the Mumbai Bench of National Company Law Tribunal (NCLT) on 26th April 2021 and the required approvals/consent of Department of Industries, Government of Maharashtra and Maharashtra Industrial Development Corporation were also received on 15th June 2021 and 29th June 2021 respectively. Consequently, upon completion of other required formalities on 1st July 2021, the Scheme has become effective from the Appointed date i.e. 1st April 2019. The effect of the merger of MVML on the amounts of Revenue and Profit published in previous year are as shown below.
(ii) The Scheme of Merger by Absorption of the wholly-owned subsidiaries, Mahindra Engineering and Chemical Products Limited (MECP), Retail Initiative Holdings Limited (RIHL) and Mahindra Retail Limited (MRL) with the Company and their respective Shareholders (âthe Scheme") has been approved by the Mumbai Bench of National Company Law Tribunal on 24th March 2022. The effect of the MECP, MRL & RIHL merger on the amounts of Revenue and Profit published in previous year are as shown below.
(iii) Both the above schemes of merger have been accounted under ''the pooling of interests method'' i.e. in accordance with Appendix C of Ind AS 103 - Business Combinations, read with Ind AS 10 - Events after the Reporting Period and comparatives have been restated for the merger from the beginning of the previous year i.e. 1st April 2020. Accordingly, the impact of MVML, MECP, RIHL and MRL have been included in the standalone financial statements for all the periods presented. The effect of the mergers on the amounts of Revenue and Profit published in previous year are as shown below.
(C) Effective 1 January 2021, the US branch of Mahindra Vehicle Manufacturers Limited (merged with the Company), (refer Note [44(B)(i)]) has been transferred to Mahindra Integrated Business Solutions Private Limited (''MIBS''), subsidiary of the Company and consequently a gain of Rs. 46.78 crores has been recorded as Exceptional Item for the year ended 31st March, 2021 (Refer note 33).
(D) The Board of Directors of the Company at its Meeting held on 26th March, 2021 had accorded an in-principle approval for consolidation of Mahindra Electric Mobility Limited, a subsidiary of the Company (âMEML") into the Company and had authorised its Loans & Investment Committee to decide on the mode of consolidation including finalizing the Scheme, Valuation, Swap Ratio, etc. and recommend the same to the Audit Committee and to the Board of Directors for their approval. The Board of Directors of the Company at its Meeting held on 28th May, 2021, have approved the Scheme of Merger by Absorption of MEML with the Company and their respective Shareholders under sections 230 to 232 and other applicable provisions of the Companies Act, 2013.
The Appointed Date of the scheme of merger would be 1st April, 2021 or such other date as may be approved by NCLT or any other appropriate authority. The Scheme will be given effect upon receipt of requisite approvals/consent.
Explanatory notes:
(i) Cost of materials consumed for the purpose of Inventory turnover ratio includes Purchases of stock-in-trade and Changes in inventories of finished goods, stock-in-trade and work-in-progress.
(ii) Investments includes current and non-current investments including Fixed deposits, Mutual funds, Corporate deposits, Inter corporate deposits excluding investments in Equity instruments.
Explanation for change in the ratios by more than 25%:
(i) Debt Service Coverage Ratio (times): The debt service coverage ratio is healthier at 10.95 in current year as against 6.96 in previous year primarily due to decrease in finance cost resulting from repayment of borrowings during the year.
(ii) Return on Equity (%): Return on Equity in the current year has improved from 2.85% in previous year to 13.35% in current year on the base of higher profit for the year.
(iii) Trade Receivables Turnover (times): The debtor''s turnover ratio improved to 21.51 in current year as against 17.13 in the previous year primarily due to better collection efforts and significant improvements in credit management process across divisions.
(iv) Net Profit margin (%): The net profit margin (after exceptional items) improved to 8.59% in current year as against 2.21% in the previous year primarily on account of increase in operation performance, lower impairment losses on investments, higher gain on sale of long-term investment and lower tax expenses for the year.
(v) Return on Capital Employed (%): Return on capital employed has improved from 6.73% in the previous year to 14.67% in the current year on the base of higher profit for the year.
46. Previous year''s figures have been regrouped/reclassified wherever necessary.
Mar 31, 2022
Note: For the purposes of impairment assessment, goodwill is allocated to the operating divisions which represent the lowest level within the Company at which goodwill is monitored for internal management purposes, which is not higher than the operating segments. The recoverable amount of the unit is determined based on discounted cash flows and the key assumptions used are discount rate, budgeted growth rates and terminal value growth rate. The estimated recoverable amount of the unit exceeds the carrying amount of goodwill for the respective cash generating units. Refer note 32.2 for details of the respective cash generating units.
Note :
i) I nvestment in these entities is not denominated in number of shares as per laws of country of incorporation i.e. The Peopleâs Republic of China and Vietnam.
ii) The number of shares held in Tech Mahindra De Mexico, S.DE R.L.DE C.V. comprise 1 share (March 31, 2021- 1) each of Peso 2,999 and Peso 1; fully paid up of Series A (fixed capital) and 1 share (March 31, 2021 - 1) of Peso 12,931,770 fully paid up of Series B (variable capital).
iii) The number of shares held in Sofgen Holdings Limited comprise 13,739,910 Ordinary shares (March 31, 2021 -5,362,910) and 27,062 shares of Class A (March 31, 2021 - 27,062).
iv) The number of shares held in The Bio Agency Limited comprise 1 Class A Ordinary shares (March 31, 2021 - 102,000) and 1 Class B Ordinary shares (March 31, 2021 - 18,000)
v) As per the Scheme of merger of the Company with Mahindra Satyam Computer Services Limited with effect from June 24, 2013, the Company had created TML Benefit Trust (Trust) as per the merger order. As per the scheme, the Company transferred, out of its total holding in Satyam as on April 1, 2011; 204 Million equity shares to the Trust, to hold the shares and any additions thereto exclusively for the benefit of the Company. Post-merger with the Company these shares were converted into Tech Mahindra Limitedâs shares in the ratio of 2: 17. As of date, post bonus and split approved by the shareholders from time to time by the Company; the Trust holds 94,235,629 (March 2021: 94,235,629) shares of the Company.
vi) During the year, Tech Mahindra London Limited has converted Preference shares 46,961,578 into 46,961,578 Ordinary shares.
vii) Amounts less than '' 0.5 Million are reported as â0â
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 54 for details relating to stock options.
iii) On April 26, 2021 the Board of Directors of the Company had proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 and shareholders at the Annual General Meeting held on 30 July 2021 approved the dividend amounting to '' 29,074 Million which is paid in the month of August 2021 . Further, special dividend of '' 15 per equity share which was approved on 25 October 2021 and paid in the month of December 2021 amounting to '' 14,550 Million. The amount is recognized as distribution to equity shareholders.
On May 13, 2022 the Board of Directors of the Company have proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2022 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 29,155 Million
iv) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
The estimated amount of contracts remaining to be executed on capital account (net of capital advances)
as at March 31, 2022 is '' 2,318 Million. (March 31, 2021: '' 2,050 Million).
i) Pursuant to a share purchase agreement, the Company acquired 51% stake in Cerium Systems Private Limited ("Ceriumâ) on April 9, 2020 for a total consideration of '' 1,454 Million, out of which '' 916 Million was paid upfront. Further, the Company has entered into an agreement to purchase the remaining 49% stake over a period of three-year, ending March 31, 2023.
Subsequently, the Company paid '' 1,061 Million for acquiring 20% stake and earnout payment for first tranche. As at March 31, 2022, the contractual obligation towards the acquisition amounts to '' 3,320 Million. (March 31,2021, '' 1,957 Million)
ii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Zen3 Infosolutions Private Limited on April 9, 2020 for a consideration of '' 141 Million.
iii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Perigord Premedia (India) Private Limited and Perigord Data Solutions (India) Private Limited on March 15, 2021 for a consideration of '' 133 million and '' 101 million, respectively.
iv) Pursuant to a business purchase agreement, the Company acquired the business of TransSys Technologies Solutions LLC and its group companies ("TransSys Groupâ) in October 2020 for a consideration of USD 4.84 million ('' 354 million) (upfront consideration of USD 3.9 million ('' 291 Million) and contingent consideration linked to financial performance).
v) Pursuant to a share purchase agreement, the Company acquired 100% stake in Allyis India Private Limited on December 31, 2021 for a consideration of USD 2.6 Million ('' 194 Million).
vi) Pursuant to a business purchase agreement, the Company acquired the business of M/s BrainScale on December 03, 2021 for a total consideration of '' 154 Million.
vii) Pursuant to a business purchase agreement, the Company acquired the business of Lodestone Software Services Private Limited on October 25, 2021 for a consideration of USD 6.7 Million ('' 497.5 million).
i. Bank Guarantees outstanding as at March 31,2022: '' 22,504 Million (March 31, 2021: '' 22,811 Million).
ii. Letters of support/letters of comfort of USD 94 Million: ''7,162 Million (March 31, 2021: USD 94 Million, '' 6,836 Million) to banks for loans availed by step down subsidiaries of the Company.
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011, the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was compiled by erstwhile Satyam. The BG has been extended up to October 14, 2022.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
⢠In August 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,928 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: '' 1,480 Million (March 31, 2021 '' 1,458 Million).
ii. Claims made on the Company not acknowledged as debt: '' 297 Million (March 31,2021 '' 231 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Other contingencies '' 407 Million (March 31, 2021 '' 407 Million).
33 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
36 MERGER/AMALGAMATION OF ENTITIES
The Board of Directors of the Company at its meeting held on January 29, 2021 have approved the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited, two wholly owned subsidiaries with the Company. Subsequently, the Company has filed the application with Honâble jurisdictional National Company Law Board Tribunal ("the NCLTâ). As on the date of the standalone financial statements, the Company is awaiting the order from the NCLT.
37 DIMINUTIO N IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2022.
Since the recoverable amount determined was lower than the carrying value ofthe respective investment, the Company has recognized an impairment loss of '' 4,669 Million for the year ended March 31, 2022 (March 31, 2021 '' 1,439 Million). Details of these investments are:
Estimates of future cash flows used in the value-in-use calculation are specific to the entity based on business plans. The future cash flows consider potential risks given the current economic environment and key assumptions, such as volume forecasts and margins. The discount rate used in the calculation reflects marketâs assessment of the risks specific to the asset as well as time value of money.
The financial projections and future cash flows basis which investments have been tested for impairment consider the present economic situation which includes reassessment of the discount rates, revisiting the growth rates factored while arriving at terminal value and subjecting these variables to sensitivity analysis.
38 A. CERTAIN MATTERS RELATING TO ERSTWHILE SATYAM COMPUTER SERVICES LIMITED (ERSTWHILE SATYAM):
I n the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtors position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
I n 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD
39.2 Million; and
b) non-realisation and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
B. Proceedings in relation to âAlleged Advancesâ
Erstwhile Satyam had, in the past, received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed with legal notices claiming repayment of the alleged advances aggregating to '' 12,304 Million together with damages/compensation @ 18% per annum till the date of repayment. The erstwhile Satyam had not acknowledged any liability and replied to the legal notices stating that the claims are not legally tenable.
Subsequently, the 37 companies filed petitions for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court of Andhra Pradesh in its Order approving the merger of the erstwhile Satyam with the Company, held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile
Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in the names of the said 37 companies and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved. The matter is pending final adjudication.
Appeals were filed before the Division Bench of the Honâble High Court of Andhra Pradesh against the Order of the single judge of the Honâble High Court of Andhra Pradesh sanctioning the Scheme of merger of erstwhile Satyam with the Company w.e.f. April 1, 2011, which are yet to be heard.
Further, petition was filed by the 37 companies for winding-up of the erstwhile Satyam with the Honâble High Court of Andhra Pradesh which was subsequently rejected. One of the aforesaid companies also filed an appeal against the said order with the Division Bench of the Honâble High Court of Andhra Pradesh.
These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions.
In view of the aforesaid and based on an independent legal opinion, current legal status and lack of documentation to support the validity of the claim, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon will not be payable on final adjudication. As endorsed by the Honâble High Court in the scheme of merger, the said amount of '' 12,304 Million has been disclosed as "Amounts pending investigation suspense account (net)â ("Suspense Account (net)â), which override the relevant requirement of Conceptual Framework for Financial Reporting under Indian Accounting Standards (Ind AS). Accordingly, the amounts of these alleged advances are recorded separately from equity and liability of the Company in the books of account.
39 CLAIMS BY CERTAIN SHAREHOLDERS OF ERSTWHILE SATYAM
In terms of the Settlement of claims made by Aberdeen Asset Management PLC., UK and Aberdeen Claims Administration Inc., USA, (together referred to as âAberdeenâ) the erstwhile Satyam had deposited a total amount of USD 80.16 Million towards the Settlement Amount and interest in an Escrow Account during the financial year ended March 31, 2013.
I n the meanwhile, Commissioner of Income Tax Mumbai has filed two writ petitions before the Honâble High Court of Bombay, seeking to set aside the orders of Authority for Advance Ruling dated February 15, 2016, which ruled that no withholding tax is applicable for remittance of Settlement Amount. The above writ petitions have been disposed off by the Prothonotary authority of non-removal of office objections.
Considering the disposal of writs filed by the Commissioner of Income Tax Mumbai and no subsequent action being taken by the Income tax department to restore such writs / file fresh writ petitions before the Honâble High Court of Bombay, the Company have obtained letters of indemnity from the claimants, indemnifying the Company in regard to future actions by Indian Income tax department in the current year and consequently remitted the Settlement amounts to Aberdeen trusts.
40 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honor the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
I n the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order Before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
The company has not revalued any Property, Plant and Equipment, Investment Property and intangible property during the year.
42 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
43 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
45 DETAILS OF EMPLOYEE BENEFITS AS REQUIRED BY THE IND AS-19 - EMPLOYEE BENEFITS ARE AS UNDER:i. Defined Contribution Plans
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠'' 71 Million (March 31, 2021: '' 38 Million) for National Pension Scheme contributions.
⢠'' 461 Million (March 31, 2021: '' 357 Million) for Superannuation Fund contributions; and
⢠'' 4053 Million (March 31, 2021: '' 2,771 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognised as of the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation for contracts where the entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entityâs performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2022 other than those meeting the exclusion criteria mentioned above, is '' 358,110 Million. Out of this, the Company expects to recognise revenue of around 54% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
Changes in the contract assets balances during the year ended March 31, 2022 and March 31, 2021 are as follows:
Reconciliation of revenue recognised in the statement of profit and loss with the contracted price:
The Company has recognized revenue of '' 347,261 Million (March 31, 2021 '' 296,409 Million) which is adjusted by discounts of ''9,619 Million (March 31, 2021 '' 12,555 Million) for the year ended March 31, 2022.
The total cash outflow for leases is ''1,199 Million (March 31, 2021 '' 1,262 Million) for the year ended March 31, 2022, including cash outflow for short term and low value leases.
The Company has given land and building on operating lease. The rental income recognized in the Statement of Profit and Loss for the year ended March 31, 2022 is ''349 Million (year ended March 31, 2021: '' 306 Million). The future lease rentals receivable on such non-cancellable operating leases are as follows:
50 FINANCIAL RISK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
*The fair value of cash and cash equivalents, other balances with bank, trade receivables, unbilled receivables, loans, trade payables, borrowings, lease liabilities and certain other financial assets and liabilities approximate their carrying amount largely due to the short term nature of these instruments.
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''158,353 and '' 189,975 Million as of March 31, 2022 and March 31, 2021 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2022 and March 31, 2021. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The carrying amounts of the Companyâs foreign currency denominated monetary assets and monetary liabilities at the end of the year are as follows:
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
The following are the principal amounts of outstanding foreign currency exchange forward and option contracts entered into by the Company which have been designated as Cash Flow Hedges:
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.
There are bank guarantee/corporate guarantee contracts, letters of support/letters of comfort issued on behalf of related parties amounting to '' '' 22,068 Million (March 31, 2021: '' 22,035 Million).
Amounts less than '' 0.5 Million are reported as "0â
Refer Note 8 for closing balance of investment. The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017
Note: Disclosure of entity wise balances are given for material transactions within each category.
i. ESOP 2000 & ESOP 2010:
The Company has instituted âEmployee Stock Option Plan 2000â (ESOP 2000) and âEmployee Stock Option Plan 2010â (ESOP 2010) for eligible employees and Directors of the Company and its subsidiaries. The vesting pattern of the schemes has been provided below. The options can be exercised over a period of 5 years from the date of the grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Company at the time of grant for ESOP 2000 and exercise price as determined by the Nomination and remuneration Committee for ESOP 2010.
The Company has instituted âEmployee Stock Option Plan 2006â (ESOP 2006) ,âEmployee Stock Option Plan 2014â (ESOP 2014) and âEmployee Stock Option Plan 2018â (ESOP 2018) for eligible employees and Directors of the Company and its subsidiaries. In terms of the said plan, the Nomination and Remuneration Committee has granted options to the employees of the Company and its subsidiaries. The maximum exercise period is 7 years from the date of grant for ESOP 2006 and options can be exercised over a period of 5 years from the date of each grant for ESOP 2014 and ESOP 2018.
iii. TML ESOP - B 2013:
Erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Bâ (ASOP - B) under which 28,925,610 options were available for grant/exercise at the time the Scheme of Amalgamation became effective. Post-merger, these options were adjusted in terms of the approved Scheme of Amalgamation. Each option entitles the holder one equity share of the Company. These options vest over a period of 1 to 4 years from the date of the grant. Upon vesting, employees have 5 years to exercise the options. Postmerger, the name of the ESOP scheme has been changed to âTML ESOP B 2013â.
The erstwhile Satyam has established a scheme âAssociate Stock Option Plan - Restricted Stock Units (ASOP - RSUs)â to be administered by the Administrator of the ASOP - RSUs, a committee appointed by the Board of Directors of the erstwhile Satyam in May 2000. Under the scheme, 1,529,412 equity shares (equivalent number of equity shares post-merger) are reserved to be issued to eligible associates at a
price to be determined by the Administrator which shall not be less than the face value of the share. These RSUs vest over a period of 1 to 4 years from the date of the grant. The maximum time available to exercise the options upon vesting is five years from the date of each vesting. Post-merger, the name of the ESOP scheme has been changed to TML RSU.
Erstwhile Satyam had established an ESOP scheme viz., âAssociate Stock Option Plan - Aâ (ASOP - A) formulated prior to the SEBI Guidelines on ESOP and ESPS issued in 1999. This plan was administered through a Trust viz., Satyam Associates Trust (Satyam Trust). At the time the Scheme of Amalgamation and Arrangement became effective, the Satyam Trust was holding 2,055,320 shares of erstwhile Satyam, which post amalgamation were converted into 241,802 shares of the Company at the approved share exchange ratio and this scheme has been transitioned and renamed as ESOP-A. Satyam Trust grants warrants to the employees of the Company with an exercise price and terms of vesting advised by the Nomination and Remuneration Committee of the Company. Each warrant shall entitle the warrant holder to one equity share. The exercise period is 180 days from the date of each vesting.
Erstwhile MESL has established Employee Stock Option Scheme (ESOS) - ESOS for which 1,400,000 equity shares were earmarked. ESOS Scheme is administered through a Trust viz., MES Employees Stock Option Trust. The options under this Scheme vest over a period of 1 to 3 years from the date of the grant. Upon vesting, employees have 7 years to exercise the options. As on the effective date of amalgamation, 18,084 options were outstanding under ESOS, which were converted into equivalent 30,144 options of the Company giving effect to approved share exchange ratio, split and bonus.
x. The employee stock compensation cost for the Employee Stock Option Plan 2018, Employee Stock Option Plan 2010, Employee Stock Option Plan 2000, Employee Stock Option Plan- B 2013, ESOP-A, ESOP 2014 and TML-RSU schemes has been computed by reference to the fair value of share options granted and amortized over each vesting period. For the period ended March 31, 2022, the Company has accounted for employee stock compensation cost (equity settled) amounting to '' 712 Million (March 31, 2021: '' 1,039 Million). This amount is net of cost of options granted to employees of subsidiaries.
Mar 31, 2021
i) Investment in these entities is not denominated in number of shares as per laws of country of incorporation i.e. The Peopleâs Republic of China and Vietnam.
ii) The number of shares held in Tech Mahindra De Mexico, S.DE R.L.DE C.V. comprise 1 share (March 31, 2020- 1) each of Peso 2,999 and Peso 1; fully paid up of Series A (fixed capital) and 1 share (March 31, 2020 - 1) of Peso 12,931,770 fully paid up of Series B (variable capital).
iii) The number of shares held in Sofgen Holdings Limited comprise 1,065,848 Ordinary shares (March 31, 2020 - 1,065,848) and 27,062 shares of Class A (March 31, 2020 - 27,062).
iv) The number of shares held in The Bio Agency Limited comprise 102,000 Class A Ordinary shares (March 31, 2020 - 102,000) and 18,000 Class B Ordinary shares (March 31, 2020 - 18,000)
v) As per the Scheme of merger of the Company with Mahindra Satyam Computer Services Limited with effect from June 24, 2013, the Company had created TML Benefit Trust (Trust) as per the merger order. As per the scheme, the Company transferred, out of its total holding in Satyam as on April 1, 2011; 204 Million equity shares to the Trust, to hold the shares and any additions thereto exclusively for the benefit of the Company. Post-merger with the Company these shares were converted into Tech Mahindra Limitedâs shares in the ratio of 2: 17. As of date, post bonus and split approved by the shareholders from time to time by the Company; the Trust holds 94,235,629 (March 2020: 94,235,629) shares of the Company.
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 55 for details relating to stock options.
iii) The shareholders at the Annual General Meeting held on July 31,2019 approved dividend of '' 14 per equity share for year ended March 31, 2019 which was subsequently paid. The amount was recognized as distributions to equity shareholders, the total appropriation was''16,152 Million including corporate dividend tax of''2,647 Million. In addition, interim dividend of '' 10 per equity share was paid during the year ended 31 March 2020 amounting to '' 11,370 Million including corporate dividend tax of '' 1,711 Million. On April 30, 2020 the Board of directors of the Company had proposed a final dividend of ''5 per share in respect of year ended March 31,2020 and shareholders at the Annual General Meeting held on July 28, 2020 approved the dividend amounting to '' 4,831 Million. The amount was recognized as distribution to equity shareholders. Further, special dividend of '' 15 per equity share was paid during the period ended 31 December 2020 amounting to '' 14,504 Million. On April 26, 2021 the Board of directors of the company have proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 29,048 Million
iv) During the year ended March 31,2020, the Company bought back 20,585,000 equity shares for an aggregate amount of '' 19,556 Million. The equity shares bought back were extinguished. Capital redemption reserve was created to the extent of equity share capital extinguished of '' 103 Million. Transaction costs of '' 132 Million for buy-back have been adjusted to retained earnings.
v) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
Provision for claims and provision for contingencies represents the cash outflows estimated by the Company against the service claims made by customers and the compliance related contingencies, respectively. The timing of cash outflows in respect of such provision cannot be reasonably determined. Others mainly includes the provisions related to onerous contracts which are recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract.
a. Gross amount required to be spent by the Company during the year is '' 1,052 Million (previous year '' 1,148 million) (calculated at 2% of the average net profits of the Company during the three immediately preceding financial years)
The estimated amount of contracts remaining to be executed on capital account (net of capital advances)
as at March 31, 2021 is '' 2,050 Million (March 31, 2020: '' 2,508 Million).
i) Pursuant to a share purchase agreement, the Company acquired 51% stake in Cerium Systems Private Limited ("Ceriumâ) on April 9, 2020 for a total consideration of '' 1,454 Million, out of which '' 916 Million was paid upfront. Further, the Company has entered into an agreement to purchase the remaining 49% stake over a period of three-year, ending March 31, 2023.
Subsequently, the Company has acquired 6% stake for '' 164 Million. Further, the Company has made earnout payment for first tranche amounting to '' 412 Million. As at March 31, 2021, the contractual obligation towards the acquisition amounts to '' 1,957 Million.
ii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Zen3 Infosolutions Private Limited on April 9, 2020 for a consideration of '' 141 Million. Further, the Company through its wholly owned subsidiary Tech Mahindra (Americas) Inc., acquired 100% stake in Zen3 Infosolutions (America) Inc. on April 9, 2020.
iii) Pursuant to a business purchase agreement, the Company acquired the business of TransSys Technologies Solutions LLC and its group companies ("TransSys Groupâ) in October 2020 for a consideration of USD 4.84 million ('' 354 million) (upfront consideration of USD 3.9 million ('' 291 Million) and contingent consideration linked to financial performance).
iv) Pursuant to a share purchase agreement, the Company acquired 100% stake in Perigord Premedia (India) Private Limited and Perigord Data Solutions (India) Private Limited on March 15, 2021 for a consideration of '' 133 million and '' 101 million, respectively. Further, the Company through its wholly owned subsidiary Mahindra Engineering Services (Europe) Limited, acquired 70% stake in Perigord Asset Holdings Limited on March 15, 2021. Further, Mahindra Engineering Services (Europe) Limited has entered into an agreement to purchase the balance 30% stake over a period of four-years, ending March 31, 2024.
i. Bank Guarantees outstanding as at March 31,2021: '' 22,811 Million (March 31, 2020: '' 23,129 Million).
ii. Letters of support/letters of comfort of USD 94 Million: '' 6,836 Million (March 31, 2020: USD 89 Million, '' 6,692 Million) to banks for loans availed by step down subsidiaries of the Company.
Contingent Liabilities in respect of Income Taxes/ Service Tax/ GST/ Value Added Tax/Customs and
International tax to the extent not provided for
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011, the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was complied by erstwhile Satyam. The BG has been extended upto October 14, 2021.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
ii. Appointment of Special Auditor and re-assessment proceedings
⢠In August, 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,948 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: '' 1,458 Million (March 31, 2020 '' 1,443 Million).
ii. Claims made on the Company not acknowledged as debt: ''231 Million (March 31,2020''185 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal, and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Claim against the Company for transfer of land in SEZ at Nagpur considered by Maharashtra Airport Development Company Limited (MADC) as ânon-formal transferâ as per its Transfer Policy and claiming the transfer fee of '' 152 Million. In addition, for leasehold land at Bhubaneshwar, the transfer is pending in the name of the Company as the department has not yet issued the letter communicating transfer fee.
v. Other contingencies '' 407 Million (March 31, 2020''407 Million).
Pursuant to the Scheme of Amalgamation and Arrangement (âthe Schemeâ) sanctioned by the Honâble High Courts of Andhra Pradesh and Bombay, Venturbay Consultants Private Limited (Venturbay), CanvasM Technologies Limited (CanvasM) and Mahindra Logisoft Business Solutions Limited (Logisoft), the wholly owned subsidiaries of the Company, and Satyam Computer Services Limited (Satyam) (through Venturbay) and C&S System Technologies Private Limited (C&S) a wholly owned subsidiary of erstwhile Satyam, merged with the Company with effect from April 1, 2011 (âthe appointed dateâ). Pursuant to the Scheme, the title deeds for the immovable properties pertaining to the amalgamating companies are pending conveyance in the name of the Company. The gross block and net block of the aforesaid immovable properties pending conveyance is ''665 million and ''614 million respectively as at 31 March 2021. The Company has initiated the name change formalities.
The amounts assessed as contingent liability do not include interest that could be claimed by counter parties
33 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The Ministry of Labour and Employment had released draft rules for the Code on November 13, 2020 and had invited suggestions from stakeholders which are under active consideration by the Ministry. However, the effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
36 MERGER/AMALGAMATION OF ENTITIES
The Board of Directors of the Company at its meeting held on January 29, 2021 have approved the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited, two wholly owned subsidiaries with the Company. Subsequently, the Company has filed the application with Honâble jurisdictional National Company Law Board Tribunal ("the NCLTâ). As on the date of the financial statements, the Company is awaiting the order from the NCLT.
Following companies were merged with the Company by approved schemes and were accounted as per âpooling of interestsâ method in accordance with Appendix C of Ind AS 103 âBusiness Combinationsâ.
⢠All assets and liabilities of Tech Mahindra Growth Factories Limited were taken over as per the scheme approved by National Company Law Tribunal, Mumbai Bench with appointed date as April 1, 2019. Comparatives were restated from the beginning of the previous year i.e. from April 1, 2018 as required by IND AS 103.
⢠All assets and liabilities of Dynacommerce India Private Ltd were taken over as per the scheme approved National Company Law Tribunal, Bengaluru Bench with appointed date as June 1, 2019.
37 DIMINUTION IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2021.
Since the recoverable amount determined was lower than the carrying value of the respective investment, the Company has recognized an impairment loss of '' 1,439 Million for the year ended March 31, 2021 (March 31, 2020''5,554 Million). Details of these investments are:
Estimates of future cash flows used in the value-in-use calculation are specific to the entity based on business plans. The future cash flows consider potential risks given the current economic environment and key assumptions, such as volume forecasts and margins. The discount rate used in the calculation reflects marketâs assessment of the risks specific to the asset as well as time value of money.
With respect to determination of recoverable amount of investment based on fair value less costs of disposal, the fair value measurement of the asset is determined using the market approach and is categorized as Level 1 in the fair value hierarchy (refer note 51).
The financial projections and future cash flows basis which investments have been tested for impairment consider the present economic situation which includes reassessment of the discount rates, revisiting the growth rates factored while arriving at terminal value and subjecting these variables to sensitivity analysis.
38 SALE OF INVESTMENT iN SUBSiDiARiES
i. During the previous year, the Company had sold its entire stake in Fixstream Networks Inc. as on September 30, 2019 for an amount of USD 2 Million ('' 142 Million ). Amount of USD 1.5 Million ('' 106 Million) was received and USD 0.5 Million ('' 36 Million) is in Escrow Account.
ii. During the previous year, the Company had also sold its 100% stake in Mahindra Technologies Services Inc. as on July 1, 2019 to Tech Mahindra Americas Inc. (100% subsidiary) for a consideration of USD 1.2 Million ('' 83 Million).
39 A. CERTAiN MATTERS RELATiNG TO ERSTWHiLE SATYAM COMPUTER SERViCES
LiMiTED (ERSTwHILE SATYAM):
In the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtors position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
In 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD 39.2 Million; and
b) non-realisation and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
Erstwhile Satyam received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed by legal notices from these companies dated August 4 and August 5, 2009, claiming repayment of the alleged advances aggregating '' 12,304 Million stated to be given as temporary advances but without any evidence in support of the nature of these transactions. This was also borne out in the internal forensic investigation. The legal notices also claimed damages/ compensation @18% per annum from the date of the advances till the date of repayment. The erstwhile Satyam has not acknowledged any liability to any of the 37 companies and has replied to the legal notices stating that the claims are legally untenable.
The 37 companies have filed petitions/suits for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court in its Order approving the merger of the erstwhile Satyam with the Company, further held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in their names and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention of the 37 companies that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved beyond doubt which is not so in this case.
The said 37 companies have filed appeals before the Division Bench of the Honâble High Court of Andhra Pradesh, against the Orders of the Honâble High Court of Andhra Pradesh and the Honâble High Court of Bombay sanctioning the scheme of merger of Satyam Computer Services Limited (Satyam) with the Company w.e.f. April 1, 2011, which are yet to be heard. One of the aforesaid companies has also appealed against the Order rejecting the Petition for winding-up of the erstwhile Satyam. These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions. In furtherance to the investigation, certain fixed deposits of the Company with certain banks, then aggregating to '' 8,220 Million were alleged by ED to be âproceeds of crimeâ
and were provisionally attached vide Order dated October 18, 2012 by the ED (the Order). The Honâble High Court of Judicature at Hyderabad quashed the said Provisional attachment Order and directed Banks to release the Fixed deposits to the Company vide its Order dated December 31, 2018. Accordingly, these deposits have been released by the Banks. In a recent development, ED has filed a Special Leave Petition (SLP) before the Honâble Supreme Court of India, against the above Order of the Honâble High Court of Telangana. The Honâble Supreme Court upon hearing the parties upheld the judgement of Honâble High court of Andhra Pradesh and Telangana and consequently dismissed the SLP filed by ED by its order dated February 26, 2021.
Criminal prosecution was initiated by the ED against SCSL, since merged with Tech Mahindra Limited (Company) under Section 3 of The Prevention of Money-Laundering Act, 2002 for alleged money laundering along with 212 accused persons. Upon an application challenging the prosecution against the Company, the Honâble High Court of Andhra Pradesh quashed the proceedings by its Order dated December 22, 2014. The appeal preferred by the ED challenging the order of quashing the prosecution before the Division Bench of the Honâble High Court was dismissed by an order dated March 30, 2017 and confirmed the order of quashing. A Special Leave Petition was filed by ED before the Honâble Supreme Court of India. By an order dated December 8, 2017, the Honâble Supreme Court dismissed the SLP filed by the ED and affirmed the order of the Single Judge quashing the prosecution against the Company.
In view of the aforesaid developments and based on an independent legal opinion, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon is not legally tenable. Consequently, pending the final outcome of the proceedings, as a matter of prudence, the Company has accounted and disclosed the amount of '' 12,304 Million as âSuspense Account (net)â.
40 CLAIMS BY CERTAIN SHAREHOLDERS OF ERSTWHILE SATYAM
In terms of the Settlement of claims made by Aberdeen Asset Management PLC., UK and Aberdeen Claims Administration Inc., USA, (together referred to as âAberdeenâ) the erstwhile Satyam had deposited a total amount of USD 80.16 Million towards the Settlement Amount and interest in an Escrow Account during the financial year ended March 31, 2013.
In the meanwhile, Commissioner of Income Tax Mumbai has filed two writ petitions before the Honâble High Court of Bombay, seeking to set aside the orders of Authority for Advance Ruling dated February 15, 2016, which ruled that no withholding tax is applicable for remittance of Settlement Amount. The above writ petitions have been disposed off by the Prothonotary authority of non-removal of office objections.
Considering the disposal of writs filed by the Commissioner of Income Tax Mumbai and no subsequent action being taken by the Income tax department to restore such writs / file fresh writ petitions before the Honâble High Court of Bombay, the Company is in discussions with Aberdeen trusts to obtain letters of indemnity from the claimants, indemnifying the Company in regard to future actions by Indian Income tax department. Post receipt of such letters, the Company seeks to remit the Settlement amounts to Aberdeen trusts.
41 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London
Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honour the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
In the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad, before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In a related development, in December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
43 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
44 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
45 Based on the information available with the Company, there are below outstanding amounts payable to creditors who have been identified as "suppliersâ within the meaning of "Micro, Small and Medium
Enterprises Development (MSMED) Act 2006â
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠'' 38 Million (March 31, 2020: '' 32 Million) for National Pension Scheme contributions.
⢠'' 357 Million (March 31, 2020: '' 355 Million) for Superannuation Fund contributions; and
⢠''2,771 Million (March 31, 2020: '' 2,658 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The following table sets out the Changes in Defined Benefit Obligation (âDBOâ) and Trust Fund plan assets recognized in the Balance Sheet are as under:
The Company has assessed the impact of the COVID-19 pandemic, amongst other matters, resulting from (i) the possibility of constraints to render services which may require revision of estimations of costs to complete the contract because of additional efforts, (ii) termination or deferment of contracts by customers and (iii) customer disputes in its assessment of recognition of revenue in accordance with IND AS 115.
No single customer represents 10% or more of the Companyâs total revenue during the years ended March 31, 2021 and March 31, 2020.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognised as of the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation for contracts where the entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entityâs performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2021 other than those meeting the exclusion criteria mentioned above, is '' 268,790 Million. Out of this, the Company expects to recognise revenue of around 52% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
(iv) Contract Price
Reconciliation of revenue recognised in the statement of profit and loss with the contracted price:
The Company has recognized revenue of '' 296,409 Million (March 31, 2020''292,254 Million) which is adjusted by discounts of ''12,555 Million (March 31, 2020 '' 11,263 Million) for the year ended March 31, 2021.
The total cash outflow for leases is ''1,262 Million (March 31, 2020''1,145 Million) for the year ended March 31, 2021, including cash outflow for short term and low value leases.
51 FINANCIAL RiSK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
Fair value Hierarchy:
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''189,975 and '' 165,539 Million as of March 31, 2021 and March 31, 2020 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2021 and March 31, 2020. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
a) Foreign currency exchange rate risk
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The carrying amounts of the Companyâs foreign currency denominated monetary assets and monetary liabilities at the end of the year are as follows:
b) Foreign Exchange Contracts and Options
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
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.
âIncludes allowance under section 10AA of Income Tax Act, 1961 and dividend received from subsidiaries.
#Includes the impact on scheduling of deferred taxes on account of section 115BAA under Income Tax Act, 1961
The tax rate used for the above reconciliation is the rate as applicable for the respective period payable by corporate entities in India on taxable profits under the Indian income tax laws.
Current tax for the year ended March 31, 2021 includes tax expense with respect to foreign branches amounting to '' 1,096 Million (year ended March 31, 2020: '' 1,411 Million).
Mar 31, 2021
i) Investment in these entities is not denominated in number of shares as per laws of country of incorporation i.e. The Peopleâs Republic of China and Vietnam.
ii) The number of shares held in Tech Mahindra De Mexico, S.DE R.L.DE C.V. comprise 1 share (March 31, 2020- 1) each of Peso 2,999 and Peso 1; fully paid up of Series A (fixed capital) and 1 share (March 31, 2020 - 1) of Peso 12,931,770 fully paid up of Series B (variable capital).
iii) The number of shares held in Sofgen Holdings Limited comprise 1,065,848 Ordinary shares (March 31, 2020 - 1,065,848) and 27,062 shares of Class A (March 31, 2020 - 27,062).
iv) The number of shares held in The Bio Agency Limited comprise 102,000 Class A Ordinary shares (March 31, 2020 - 102,000) and 18,000 Class B Ordinary shares (March 31, 2020 - 18,000)
v) As per the Scheme of merger of the Company with Mahindra Satyam Computer Services Limited with effect from June 24, 2013, the Company had created TML Benefit Trust (Trust) as per the merger order. As per the scheme, the Company transferred, out of its total holding in Satyam as on April 1, 2011; 204 Million equity shares to the Trust, to hold the shares and any additions thereto exclusively for the benefit of the Company. Post-merger with the Company these shares were converted into Tech Mahindra Limitedâs shares in the ratio of 2: 17. As of date, post bonus and split approved by the shareholders from time to time by the Company; the Trust holds 94,235,629 (March 2020: 94,235,629) shares of the Company.
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 55 for details relating to stock options.
iii) The shareholders at the Annual General Meeting held on July 31,2019 approved dividend of '' 14 per equity share for year ended March 31, 2019 which was subsequently paid. The amount was recognized as distributions to equity shareholders, the total appropriation was''16,152 Million including corporate dividend tax of''2,647 Million. In addition, interim dividend of '' 10 per equity share was paid during the year ended 31 March 2020 amounting to '' 11,370 Million including corporate dividend tax of '' 1,711 Million. On April 30, 2020 the Board of directors of the Company had proposed a final dividend of ''5 per share in respect of year ended March 31,2020 and shareholders at the Annual General Meeting held on July 28, 2020 approved the dividend amounting to '' 4,831 Million. The amount was recognized as distribution to equity shareholders. Further, special dividend of '' 15 per equity share was paid during the period ended 31 December 2020 amounting to '' 14,504 Million. On April 26, 2021 the Board of directors of the company have proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 29,048 Million
iv) During the year ended March 31,2020, the Company bought back 20,585,000 equity shares for an aggregate amount of '' 19,556 Million. The equity shares bought back were extinguished. Capital redemption reserve was created to the extent of equity share capital extinguished of '' 103 Million. Transaction costs of '' 132 Million for buy-back have been adjusted to retained earnings.
v) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
Provision for claims and provision for contingencies represents the cash outflows estimated by the Company against the service claims made by customers and the compliance related contingencies, respectively. The timing of cash outflows in respect of such provision cannot be reasonably determined. Others mainly includes the provisions related to onerous contracts which are recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract.
a. Gross amount required to be spent by the Company during the year is '' 1,052 Million (previous year '' 1,148 million) (calculated at 2% of the average net profits of the Company during the three immediately preceding financial years)
The estimated amount of contracts remaining to be executed on capital account (net of capital advances)
as at March 31, 2021 is '' 2,050 Million (March 31, 2020: '' 2,508 Million).
i) Pursuant to a share purchase agreement, the Company acquired 51% stake in Cerium Systems Private Limited ("Ceriumâ) on April 9, 2020 for a total consideration of '' 1,454 Million, out of which '' 916 Million was paid upfront. Further, the Company has entered into an agreement to purchase the remaining 49% stake over a period of three-year, ending March 31, 2023.
Subsequently, the Company has acquired 6% stake for '' 164 Million. Further, the Company has made earnout payment for first tranche amounting to '' 412 Million. As at March 31, 2021, the contractual obligation towards the acquisition amounts to '' 1,957 Million.
ii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Zen3 Infosolutions Private Limited on April 9, 2020 for a consideration of '' 141 Million. Further, the Company through its wholly owned subsidiary Tech Mahindra (Americas) Inc., acquired 100% stake in Zen3 Infosolutions (America) Inc. on April 9, 2020.
iii) Pursuant to a business purchase agreement, the Company acquired the business of TransSys Technologies Solutions LLC and its group companies ("TransSys Groupâ) in October 2020 for a consideration of USD 4.84 million ('' 354 million) (upfront consideration of USD 3.9 million ('' 291 Million) and contingent consideration linked to financial performance).
iv) Pursuant to a share purchase agreement, the Company acquired 100% stake in Perigord Premedia (India) Private Limited and Perigord Data Solutions (India) Private Limited on March 15, 2021 for a consideration of '' 133 million and '' 101 million, respectively. Further, the Company through its wholly owned subsidiary Mahindra Engineering Services (Europe) Limited, acquired 70% stake in Perigord Asset Holdings Limited on March 15, 2021. Further, Mahindra Engineering Services (Europe) Limited has entered into an agreement to purchase the balance 30% stake over a period of four-years, ending March 31, 2024.
i. Bank Guarantees outstanding as at March 31,2021: '' 22,811 Million (March 31, 2020: '' 23,129 Million).
ii. Letters of support/letters of comfort of USD 94 Million: '' 6,836 Million (March 31, 2020: USD 89 Million, '' 6,692 Million) to banks for loans availed by step down subsidiaries of the Company.
Contingent Liabilities in respect of Income Taxes/ Service Tax/ GST/ Value Added Tax/Customs and
International tax to the extent not provided for
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011, the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was complied by erstwhile Satyam. The BG has been extended upto October 14, 2021.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
ii. Appointment of Special Auditor and re-assessment proceedings
⢠In August, 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,948 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: '' 1,458 Million (March 31, 2020 '' 1,443 Million).
ii. Claims made on the Company not acknowledged as debt: ''231 Million (March 31,2020''185 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal, and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Claim against the Company for transfer of land in SEZ at Nagpur considered by Maharashtra Airport Development Company Limited (MADC) as ânon-formal transferâ as per its Transfer Policy and claiming the transfer fee of '' 152 Million. In addition, for leasehold land at Bhubaneshwar, the transfer is pending in the name of the Company as the department has not yet issued the letter communicating transfer fee.
v. Other contingencies '' 407 Million (March 31, 2020''407 Million).
Pursuant to the Scheme of Amalgamation and Arrangement (âthe Schemeâ) sanctioned by the Honâble High Courts of Andhra Pradesh and Bombay, Venturbay Consultants Private Limited (Venturbay), CanvasM Technologies Limited (CanvasM) and Mahindra Logisoft Business Solutions Limited (Logisoft), the wholly owned subsidiaries of the Company, and Satyam Computer Services Limited (Satyam) (through Venturbay) and C&S System Technologies Private Limited (C&S) a wholly owned subsidiary of erstwhile Satyam, merged with the Company with effect from April 1, 2011 (âthe appointed dateâ). Pursuant to the Scheme, the title deeds for the immovable properties pertaining to the amalgamating companies are pending conveyance in the name of the Company. The gross block and net block of the aforesaid immovable properties pending conveyance is ''665 million and ''614 million respectively as at 31 March 2021. The Company has initiated the name change formalities.
The amounts assessed as contingent liability do not include interest that could be claimed by counter parties
33 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The Ministry of Labour and Employment had released draft rules for the Code on November 13, 2020 and had invited suggestions from stakeholders which are under active consideration by the Ministry. However, the effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
36 MERGER/AMALGAMATION OF ENTITIES
The Board of Directors of the Company at its meeting held on January 29, 2021 have approved the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited, two wholly owned subsidiaries with the Company. Subsequently, the Company has filed the application with Honâble jurisdictional National Company Law Board Tribunal ("the NCLTâ). As on the date of the financial statements, the Company is awaiting the order from the NCLT.
Following companies were merged with the Company by approved schemes and were accounted as per âpooling of interestsâ method in accordance with Appendix C of Ind AS 103 âBusiness Combinationsâ.
⢠All assets and liabilities of Tech Mahindra Growth Factories Limited were taken over as per the scheme approved by National Company Law Tribunal, Mumbai Bench with appointed date as April 1, 2019. Comparatives were restated from the beginning of the previous year i.e. from April 1, 2018 as required by IND AS 103.
⢠All assets and liabilities of Dynacommerce India Private Ltd were taken over as per the scheme approved National Company Law Tribunal, Bengaluru Bench with appointed date as June 1, 2019.
37 DIMINUTION IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2021.
Since the recoverable amount determined was lower than the carrying value of the respective investment, the Company has recognized an impairment loss of '' 1,439 Million for the year ended March 31, 2021 (March 31, 2020''5,554 Million). Details of these investments are:
Estimates of future cash flows used in the value-in-use calculation are specific to the entity based on business plans. The future cash flows consider potential risks given the current economic environment and key assumptions, such as volume forecasts and margins. The discount rate used in the calculation reflects marketâs assessment of the risks specific to the asset as well as time value of money.
With respect to determination of recoverable amount of investment based on fair value less costs of disposal, the fair value measurement of the asset is determined using the market approach and is categorized as Level 1 in the fair value hierarchy (refer note 51).
The financial projections and future cash flows basis which investments have been tested for impairment consider the present economic situation which includes reassessment of the discount rates, revisiting the growth rates factored while arriving at terminal value and subjecting these variables to sensitivity analysis.
38 SALE OF INVESTMENT iN SUBSiDiARiES
i. During the previous year, the Company had sold its entire stake in Fixstream Networks Inc. as on September 30, 2019 for an amount of USD 2 Million ('' 142 Million ). Amount of USD 1.5 Million ('' 106 Million) was received and USD 0.5 Million ('' 36 Million) is in Escrow Account.
ii. During the previous year, the Company had also sold its 100% stake in Mahindra Technologies Services Inc. as on July 1, 2019 to Tech Mahindra Americas Inc. (100% subsidiary) for a consideration of USD 1.2 Million ('' 83 Million).
39 A. CERTAiN MATTERS RELATiNG TO ERSTWHiLE SATYAM COMPUTER SERViCES
LiMiTED (ERSTwHILE SATYAM):
In the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtors position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
In 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD 39.2 Million; and
b) non-realisation and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
Erstwhile Satyam received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed by legal notices from these companies dated August 4 and August 5, 2009, claiming repayment of the alleged advances aggregating '' 12,304 Million stated to be given as temporary advances but without any evidence in support of the nature of these transactions. This was also borne out in the internal forensic investigation. The legal notices also claimed damages/ compensation @18% per annum from the date of the advances till the date of repayment. The erstwhile Satyam has not acknowledged any liability to any of the 37 companies and has replied to the legal notices stating that the claims are legally untenable.
The 37 companies have filed petitions/suits for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court in its Order approving the merger of the erstwhile Satyam with the Company, further held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in their names and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention of the 37 companies that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved beyond doubt which is not so in this case.
The said 37 companies have filed appeals before the Division Bench of the Honâble High Court of Andhra Pradesh, against the Orders of the Honâble High Court of Andhra Pradesh and the Honâble High Court of Bombay sanctioning the scheme of merger of Satyam Computer Services Limited (Satyam) with the Company w.e.f. April 1, 2011, which are yet to be heard. One of the aforesaid companies has also appealed against the Order rejecting the Petition for winding-up of the erstwhile Satyam. These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions. In furtherance to the investigation, certain fixed deposits of the Company with certain banks, then aggregating to '' 8,220 Million were alleged by ED to be âproceeds of crimeâ
and were provisionally attached vide Order dated October 18, 2012 by the ED (the Order). The Honâble High Court of Judicature at Hyderabad quashed the said Provisional attachment Order and directed Banks to release the Fixed deposits to the Company vide its Order dated December 31, 2018. Accordingly, these deposits have been released by the Banks. In a recent development, ED has filed a Special Leave Petition (SLP) before the Honâble Supreme Court of India, against the above Order of the Honâble High Court of Telangana. The Honâble Supreme Court upon hearing the parties upheld the judgement of Honâble High court of Andhra Pradesh and Telangana and consequently dismissed the SLP filed by ED by its order dated February 26, 2021.
Criminal prosecution was initiated by the ED against SCSL, since merged with Tech Mahindra Limited (Company) under Section 3 of The Prevention of Money-Laundering Act, 2002 for alleged money laundering along with 212 accused persons. Upon an application challenging the prosecution against the Company, the Honâble High Court of Andhra Pradesh quashed the proceedings by its Order dated December 22, 2014. The appeal preferred by the ED challenging the order of quashing the prosecution before the Division Bench of the Honâble High Court was dismissed by an order dated March 30, 2017 and confirmed the order of quashing. A Special Leave Petition was filed by ED before the Honâble Supreme Court of India. By an order dated December 8, 2017, the Honâble Supreme Court dismissed the SLP filed by the ED and affirmed the order of the Single Judge quashing the prosecution against the Company.
In view of the aforesaid developments and based on an independent legal opinion, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon is not legally tenable. Consequently, pending the final outcome of the proceedings, as a matter of prudence, the Company has accounted and disclosed the amount of '' 12,304 Million as âSuspense Account (net)â.
40 CLAIMS BY CERTAIN SHAREHOLDERS OF ERSTWHILE SATYAM
In terms of the Settlement of claims made by Aberdeen Asset Management PLC., UK and Aberdeen Claims Administration Inc., USA, (together referred to as âAberdeenâ) the erstwhile Satyam had deposited a total amount of USD 80.16 Million towards the Settlement Amount and interest in an Escrow Account during the financial year ended March 31, 2013.
In the meanwhile, Commissioner of Income Tax Mumbai has filed two writ petitions before the Honâble High Court of Bombay, seeking to set aside the orders of Authority for Advance Ruling dated February 15, 2016, which ruled that no withholding tax is applicable for remittance of Settlement Amount. The above writ petitions have been disposed off by the Prothonotary authority of non-removal of office objections.
Considering the disposal of writs filed by the Commissioner of Income Tax Mumbai and no subsequent action being taken by the Income tax department to restore such writs / file fresh writ petitions before the Honâble High Court of Bombay, the Company is in discussions with Aberdeen trusts to obtain letters of indemnity from the claimants, indemnifying the Company in regard to future actions by Indian Income tax department. Post receipt of such letters, the Company seeks to remit the Settlement amounts to Aberdeen trusts.
41 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London
Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honour the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
In the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad, before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In a related development, in December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
43 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
44 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
45 Based on the information available with the Company, there are below outstanding amounts payable to creditors who have been identified as "suppliersâ within the meaning of "Micro, Small and Medium
Enterprises Development (MSMED) Act 2006â
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠'' 38 Million (March 31, 2020: '' 32 Million) for National Pension Scheme contributions.
⢠'' 357 Million (March 31, 2020: '' 355 Million) for Superannuation Fund contributions; and
⢠''2,771 Million (March 31, 2020: '' 2,658 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The following table sets out the Changes in Defined Benefit Obligation (âDBOâ) and Trust Fund plan assets recognized in the Balance Sheet are as under:
The Company has assessed the impact of the COVID-19 pandemic, amongst other matters, resulting from (i) the possibility of constraints to render services which may require revision of estimations of costs to complete the contract because of additional efforts, (ii) termination or deferment of contracts by customers and (iii) customer disputes in its assessment of recognition of revenue in accordance with IND AS 115.
No single customer represents 10% or more of the Companyâs total revenue during the years ended March 31, 2021 and March 31, 2020.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognised as of the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation for contracts where the entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entityâs performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2021 other than those meeting the exclusion criteria mentioned above, is '' 268,790 Million. Out of this, the Company expects to recognise revenue of around 52% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
(iv) Contract Price
Reconciliation of revenue recognised in the statement of profit and loss with the contracted price:
The Company has recognized revenue of '' 296,409 Million (March 31, 2020''292,254 Million) which is adjusted by discounts of ''12,555 Million (March 31, 2020 '' 11,263 Million) for the year ended March 31, 2021.
The total cash outflow for leases is ''1,262 Million (March 31, 2020''1,145 Million) for the year ended March 31, 2021, including cash outflow for short term and low value leases.
51 FINANCIAL RiSK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
Fair value Hierarchy:
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''189,975 and '' 165,539 Million as of March 31, 2021 and March 31, 2020 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2021 and March 31, 2020. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
a) Foreign currency exchange rate risk
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The carrying amounts of the Companyâs foreign currency denominated monetary assets and monetary liabilities at the end of the year are as follows:
b) Foreign Exchange Contracts and Options
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
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.
âIncludes allowance under section 10AA of Income Tax Act, 1961 and dividend received from subsidiaries.
#Includes the impact on scheduling of deferred taxes on account of section 115BAA under Income Tax Act, 1961
The tax rate used for the above reconciliation is the rate as applicable for the respective period payable by corporate entities in India on taxable profits under the Indian income tax laws.
Current tax for the year ended March 31, 2021 includes tax expense with respect to foreign branches amounting to '' 1,096 Million (year ended March 31, 2020: '' 1,411 Million).
Mar 31, 2021
i) Investment in these entities is not denominated in number of shares as per laws of country of incorporation i.e. The Peopleâs Republic of China and Vietnam.
ii) The number of shares held in Tech Mahindra De Mexico, S.DE R.L.DE C.V. comprise 1 share (March 31, 2020- 1) each of Peso 2,999 and Peso 1; fully paid up of Series A (fixed capital) and 1 share (March 31, 2020 - 1) of Peso 12,931,770 fully paid up of Series B (variable capital).
iii) The number of shares held in Sofgen Holdings Limited comprise 1,065,848 Ordinary shares (March 31, 2020 - 1,065,848) and 27,062 shares of Class A (March 31, 2020 - 27,062).
iv) The number of shares held in The Bio Agency Limited comprise 102,000 Class A Ordinary shares (March 31, 2020 - 102,000) and 18,000 Class B Ordinary shares (March 31, 2020 - 18,000)
v) As per the Scheme of merger of the Company with Mahindra Satyam Computer Services Limited with effect from June 24, 2013, the Company had created TML Benefit Trust (Trust) as per the merger order. As per the scheme, the Company transferred, out of its total holding in Satyam as on April 1, 2011; 204 Million equity shares to the Trust, to hold the shares and any additions thereto exclusively for the benefit of the Company. Post-merger with the Company these shares were converted into Tech Mahindra Limitedâs shares in the ratio of 2: 17. As of date, post bonus and split approved by the shareholders from time to time by the Company; the Trust holds 94,235,629 (March 2020: 94,235,629) shares of the Company.
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 55 for details relating to stock options.
iii) The shareholders at the Annual General Meeting held on July 31,2019 approved dividend of '' 14 per equity share for year ended March 31, 2019 which was subsequently paid. The amount was recognized as distributions to equity shareholders, the total appropriation was''16,152 Million including corporate dividend tax of''2,647 Million. In addition, interim dividend of '' 10 per equity share was paid during the year ended 31 March 2020 amounting to '' 11,370 Million including corporate dividend tax of '' 1,711 Million. On April 30, 2020 the Board of directors of the Company had proposed a final dividend of ''5 per share in respect of year ended March 31,2020 and shareholders at the Annual General Meeting held on July 28, 2020 approved the dividend amounting to '' 4,831 Million. The amount was recognized as distribution to equity shareholders. Further, special dividend of '' 15 per equity share was paid during the period ended 31 December 2020 amounting to '' 14,504 Million. On April 26, 2021 the Board of directors of the company have proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 29,048 Million
iv) During the year ended March 31,2020, the Company bought back 20,585,000 equity shares for an aggregate amount of '' 19,556 Million. The equity shares bought back were extinguished. Capital redemption reserve was created to the extent of equity share capital extinguished of '' 103 Million. Transaction costs of '' 132 Million for buy-back have been adjusted to retained earnings.
v) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
Provision for claims and provision for contingencies represents the cash outflows estimated by the Company against the service claims made by customers and the compliance related contingencies, respectively. The timing of cash outflows in respect of such provision cannot be reasonably determined. Others mainly includes the provisions related to onerous contracts which are recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract.
a. Gross amount required to be spent by the Company during the year is '' 1,052 Million (previous year '' 1,148 million) (calculated at 2% of the average net profits of the Company during the three immediately preceding financial years)
The estimated amount of contracts remaining to be executed on capital account (net of capital advances)
as at March 31, 2021 is '' 2,050 Million (March 31, 2020: '' 2,508 Million).
i) Pursuant to a share purchase agreement, the Company acquired 51% stake in Cerium Systems Private Limited ("Ceriumâ) on April 9, 2020 for a total consideration of '' 1,454 Million, out of which '' 916 Million was paid upfront. Further, the Company has entered into an agreement to purchase the remaining 49% stake over a period of three-year, ending March 31, 2023.
Subsequently, the Company has acquired 6% stake for '' 164 Million. Further, the Company has made earnout payment for first tranche amounting to '' 412 Million. As at March 31, 2021, the contractual obligation towards the acquisition amounts to '' 1,957 Million.
ii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Zen3 Infosolutions Private Limited on April 9, 2020 for a consideration of '' 141 Million. Further, the Company through its wholly owned subsidiary Tech Mahindra (Americas) Inc., acquired 100% stake in Zen3 Infosolutions (America) Inc. on April 9, 2020.
iii) Pursuant to a business purchase agreement, the Company acquired the business of TransSys Technologies Solutions LLC and its group companies ("TransSys Groupâ) in October 2020 for a consideration of USD 4.84 million ('' 354 million) (upfront consideration of USD 3.9 million ('' 291 Million) and contingent consideration linked to financial performance).
iv) Pursuant to a share purchase agreement, the Company acquired 100% stake in Perigord Premedia (India) Private Limited and Perigord Data Solutions (India) Private Limited on March 15, 2021 for a consideration of '' 133 million and '' 101 million, respectively. Further, the Company through its wholly owned subsidiary Mahindra Engineering Services (Europe) Limited, acquired 70% stake in Perigord Asset Holdings Limited on March 15, 2021. Further, Mahindra Engineering Services (Europe) Limited has entered into an agreement to purchase the balance 30% stake over a period of four-years, ending March 31, 2024.
i. Bank Guarantees outstanding as at March 31,2021: '' 22,811 Million (March 31, 2020: '' 23,129 Million).
ii. Letters of support/letters of comfort of USD 94 Million: '' 6,836 Million (March 31, 2020: USD 89 Million, '' 6,692 Million) to banks for loans availed by step down subsidiaries of the Company.
Contingent Liabilities in respect of Income Taxes/ Service Tax/ GST/ Value Added Tax/Customs and
International tax to the extent not provided for
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011, the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was complied by erstwhile Satyam. The BG has been extended upto October 14, 2021.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
ii. Appointment of Special Auditor and re-assessment proceedings
⢠In August, 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,948 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: '' 1,458 Million (March 31, 2020 '' 1,443 Million).
ii. Claims made on the Company not acknowledged as debt: ''231 Million (March 31,2020''185 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal, and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Claim against the Company for transfer of land in SEZ at Nagpur considered by Maharashtra Airport Development Company Limited (MADC) as ânon-formal transferâ as per its Transfer Policy and claiming the transfer fee of '' 152 Million. In addition, for leasehold land at Bhubaneshwar, the transfer is pending in the name of the Company as the department has not yet issued the letter communicating transfer fee.
v. Other contingencies '' 407 Million (March 31, 2020''407 Million).
Pursuant to the Scheme of Amalgamation and Arrangement (âthe Schemeâ) sanctioned by the Honâble High Courts of Andhra Pradesh and Bombay, Venturbay Consultants Private Limited (Venturbay), CanvasM Technologies Limited (CanvasM) and Mahindra Logisoft Business Solutions Limited (Logisoft), the wholly owned subsidiaries of the Company, and Satyam Computer Services Limited (Satyam) (through Venturbay) and C&S System Technologies Private Limited (C&S) a wholly owned subsidiary of erstwhile Satyam, merged with the Company with effect from April 1, 2011 (âthe appointed dateâ). Pursuant to the Scheme, the title deeds for the immovable properties pertaining to the amalgamating companies are pending conveyance in the name of the Company. The gross block and net block of the aforesaid immovable properties pending conveyance is ''665 million and ''614 million respectively as at 31 March 2021. The Company has initiated the name change formalities.
The amounts assessed as contingent liability do not include interest that could be claimed by counter parties
33 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The Ministry of Labour and Employment had released draft rules for the Code on November 13, 2020 and had invited suggestions from stakeholders which are under active consideration by the Ministry. However, the effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
36 MERGER/AMALGAMATION OF ENTITIES
The Board of Directors of the Company at its meeting held on January 29, 2021 have approved the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited, two wholly owned subsidiaries with the Company. Subsequently, the Company has filed the application with Honâble jurisdictional National Company Law Board Tribunal ("the NCLTâ). As on the date of the financial statements, the Company is awaiting the order from the NCLT.
Following companies were merged with the Company by approved schemes and were accounted as per âpooling of interestsâ method in accordance with Appendix C of Ind AS 103 âBusiness Combinationsâ.
⢠All assets and liabilities of Tech Mahindra Growth Factories Limited were taken over as per the scheme approved by National Company Law Tribunal, Mumbai Bench with appointed date as April 1, 2019. Comparatives were restated from the beginning of the previous year i.e. from April 1, 2018 as required by IND AS 103.
⢠All assets and liabilities of Dynacommerce India Private Ltd were taken over as per the scheme approved National Company Law Tribunal, Bengaluru Bench with appointed date as June 1, 2019.
37 DIMINUTION IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2021.
Since the recoverable amount determined was lower than the carrying value of the respective investment, the Company has recognized an impairment loss of '' 1,439 Million for the year ended March 31, 2021 (March 31, 2020''5,554 Million). Details of these investments are:
Estimates of future cash flows used in the value-in-use calculation are specific to the entity based on business plans. The future cash flows consider potential risks given the current economic environment and key assumptions, such as volume forecasts and margins. The discount rate used in the calculation reflects marketâs assessment of the risks specific to the asset as well as time value of money.
With respect to determination of recoverable amount of investment based on fair value less costs of disposal, the fair value measurement of the asset is determined using the market approach and is categorized as Level 1 in the fair value hierarchy (refer note 51).
The financial projections and future cash flows basis which investments have been tested for impairment consider the present economic situation which includes reassessment of the discount rates, revisiting the growth rates factored while arriving at terminal value and subjecting these variables to sensitivity analysis.
38 SALE OF INVESTMENT iN SUBSiDiARiES
i. During the previous year, the Company had sold its entire stake in Fixstream Networks Inc. as on September 30, 2019 for an amount of USD 2 Million ('' 142 Million ). Amount of USD 1.5 Million ('' 106 Million) was received and USD 0.5 Million ('' 36 Million) is in Escrow Account.
ii. During the previous year, the Company had also sold its 100% stake in Mahindra Technologies Services Inc. as on July 1, 2019 to Tech Mahindra Americas Inc. (100% subsidiary) for a consideration of USD 1.2 Million ('' 83 Million).
39 A. CERTAiN MATTERS RELATiNG TO ERSTWHiLE SATYAM COMPUTER SERViCES
LiMiTED (ERSTwHILE SATYAM):
In the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtors position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
In 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD 39.2 Million; and
b) non-realisation and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
Erstwhile Satyam received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed by legal notices from these companies dated August 4 and August 5, 2009, claiming repayment of the alleged advances aggregating '' 12,304 Million stated to be given as temporary advances but without any evidence in support of the nature of these transactions. This was also borne out in the internal forensic investigation. The legal notices also claimed damages/ compensation @18% per annum from the date of the advances till the date of repayment. The erstwhile Satyam has not acknowledged any liability to any of the 37 companies and has replied to the legal notices stating that the claims are legally untenable.
The 37 companies have filed petitions/suits for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court in its Order approving the merger of the erstwhile Satyam with the Company, further held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in their names and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention of the 37 companies that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved beyond doubt which is not so in this case.
The said 37 companies have filed appeals before the Division Bench of the Honâble High Court of Andhra Pradesh, against the Orders of the Honâble High Court of Andhra Pradesh and the Honâble High Court of Bombay sanctioning the scheme of merger of Satyam Computer Services Limited (Satyam) with the Company w.e.f. April 1, 2011, which are yet to be heard. One of the aforesaid companies has also appealed against the Order rejecting the Petition for winding-up of the erstwhile Satyam. These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions. In furtherance to the investigation, certain fixed deposits of the Company with certain banks, then aggregating to '' 8,220 Million were alleged by ED to be âproceeds of crimeâ
and were provisionally attached vide Order dated October 18, 2012 by the ED (the Order). The Honâble High Court of Judicature at Hyderabad quashed the said Provisional attachment Order and directed Banks to release the Fixed deposits to the Company vide its Order dated December 31, 2018. Accordingly, these deposits have been released by the Banks. In a recent development, ED has filed a Special Leave Petition (SLP) before the Honâble Supreme Court of India, against the above Order of the Honâble High Court of Telangana. The Honâble Supreme Court upon hearing the parties upheld the judgement of Honâble High court of Andhra Pradesh and Telangana and consequently dismissed the SLP filed by ED by its order dated February 26, 2021.
Criminal prosecution was initiated by the ED against SCSL, since merged with Tech Mahindra Limited (Company) under Section 3 of The Prevention of Money-Laundering Act, 2002 for alleged money laundering along with 212 accused persons. Upon an application challenging the prosecution against the Company, the Honâble High Court of Andhra Pradesh quashed the proceedings by its Order dated December 22, 2014. The appeal preferred by the ED challenging the order of quashing the prosecution before the Division Bench of the Honâble High Court was dismissed by an order dated March 30, 2017 and confirmed the order of quashing. A Special Leave Petition was filed by ED before the Honâble Supreme Court of India. By an order dated December 8, 2017, the Honâble Supreme Court dismissed the SLP filed by the ED and affirmed the order of the Single Judge quashing the prosecution against the Company.
In view of the aforesaid developments and based on an independent legal opinion, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon is not legally tenable. Consequently, pending the final outcome of the proceedings, as a matter of prudence, the Company has accounted and disclosed the amount of '' 12,304 Million as âSuspense Account (net)â.
40 CLAIMS BY CERTAIN SHAREHOLDERS OF ERSTWHILE SATYAM
In terms of the Settlement of claims made by Aberdeen Asset Management PLC., UK and Aberdeen Claims Administration Inc., USA, (together referred to as âAberdeenâ) the erstwhile Satyam had deposited a total amount of USD 80.16 Million towards the Settlement Amount and interest in an Escrow Account during the financial year ended March 31, 2013.
In the meanwhile, Commissioner of Income Tax Mumbai has filed two writ petitions before the Honâble High Court of Bombay, seeking to set aside the orders of Authority for Advance Ruling dated February 15, 2016, which ruled that no withholding tax is applicable for remittance of Settlement Amount. The above writ petitions have been disposed off by the Prothonotary authority of non-removal of office objections.
Considering the disposal of writs filed by the Commissioner of Income Tax Mumbai and no subsequent action being taken by the Income tax department to restore such writs / file fresh writ petitions before the Honâble High Court of Bombay, the Company is in discussions with Aberdeen trusts to obtain letters of indemnity from the claimants, indemnifying the Company in regard to future actions by Indian Income tax department. Post receipt of such letters, the Company seeks to remit the Settlement amounts to Aberdeen trusts.
41 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London
Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honour the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
In the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad, before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In a related development, in December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
43 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
44 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
45 Based on the information available with the Company, there are below outstanding amounts payable to creditors who have been identified as "suppliersâ within the meaning of "Micro, Small and Medium
Enterprises Development (MSMED) Act 2006â
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠'' 38 Million (March 31, 2020: '' 32 Million) for National Pension Scheme contributions.
⢠'' 357 Million (March 31, 2020: '' 355 Million) for Superannuation Fund contributions; and
⢠''2,771 Million (March 31, 2020: '' 2,658 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The following table sets out the Changes in Defined Benefit Obligation (âDBOâ) and Trust Fund plan assets recognized in the Balance Sheet are as under:
The Company has assessed the impact of the COVID-19 pandemic, amongst other matters, resulting from (i) the possibility of constraints to render services which may require revision of estimations of costs to complete the contract because of additional efforts, (ii) termination or deferment of contracts by customers and (iii) customer disputes in its assessment of recognition of revenue in accordance with IND AS 115.
No single customer represents 10% or more of the Companyâs total revenue during the years ended March 31, 2021 and March 31, 2020.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognised as of the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation for contracts where the entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entityâs performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2021 other than those meeting the exclusion criteria mentioned above, is '' 268,790 Million. Out of this, the Company expects to recognise revenue of around 52% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
(iv) Contract Price
Reconciliation of revenue recognised in the statement of profit and loss with the contracted price:
The Company has recognized revenue of '' 296,409 Million (March 31, 2020''292,254 Million) which is adjusted by discounts of ''12,555 Million (March 31, 2020 '' 11,263 Million) for the year ended March 31, 2021.
The total cash outflow for leases is ''1,262 Million (March 31, 2020''1,145 Million) for the year ended March 31, 2021, including cash outflow for short term and low value leases.
51 FINANCIAL RiSK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
Fair value Hierarchy:
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''189,975 and '' 165,539 Million as of March 31, 2021 and March 31, 2020 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2021 and March 31, 2020. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
a) Foreign currency exchange rate risk
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The carrying amounts of the Companyâs foreign currency denominated monetary assets and monetary liabilities at the end of the year are as follows:
b) Foreign Exchange Contracts and Options
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
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.
âIncludes allowance under section 10AA of Income Tax Act, 1961 and dividend received from subsidiaries.
#Includes the impact on scheduling of deferred taxes on account of section 115BAA under Income Tax Act, 1961
The tax rate used for the above reconciliation is the rate as applicable for the respective period payable by corporate entities in India on taxable profits under the Indian income tax laws.
Current tax for the year ended March 31, 2021 includes tax expense with respect to foreign branches amounting to '' 1,096 Million (year ended March 31, 2020: '' 1,411 Million).
Mar 31, 2021
i) Investment in these entities is not denominated in number of shares as per laws of country of incorporation i.e. The Peopleâs Republic of China and Vietnam.
ii) The number of shares held in Tech Mahindra De Mexico, S.DE R.L.DE C.V. comprise 1 share (March 31, 2020- 1) each of Peso 2,999 and Peso 1; fully paid up of Series A (fixed capital) and 1 share (March 31, 2020 - 1) of Peso 12,931,770 fully paid up of Series B (variable capital).
iii) The number of shares held in Sofgen Holdings Limited comprise 1,065,848 Ordinary shares (March 31, 2020 - 1,065,848) and 27,062 shares of Class A (March 31, 2020 - 27,062).
iv) The number of shares held in The Bio Agency Limited comprise 102,000 Class A Ordinary shares (March 31, 2020 - 102,000) and 18,000 Class B Ordinary shares (March 31, 2020 - 18,000)
v) As per the Scheme of merger of the Company with Mahindra Satyam Computer Services Limited with effect from June 24, 2013, the Company had created TML Benefit Trust (Trust) as per the merger order. As per the scheme, the Company transferred, out of its total holding in Satyam as on April 1, 2011; 204 Million equity shares to the Trust, to hold the shares and any additions thereto exclusively for the benefit of the Company. Post-merger with the Company these shares were converted into Tech Mahindra Limitedâs shares in the ratio of 2: 17. As of date, post bonus and split approved by the shareholders from time to time by the Company; the Trust holds 94,235,629 (March 2020: 94,235,629) shares of the Company.
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 55 for details relating to stock options.
iii) The shareholders at the Annual General Meeting held on July 31,2019 approved dividend of '' 14 per equity share for year ended March 31, 2019 which was subsequently paid. The amount was recognized as distributions to equity shareholders, the total appropriation was''16,152 Million including corporate dividend tax of''2,647 Million. In addition, interim dividend of '' 10 per equity share was paid during the year ended 31 March 2020 amounting to '' 11,370 Million including corporate dividend tax of '' 1,711 Million. On April 30, 2020 the Board of directors of the Company had proposed a final dividend of ''5 per share in respect of year ended March 31,2020 and shareholders at the Annual General Meeting held on July 28, 2020 approved the dividend amounting to '' 4,831 Million. The amount was recognized as distribution to equity shareholders. Further, special dividend of '' 15 per equity share was paid during the period ended 31 December 2020 amounting to '' 14,504 Million. On April 26, 2021 the Board of directors of the company have proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 29,048 Million
iv) During the year ended March 31,2020, the Company bought back 20,585,000 equity shares for an aggregate amount of '' 19,556 Million. The equity shares bought back were extinguished. Capital redemption reserve was created to the extent of equity share capital extinguished of '' 103 Million. Transaction costs of '' 132 Million for buy-back have been adjusted to retained earnings.
v) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
Provision for claims and provision for contingencies represents the cash outflows estimated by the Company against the service claims made by customers and the compliance related contingencies, respectively. The timing of cash outflows in respect of such provision cannot be reasonably determined. Others mainly includes the provisions related to onerous contracts which are recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract.
a. Gross amount required to be spent by the Company during the year is '' 1,052 Million (previous year '' 1,148 million) (calculated at 2% of the average net profits of the Company during the three immediately preceding financial years)
The estimated amount of contracts remaining to be executed on capital account (net of capital advances)
as at March 31, 2021 is '' 2,050 Million (March 31, 2020: '' 2,508 Million).
i) Pursuant to a share purchase agreement, the Company acquired 51% stake in Cerium Systems Private Limited ("Ceriumâ) on April 9, 2020 for a total consideration of '' 1,454 Million, out of which '' 916 Million was paid upfront. Further, the Company has entered into an agreement to purchase the remaining 49% stake over a period of three-year, ending March 31, 2023.
Subsequently, the Company has acquired 6% stake for '' 164 Million. Further, the Company has made earnout payment for first tranche amounting to '' 412 Million. As at March 31, 2021, the contractual obligation towards the acquisition amounts to '' 1,957 Million.
ii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Zen3 Infosolutions Private Limited on April 9, 2020 for a consideration of '' 141 Million. Further, the Company through its wholly owned subsidiary Tech Mahindra (Americas) Inc., acquired 100% stake in Zen3 Infosolutions (America) Inc. on April 9, 2020.
iii) Pursuant to a business purchase agreement, the Company acquired the business of TransSys Technologies Solutions LLC and its group companies ("TransSys Groupâ) in October 2020 for a consideration of USD 4.84 million ('' 354 million) (upfront consideration of USD 3.9 million ('' 291 Million) and contingent consideration linked to financial performance).
iv) Pursuant to a share purchase agreement, the Company acquired 100% stake in Perigord Premedia (India) Private Limited and Perigord Data Solutions (India) Private Limited on March 15, 2021 for a consideration of '' 133 million and '' 101 million, respectively. Further, the Company through its wholly owned subsidiary Mahindra Engineering Services (Europe) Limited, acquired 70% stake in Perigord Asset Holdings Limited on March 15, 2021. Further, Mahindra Engineering Services (Europe) Limited has entered into an agreement to purchase the balance 30% stake over a period of four-years, ending March 31, 2024.
i. Bank Guarantees outstanding as at March 31,2021: '' 22,811 Million (March 31, 2020: '' 23,129 Million).
ii. Letters of support/letters of comfort of USD 94 Million: '' 6,836 Million (March 31, 2020: USD 89 Million, '' 6,692 Million) to banks for loans availed by step down subsidiaries of the Company.
Contingent Liabilities in respect of Income Taxes/ Service Tax/ GST/ Value Added Tax/Customs and
International tax to the extent not provided for
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011, the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was complied by erstwhile Satyam. The BG has been extended upto October 14, 2021.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
ii. Appointment of Special Auditor and re-assessment proceedings
⢠In August, 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,948 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: '' 1,458 Million (March 31, 2020 '' 1,443 Million).
ii. Claims made on the Company not acknowledged as debt: ''231 Million (March 31,2020''185 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal, and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Claim against the Company for transfer of land in SEZ at Nagpur considered by Maharashtra Airport Development Company Limited (MADC) as ânon-formal transferâ as per its Transfer Policy and claiming the transfer fee of '' 152 Million. In addition, for leasehold land at Bhubaneshwar, the transfer is pending in the name of the Company as the department has not yet issued the letter communicating transfer fee.
v. Other contingencies '' 407 Million (March 31, 2020''407 Million).
Pursuant to the Scheme of Amalgamation and Arrangement (âthe Schemeâ) sanctioned by the Honâble High Courts of Andhra Pradesh and Bombay, Venturbay Consultants Private Limited (Venturbay), CanvasM Technologies Limited (CanvasM) and Mahindra Logisoft Business Solutions Limited (Logisoft), the wholly owned subsidiaries of the Company, and Satyam Computer Services Limited (Satyam) (through Venturbay) and C&S System Technologies Private Limited (C&S) a wholly owned subsidiary of erstwhile Satyam, merged with the Company with effect from April 1, 2011 (âthe appointed dateâ). Pursuant to the Scheme, the title deeds for the immovable properties pertaining to the amalgamating companies are pending conveyance in the name of the Company. The gross block and net block of the aforesaid immovable properties pending conveyance is ''665 million and ''614 million respectively as at 31 March 2021. The Company has initiated the name change formalities.
The amounts assessed as contingent liability do not include interest that could be claimed by counter parties
33 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The Ministry of Labour and Employment had released draft rules for the Code on November 13, 2020 and had invited suggestions from stakeholders which are under active consideration by the Ministry. However, the effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
36 MERGER/AMALGAMATION OF ENTITIES
The Board of Directors of the Company at its meeting held on January 29, 2021 have approved the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited, two wholly owned subsidiaries with the Company. Subsequently, the Company has filed the application with Honâble jurisdictional National Company Law Board Tribunal ("the NCLTâ). As on the date of the financial statements, the Company is awaiting the order from the NCLT.
Following companies were merged with the Company by approved schemes and were accounted as per âpooling of interestsâ method in accordance with Appendix C of Ind AS 103 âBusiness Combinationsâ.
⢠All assets and liabilities of Tech Mahindra Growth Factories Limited were taken over as per the scheme approved by National Company Law Tribunal, Mumbai Bench with appointed date as April 1, 2019. Comparatives were restated from the beginning of the previous year i.e. from April 1, 2018 as required by IND AS 103.
⢠All assets and liabilities of Dynacommerce India Private Ltd were taken over as per the scheme approved National Company Law Tribunal, Bengaluru Bench with appointed date as June 1, 2019.
37 DIMINUTION IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2021.
Since the recoverable amount determined was lower than the carrying value of the respective investment, the Company has recognized an impairment loss of '' 1,439 Million for the year ended March 31, 2021 (March 31, 2020''5,554 Million). Details of these investments are:
Estimates of future cash flows used in the value-in-use calculation are specific to the entity based on business plans. The future cash flows consider potential risks given the current economic environment and key assumptions, such as volume forecasts and margins. The discount rate used in the calculation reflects marketâs assessment of the risks specific to the asset as well as time value of money.
With respect to determination of recoverable amount of investment based on fair value less costs of disposal, the fair value measurement of the asset is determined using the market approach and is categorized as Level 1 in the fair value hierarchy (refer note 51).
The financial projections and future cash flows basis which investments have been tested for impairment consider the present economic situation which includes reassessment of the discount rates, revisiting the growth rates factored while arriving at terminal value and subjecting these variables to sensitivity analysis.
38 SALE OF INVESTMENT iN SUBSiDiARiES
i. During the previous year, the Company had sold its entire stake in Fixstream Networks Inc. as on September 30, 2019 for an amount of USD 2 Million ('' 142 Million ). Amount of USD 1.5 Million ('' 106 Million) was received and USD 0.5 Million ('' 36 Million) is in Escrow Account.
ii. During the previous year, the Company had also sold its 100% stake in Mahindra Technologies Services Inc. as on July 1, 2019 to Tech Mahindra Americas Inc. (100% subsidiary) for a consideration of USD 1.2 Million ('' 83 Million).
39 A. CERTAiN MATTERS RELATiNG TO ERSTWHiLE SATYAM COMPUTER SERViCES
LiMiTED (ERSTwHILE SATYAM):
In the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtors position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
In 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD 39.2 Million; and
b) non-realisation and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
Erstwhile Satyam received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed by legal notices from these companies dated August 4 and August 5, 2009, claiming repayment of the alleged advances aggregating '' 12,304 Million stated to be given as temporary advances but without any evidence in support of the nature of these transactions. This was also borne out in the internal forensic investigation. The legal notices also claimed damages/ compensation @18% per annum from the date of the advances till the date of repayment. The erstwhile Satyam has not acknowledged any liability to any of the 37 companies and has replied to the legal notices stating that the claims are legally untenable.
The 37 companies have filed petitions/suits for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court in its Order approving the merger of the erstwhile Satyam with the Company, further held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in their names and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention of the 37 companies that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved beyond doubt which is not so in this case.
The said 37 companies have filed appeals before the Division Bench of the Honâble High Court of Andhra Pradesh, against the Orders of the Honâble High Court of Andhra Pradesh and the Honâble High Court of Bombay sanctioning the scheme of merger of Satyam Computer Services Limited (Satyam) with the Company w.e.f. April 1, 2011, which are yet to be heard. One of the aforesaid companies has also appealed against the Order rejecting the Petition for winding-up of the erstwhile Satyam. These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions. In furtherance to the investigation, certain fixed deposits of the Company with certain banks, then aggregating to '' 8,220 Million were alleged by ED to be âproceeds of crimeâ
and were provisionally attached vide Order dated October 18, 2012 by the ED (the Order). The Honâble High Court of Judicature at Hyderabad quashed the said Provisional attachment Order and directed Banks to release the Fixed deposits to the Company vide its Order dated December 31, 2018. Accordingly, these deposits have been released by the Banks. In a recent development, ED has filed a Special Leave Petition (SLP) before the Honâble Supreme Court of India, against the above Order of the Honâble High Court of Telangana. The Honâble Supreme Court upon hearing the parties upheld the judgement of Honâble High court of Andhra Pradesh and Telangana and consequently dismissed the SLP filed by ED by its order dated February 26, 2021.
Criminal prosecution was initiated by the ED against SCSL, since merged with Tech Mahindra Limited (Company) under Section 3 of The Prevention of Money-Laundering Act, 2002 for alleged money laundering along with 212 accused persons. Upon an application challenging the prosecution against the Company, the Honâble High Court of Andhra Pradesh quashed the proceedings by its Order dated December 22, 2014. The appeal preferred by the ED challenging the order of quashing the prosecution before the Division Bench of the Honâble High Court was dismissed by an order dated March 30, 2017 and confirmed the order of quashing. A Special Leave Petition was filed by ED before the Honâble Supreme Court of India. By an order dated December 8, 2017, the Honâble Supreme Court dismissed the SLP filed by the ED and affirmed the order of the Single Judge quashing the prosecution against the Company.
In view of the aforesaid developments and based on an independent legal opinion, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon is not legally tenable. Consequently, pending the final outcome of the proceedings, as a matter of prudence, the Company has accounted and disclosed the amount of '' 12,304 Million as âSuspense Account (net)â.
40 CLAIMS BY CERTAIN SHAREHOLDERS OF ERSTWHILE SATYAM
In terms of the Settlement of claims made by Aberdeen Asset Management PLC., UK and Aberdeen Claims Administration Inc., USA, (together referred to as âAberdeenâ) the erstwhile Satyam had deposited a total amount of USD 80.16 Million towards the Settlement Amount and interest in an Escrow Account during the financial year ended March 31, 2013.
In the meanwhile, Commissioner of Income Tax Mumbai has filed two writ petitions before the Honâble High Court of Bombay, seeking to set aside the orders of Authority for Advance Ruling dated February 15, 2016, which ruled that no withholding tax is applicable for remittance of Settlement Amount. The above writ petitions have been disposed off by the Prothonotary authority of non-removal of office objections.
Considering the disposal of writs filed by the Commissioner of Income Tax Mumbai and no subsequent action being taken by the Income tax department to restore such writs / file fresh writ petitions before the Honâble High Court of Bombay, the Company is in discussions with Aberdeen trusts to obtain letters of indemnity from the claimants, indemnifying the Company in regard to future actions by Indian Income tax department. Post receipt of such letters, the Company seeks to remit the Settlement amounts to Aberdeen trusts.
41 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London
Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honour the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
In the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad, before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In a related development, in December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
43 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
44 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
45 Based on the information available with the Company, there are below outstanding amounts payable to creditors who have been identified as "suppliersâ within the meaning of "Micro, Small and Medium
Enterprises Development (MSMED) Act 2006â
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠'' 38 Million (March 31, 2020: '' 32 Million) for National Pension Scheme contributions.
⢠'' 357 Million (March 31, 2020: '' 355 Million) for Superannuation Fund contributions; and
⢠''2,771 Million (March 31, 2020: '' 2,658 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The following table sets out the Changes in Defined Benefit Obligation (âDBOâ) and Trust Fund plan assets recognized in the Balance Sheet are as under:
The Company has assessed the impact of the COVID-19 pandemic, amongst other matters, resulting from (i) the possibility of constraints to render services which may require revision of estimations of costs to complete the contract because of additional efforts, (ii) termination or deferment of contracts by customers and (iii) customer disputes in its assessment of recognition of revenue in accordance with IND AS 115.
No single customer represents 10% or more of the Companyâs total revenue during the years ended March 31, 2021 and March 31, 2020.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognised as of the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation for contracts where the entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entityâs performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2021 other than those meeting the exclusion criteria mentioned above, is '' 268,790 Million. Out of this, the Company expects to recognise revenue of around 52% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
(iv) Contract Price
Reconciliation of revenue recognised in the statement of profit and loss with the contracted price:
The Company has recognized revenue of '' 296,409 Million (March 31, 2020''292,254 Million) which is adjusted by discounts of ''12,555 Million (March 31, 2020 '' 11,263 Million) for the year ended March 31, 2021.
The total cash outflow for leases is ''1,262 Million (March 31, 2020''1,145 Million) for the year ended March 31, 2021, including cash outflow for short term and low value leases.
51 FINANCIAL RiSK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
Fair value Hierarchy:
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''189,975 and '' 165,539 Million as of March 31, 2021 and March 31, 2020 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2021 and March 31, 2020. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
a) Foreign currency exchange rate risk
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The carrying amounts of the Companyâs foreign currency denominated monetary assets and monetary liabilities at the end of the year are as follows:
b) Foreign Exchange Contracts and Options
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
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.
âIncludes allowance under section 10AA of Income Tax Act, 1961 and dividend received from subsidiaries.
#Includes the impact on scheduling of deferred taxes on account of section 115BAA under Income Tax Act, 1961
The tax rate used for the above reconciliation is the rate as applicable for the respective period payable by corporate entities in India on taxable profits under the Indian income tax laws.
Current tax for the year ended March 31, 2021 includes tax expense with respect to foreign branches amounting to '' 1,096 Million (year ended March 31, 2020: '' 1,411 Million).
Mar 31, 2021
i) Investment in these entities is not denominated in number of shares as per laws of country of incorporation i.e. The Peopleâs Republic of China and Vietnam.
ii) The number of shares held in Tech Mahindra De Mexico, S.DE R.L.DE C.V. comprise 1 share (March 31, 2020- 1) each of Peso 2,999 and Peso 1; fully paid up of Series A (fixed capital) and 1 share (March 31, 2020 - 1) of Peso 12,931,770 fully paid up of Series B (variable capital).
iii) The number of shares held in Sofgen Holdings Limited comprise 1,065,848 Ordinary shares (March 31, 2020 - 1,065,848) and 27,062 shares of Class A (March 31, 2020 - 27,062).
iv) The number of shares held in The Bio Agency Limited comprise 102,000 Class A Ordinary shares (March 31, 2020 - 102,000) and 18,000 Class B Ordinary shares (March 31, 2020 - 18,000)
v) As per the Scheme of merger of the Company with Mahindra Satyam Computer Services Limited with effect from June 24, 2013, the Company had created TML Benefit Trust (Trust) as per the merger order. As per the scheme, the Company transferred, out of its total holding in Satyam as on April 1, 2011; 204 Million equity shares to the Trust, to hold the shares and any additions thereto exclusively for the benefit of the Company. Post-merger with the Company these shares were converted into Tech Mahindra Limitedâs shares in the ratio of 2: 17. As of date, post bonus and split approved by the shareholders from time to time by the Company; the Trust holds 94,235,629 (March 2020: 94,235,629) shares of the Company.
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 55 for details relating to stock options.
iii) The shareholders at the Annual General Meeting held on July 31,2019 approved dividend of '' 14 per equity share for year ended March 31, 2019 which was subsequently paid. The amount was recognized as distributions to equity shareholders, the total appropriation was''16,152 Million including corporate dividend tax of''2,647 Million. In addition, interim dividend of '' 10 per equity share was paid during the year ended 31 March 2020 amounting to '' 11,370 Million including corporate dividend tax of '' 1,711 Million. On April 30, 2020 the Board of directors of the Company had proposed a final dividend of ''5 per share in respect of year ended March 31,2020 and shareholders at the Annual General Meeting held on July 28, 2020 approved the dividend amounting to '' 4,831 Million. The amount was recognized as distribution to equity shareholders. Further, special dividend of '' 15 per equity share was paid during the period ended 31 December 2020 amounting to '' 14,504 Million. On April 26, 2021 the Board of directors of the company have proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 29,048 Million
iv) During the year ended March 31,2020, the Company bought back 20,585,000 equity shares for an aggregate amount of '' 19,556 Million. The equity shares bought back were extinguished. Capital redemption reserve was created to the extent of equity share capital extinguished of '' 103 Million. Transaction costs of '' 132 Million for buy-back have been adjusted to retained earnings.
v) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
Provision for claims and provision for contingencies represents the cash outflows estimated by the Company against the service claims made by customers and the compliance related contingencies, respectively. The timing of cash outflows in respect of such provision cannot be reasonably determined. Others mainly includes the provisions related to onerous contracts which are recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract.
a. Gross amount required to be spent by the Company during the year is '' 1,052 Million (previous year '' 1,148 million) (calculated at 2% of the average net profits of the Company during the three immediately preceding financial years)
The estimated amount of contracts remaining to be executed on capital account (net of capital advances)
as at March 31, 2021 is '' 2,050 Million (March 31, 2020: '' 2,508 Million).
i) Pursuant to a share purchase agreement, the Company acquired 51% stake in Cerium Systems Private Limited ("Ceriumâ) on April 9, 2020 for a total consideration of '' 1,454 Million, out of which '' 916 Million was paid upfront. Further, the Company has entered into an agreement to purchase the remaining 49% stake over a period of three-year, ending March 31, 2023.
Subsequently, the Company has acquired 6% stake for '' 164 Million. Further, the Company has made earnout payment for first tranche amounting to '' 412 Million. As at March 31, 2021, the contractual obligation towards the acquisition amounts to '' 1,957 Million.
ii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Zen3 Infosolutions Private Limited on April 9, 2020 for a consideration of '' 141 Million. Further, the Company through its wholly owned subsidiary Tech Mahindra (Americas) Inc., acquired 100% stake in Zen3 Infosolutions (America) Inc. on April 9, 2020.
iii) Pursuant to a business purchase agreement, the Company acquired the business of TransSys Technologies Solutions LLC and its group companies ("TransSys Groupâ) in October 2020 for a consideration of USD 4.84 million ('' 354 million) (upfront consideration of USD 3.9 million ('' 291 Million) and contingent consideration linked to financial performance).
iv) Pursuant to a share purchase agreement, the Company acquired 100% stake in Perigord Premedia (India) Private Limited and Perigord Data Solutions (India) Private Limited on March 15, 2021 for a consideration of '' 133 million and '' 101 million, respectively. Further, the Company through its wholly owned subsidiary Mahindra Engineering Services (Europe) Limited, acquired 70% stake in Perigord Asset Holdings Limited on March 15, 2021. Further, Mahindra Engineering Services (Europe) Limited has entered into an agreement to purchase the balance 30% stake over a period of four-years, ending March 31, 2024.
i. Bank Guarantees outstanding as at March 31,2021: '' 22,811 Million (March 31, 2020: '' 23,129 Million).
ii. Letters of support/letters of comfort of USD 94 Million: '' 6,836 Million (March 31, 2020: USD 89 Million, '' 6,692 Million) to banks for loans availed by step down subsidiaries of the Company.
Contingent Liabilities in respect of Income Taxes/ Service Tax/ GST/ Value Added Tax/Customs and
International tax to the extent not provided for
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011, the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was complied by erstwhile Satyam. The BG has been extended upto October 14, 2021.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
ii. Appointment of Special Auditor and re-assessment proceedings
⢠In August, 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,948 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: '' 1,458 Million (March 31, 2020 '' 1,443 Million).
ii. Claims made on the Company not acknowledged as debt: ''231 Million (March 31,2020''185 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal, and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Claim against the Company for transfer of land in SEZ at Nagpur considered by Maharashtra Airport Development Company Limited (MADC) as ânon-formal transferâ as per its Transfer Policy and claiming the transfer fee of '' 152 Million. In addition, for leasehold land at Bhubaneshwar, the transfer is pending in the name of the Company as the department has not yet issued the letter communicating transfer fee.
v. Other contingencies '' 407 Million (March 31, 2020''407 Million).
Pursuant to the Scheme of Amalgamation and Arrangement (âthe Schemeâ) sanctioned by the Honâble High Courts of Andhra Pradesh and Bombay, Venturbay Consultants Private Limited (Venturbay), CanvasM Technologies Limited (CanvasM) and Mahindra Logisoft Business Solutions Limited (Logisoft), the wholly owned subsidiaries of the Company, and Satyam Computer Services Limited (Satyam) (through Venturbay) and C&S System Technologies Private Limited (C&S) a wholly owned subsidiary of erstwhile Satyam, merged with the Company with effect from April 1, 2011 (âthe appointed dateâ). Pursuant to the Scheme, the title deeds for the immovable properties pertaining to the amalgamating companies are pending conveyance in the name of the Company. The gross block and net block of the aforesaid immovable properties pending conveyance is ''665 million and ''614 million respectively as at 31 March 2021. The Company has initiated the name change formalities.
The amounts assessed as contingent liability do not include interest that could be claimed by counter parties
33 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The Ministry of Labour and Employment had released draft rules for the Code on November 13, 2020 and had invited suggestions from stakeholders which are under active consideration by the Ministry. However, the effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
36 MERGER/AMALGAMATION OF ENTITIES
The Board of Directors of the Company at its meeting held on January 29, 2021 have approved the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited, two wholly owned subsidiaries with the Company. Subsequently, the Company has filed the application with Honâble jurisdictional National Company Law Board Tribunal ("the NCLTâ). As on the date of the financial statements, the Company is awaiting the order from the NCLT.
Following companies were merged with the Company by approved schemes and were accounted as per âpooling of interestsâ method in accordance with Appendix C of Ind AS 103 âBusiness Combinationsâ.
⢠All assets and liabilities of Tech Mahindra Growth Factories Limited were taken over as per the scheme approved by National Company Law Tribunal, Mumbai Bench with appointed date as April 1, 2019. Comparatives were restated from the beginning of the previous year i.e. from April 1, 2018 as required by IND AS 103.
⢠All assets and liabilities of Dynacommerce India Private Ltd were taken over as per the scheme approved National Company Law Tribunal, Bengaluru Bench with appointed date as June 1, 2019.
37 DIMINUTION IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2021.
Since the recoverable amount determined was lower than the carrying value of the respective investment, the Company has recognized an impairment loss of '' 1,439 Million for the year ended March 31, 2021 (March 31, 2020''5,554 Million). Details of these investments are:
Estimates of future cash flows used in the value-in-use calculation are specific to the entity based on business plans. The future cash flows consider potential risks given the current economic environment and key assumptions, such as volume forecasts and margins. The discount rate used in the calculation reflects marketâs assessment of the risks specific to the asset as well as time value of money.
With respect to determination of recoverable amount of investment based on fair value less costs of disposal, the fair value measurement of the asset is determined using the market approach and is categorized as Level 1 in the fair value hierarchy (refer note 51).
The financial projections and future cash flows basis which investments have been tested for impairment consider the present economic situation which includes reassessment of the discount rates, revisiting the growth rates factored while arriving at terminal value and subjecting these variables to sensitivity analysis.
38 SALE OF INVESTMENT iN SUBSiDiARiES
i. During the previous year, the Company had sold its entire stake in Fixstream Networks Inc. as on September 30, 2019 for an amount of USD 2 Million ('' 142 Million ). Amount of USD 1.5 Million ('' 106 Million) was received and USD 0.5 Million ('' 36 Million) is in Escrow Account.
ii. During the previous year, the Company had also sold its 100% stake in Mahindra Technologies Services Inc. as on July 1, 2019 to Tech Mahindra Americas Inc. (100% subsidiary) for a consideration of USD 1.2 Million ('' 83 Million).
39 A. CERTAiN MATTERS RELATiNG TO ERSTWHiLE SATYAM COMPUTER SERViCES
LiMiTED (ERSTwHILE SATYAM):
In the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtors position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
In 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD 39.2 Million; and
b) non-realisation and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
Erstwhile Satyam received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed by legal notices from these companies dated August 4 and August 5, 2009, claiming repayment of the alleged advances aggregating '' 12,304 Million stated to be given as temporary advances but without any evidence in support of the nature of these transactions. This was also borne out in the internal forensic investigation. The legal notices also claimed damages/ compensation @18% per annum from the date of the advances till the date of repayment. The erstwhile Satyam has not acknowledged any liability to any of the 37 companies and has replied to the legal notices stating that the claims are legally untenable.
The 37 companies have filed petitions/suits for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court in its Order approving the merger of the erstwhile Satyam with the Company, further held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in their names and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention of the 37 companies that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved beyond doubt which is not so in this case.
The said 37 companies have filed appeals before the Division Bench of the Honâble High Court of Andhra Pradesh, against the Orders of the Honâble High Court of Andhra Pradesh and the Honâble High Court of Bombay sanctioning the scheme of merger of Satyam Computer Services Limited (Satyam) with the Company w.e.f. April 1, 2011, which are yet to be heard. One of the aforesaid companies has also appealed against the Order rejecting the Petition for winding-up of the erstwhile Satyam. These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions. In furtherance to the investigation, certain fixed deposits of the Company with certain banks, then aggregating to '' 8,220 Million were alleged by ED to be âproceeds of crimeâ
and were provisionally attached vide Order dated October 18, 2012 by the ED (the Order). The Honâble High Court of Judicature at Hyderabad quashed the said Provisional attachment Order and directed Banks to release the Fixed deposits to the Company vide its Order dated December 31, 2018. Accordingly, these deposits have been released by the Banks. In a recent development, ED has filed a Special Leave Petition (SLP) before the Honâble Supreme Court of India, against the above Order of the Honâble High Court of Telangana. The Honâble Supreme Court upon hearing the parties upheld the judgement of Honâble High court of Andhra Pradesh and Telangana and consequently dismissed the SLP filed by ED by its order dated February 26, 2021.
Criminal prosecution was initiated by the ED against SCSL, since merged with Tech Mahindra Limited (Company) under Section 3 of The Prevention of Money-Laundering Act, 2002 for alleged money laundering along with 212 accused persons. Upon an application challenging the prosecution against the Company, the Honâble High Court of Andhra Pradesh quashed the proceedings by its Order dated December 22, 2014. The appeal preferred by the ED challenging the order of quashing the prosecution before the Division Bench of the Honâble High Court was dismissed by an order dated March 30, 2017 and confirmed the order of quashing. A Special Leave Petition was filed by ED before the Honâble Supreme Court of India. By an order dated December 8, 2017, the Honâble Supreme Court dismissed the SLP filed by the ED and affirmed the order of the Single Judge quashing the prosecution against the Company.
In view of the aforesaid developments and based on an independent legal opinion, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon is not legally tenable. Consequently, pending the final outcome of the proceedings, as a matter of prudence, the Company has accounted and disclosed the amount of '' 12,304 Million as âSuspense Account (net)â.
40 CLAIMS BY CERTAIN SHAREHOLDERS OF ERSTWHILE SATYAM
In terms of the Settlement of claims made by Aberdeen Asset Management PLC., UK and Aberdeen Claims Administration Inc., USA, (together referred to as âAberdeenâ) the erstwhile Satyam had deposited a total amount of USD 80.16 Million towards the Settlement Amount and interest in an Escrow Account during the financial year ended March 31, 2013.
In the meanwhile, Commissioner of Income Tax Mumbai has filed two writ petitions before the Honâble High Court of Bombay, seeking to set aside the orders of Authority for Advance Ruling dated February 15, 2016, which ruled that no withholding tax is applicable for remittance of Settlement Amount. The above writ petitions have been disposed off by the Prothonotary authority of non-removal of office objections.
Considering the disposal of writs filed by the Commissioner of Income Tax Mumbai and no subsequent action being taken by the Income tax department to restore such writs / file fresh writ petitions before the Honâble High Court of Bombay, the Company is in discussions with Aberdeen trusts to obtain letters of indemnity from the claimants, indemnifying the Company in regard to future actions by Indian Income tax department. Post receipt of such letters, the Company seeks to remit the Settlement amounts to Aberdeen trusts.
41 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London
Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honour the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
In the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad, before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In a related development, in December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
43 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
44 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
45 Based on the information available with the Company, there are below outstanding amounts payable to creditors who have been identified as "suppliersâ within the meaning of "Micro, Small and Medium
Enterprises Development (MSMED) Act 2006â
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠'' 38 Million (March 31, 2020: '' 32 Million) for National Pension Scheme contributions.
⢠'' 357 Million (March 31, 2020: '' 355 Million) for Superannuation Fund contributions; and
⢠''2,771 Million (March 31, 2020: '' 2,658 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The following table sets out the Changes in Defined Benefit Obligation (âDBOâ) and Trust Fund plan assets recognized in the Balance Sheet are as under:
The Company has assessed the impact of the COVID-19 pandemic, amongst other matters, resulting from (i) the possibility of constraints to render services which may require revision of estimations of costs to complete the contract because of additional efforts, (ii) termination or deferment of contracts by customers and (iii) customer disputes in its assessment of recognition of revenue in accordance with IND AS 115.
No single customer represents 10% or more of the Companyâs total revenue during the years ended March 31, 2021 and March 31, 2020.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognised as of the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation for contracts where the entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entityâs performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2021 other than those meeting the exclusion criteria mentioned above, is '' 268,790 Million. Out of this, the Company expects to recognise revenue of around 52% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
(iv) Contract Price
Reconciliation of revenue recognised in the statement of profit and loss with the contracted price:
The Company has recognized revenue of '' 296,409 Million (March 31, 2020''292,254 Million) which is adjusted by discounts of ''12,555 Million (March 31, 2020 '' 11,263 Million) for the year ended March 31, 2021.
The total cash outflow for leases is ''1,262 Million (March 31, 2020''1,145 Million) for the year ended March 31, 2021, including cash outflow for short term and low value leases.
51 FINANCIAL RiSK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
Fair value Hierarchy:
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''189,975 and '' 165,539 Million as of March 31, 2021 and March 31, 2020 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2021 and March 31, 2020. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
a) Foreign currency exchange rate risk
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The carrying amounts of the Companyâs foreign currency denominated monetary assets and monetary liabilities at the end of the year are as follows:
b) Foreign Exchange Contracts and Options
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
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.
âIncludes allowance under section 10AA of Income Tax Act, 1961 and dividend received from subsidiaries.
#Includes the impact on scheduling of deferred taxes on account of section 115BAA under Income Tax Act, 1961
The tax rate used for the above reconciliation is the rate as applicable for the respective period payable by corporate entities in India on taxable profits under the Indian income tax laws.
Current tax for the year ended March 31, 2021 includes tax expense with respect to foreign branches amounting to '' 1,096 Million (year ended March 31, 2020: '' 1,411 Million).
Mar 31, 2021
i) Investment in these entities is not denominated in number of shares as per laws of country of incorporation i.e. The Peopleâs Republic of China and Vietnam.
ii) The number of shares held in Tech Mahindra De Mexico, S.DE R.L.DE C.V. comprise 1 share (March 31, 2020- 1) each of Peso 2,999 and Peso 1; fully paid up of Series A (fixed capital) and 1 share (March 31, 2020 - 1) of Peso 12,931,770 fully paid up of Series B (variable capital).
iii) The number of shares held in Sofgen Holdings Limited comprise 1,065,848 Ordinary shares (March 31, 2020 - 1,065,848) and 27,062 shares of Class A (March 31, 2020 - 27,062).
iv) The number of shares held in The Bio Agency Limited comprise 102,000 Class A Ordinary shares (March 31, 2020 - 102,000) and 18,000 Class B Ordinary shares (March 31, 2020 - 18,000)
v) As per the Scheme of merger of the Company with Mahindra Satyam Computer Services Limited with effect from June 24, 2013, the Company had created TML Benefit Trust (Trust) as per the merger order. As per the scheme, the Company transferred, out of its total holding in Satyam as on April 1, 2011; 204 Million equity shares to the Trust, to hold the shares and any additions thereto exclusively for the benefit of the Company. Post-merger with the Company these shares were converted into Tech Mahindra Limitedâs shares in the ratio of 2: 17. As of date, post bonus and split approved by the shareholders from time to time by the Company; the Trust holds 94,235,629 (March 2020: 94,235,629) shares of the Company.
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 55 for details relating to stock options.
iii) The shareholders at the Annual General Meeting held on July 31,2019 approved dividend of '' 14 per equity share for year ended March 31, 2019 which was subsequently paid. The amount was recognized as distributions to equity shareholders, the total appropriation was''16,152 Million including corporate dividend tax of''2,647 Million. In addition, interim dividend of '' 10 per equity share was paid during the year ended 31 March 2020 amounting to '' 11,370 Million including corporate dividend tax of '' 1,711 Million. On April 30, 2020 the Board of directors of the Company had proposed a final dividend of ''5 per share in respect of year ended March 31,2020 and shareholders at the Annual General Meeting held on July 28, 2020 approved the dividend amounting to '' 4,831 Million. The amount was recognized as distribution to equity shareholders. Further, special dividend of '' 15 per equity share was paid during the period ended 31 December 2020 amounting to '' 14,504 Million. On April 26, 2021 the Board of directors of the company have proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 29,048 Million
iv) During the year ended March 31,2020, the Company bought back 20,585,000 equity shares for an aggregate amount of '' 19,556 Million. The equity shares bought back were extinguished. Capital redemption reserve was created to the extent of equity share capital extinguished of '' 103 Million. Transaction costs of '' 132 Million for buy-back have been adjusted to retained earnings.
v) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
Provision for claims and provision for contingencies represents the cash outflows estimated by the Company against the service claims made by customers and the compliance related contingencies, respectively. The timing of cash outflows in respect of such provision cannot be reasonably determined. Others mainly includes the provisions related to onerous contracts which are recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract.
a. Gross amount required to be spent by the Company during the year is '' 1,052 Million (previous year '' 1,148 million) (calculated at 2% of the average net profits of the Company during the three immediately preceding financial years)
The estimated amount of contracts remaining to be executed on capital account (net of capital advances)
as at March 31, 2021 is '' 2,050 Million (March 31, 2020: '' 2,508 Million).
i) Pursuant to a share purchase agreement, the Company acquired 51% stake in Cerium Systems Private Limited ("Ceriumâ) on April 9, 2020 for a total consideration of '' 1,454 Million, out of which '' 916 Million was paid upfront. Further, the Company has entered into an agreement to purchase the remaining 49% stake over a period of three-year, ending March 31, 2023.
Subsequently, the Company has acquired 6% stake for '' 164 Million. Further, the Company has made earnout payment for first tranche amounting to '' 412 Million. As at March 31, 2021, the contractual obligation towards the acquisition amounts to '' 1,957 Million.
ii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Zen3 Infosolutions Private Limited on April 9, 2020 for a consideration of '' 141 Million. Further, the Company through its wholly owned subsidiary Tech Mahindra (Americas) Inc., acquired 100% stake in Zen3 Infosolutions (America) Inc. on April 9, 2020.
iii) Pursuant to a business purchase agreement, the Company acquired the business of TransSys Technologies Solutions LLC and its group companies ("TransSys Groupâ) in October 2020 for a consideration of USD 4.84 million ('' 354 million) (upfront consideration of USD 3.9 million ('' 291 Million) and contingent consideration linked to financial performance).
iv) Pursuant to a share purchase agreement, the Company acquired 100% stake in Perigord Premedia (India) Private Limited and Perigord Data Solutions (India) Private Limited on March 15, 2021 for a consideration of '' 133 million and '' 101 million, respectively. Further, the Company through its wholly owned subsidiary Mahindra Engineering Services (Europe) Limited, acquired 70% stake in Perigord Asset Holdings Limited on March 15, 2021. Further, Mahindra Engineering Services (Europe) Limited has entered into an agreement to purchase the balance 30% stake over a period of four-years, ending March 31, 2024.
i. Bank Guarantees outstanding as at March 31,2021: '' 22,811 Million (March 31, 2020: '' 23,129 Million).
ii. Letters of support/letters of comfort of USD 94 Million: '' 6,836 Million (March 31, 2020: USD 89 Million, '' 6,692 Million) to banks for loans availed by step down subsidiaries of the Company.
Contingent Liabilities in respect of Income Taxes/ Service Tax/ GST/ Value Added Tax/Customs and
International tax to the extent not provided for
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011, the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was complied by erstwhile Satyam. The BG has been extended upto October 14, 2021.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
ii. Appointment of Special Auditor and re-assessment proceedings
⢠In August, 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,948 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: '' 1,458 Million (March 31, 2020 '' 1,443 Million).
ii. Claims made on the Company not acknowledged as debt: ''231 Million (March 31,2020''185 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal, and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Claim against the Company for transfer of land in SEZ at Nagpur considered by Maharashtra Airport Development Company Limited (MADC) as ânon-formal transferâ as per its Transfer Policy and claiming the transfer fee of '' 152 Million. In addition, for leasehold land at Bhubaneshwar, the transfer is pending in the name of the Company as the department has not yet issued the letter communicating transfer fee.
v. Other contingencies '' 407 Million (March 31, 2020''407 Million).
Pursuant to the Scheme of Amalgamation and Arrangement (âthe Schemeâ) sanctioned by the Honâble High Courts of Andhra Pradesh and Bombay, Venturbay Consultants Private Limited (Venturbay), CanvasM Technologies Limited (CanvasM) and Mahindra Logisoft Business Solutions Limited (Logisoft), the wholly owned subsidiaries of the Company, and Satyam Computer Services Limited (Satyam) (through Venturbay) and C&S System Technologies Private Limited (C&S) a wholly owned subsidiary of erstwhile Satyam, merged with the Company with effect from April 1, 2011 (âthe appointed dateâ). Pursuant to the Scheme, the title deeds for the immovable properties pertaining to the amalgamating companies are pending conveyance in the name of the Company. The gross block and net block of the aforesaid immovable properties pending conveyance is ''665 million and ''614 million respectively as at 31 March 2021. The Company has initiated the name change formalities.
The amounts assessed as contingent liability do not include interest that could be claimed by counter parties
33 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The Ministry of Labour and Employment had released draft rules for the Code on November 13, 2020 and had invited suggestions from stakeholders which are under active consideration by the Ministry. However, the effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
36 MERGER/AMALGAMATION OF ENTITIES
The Board of Directors of the Company at its meeting held on January 29, 2021 have approved the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited, two wholly owned subsidiaries with the Company. Subsequently, the Company has filed the application with Honâble jurisdictional National Company Law Board Tribunal ("the NCLTâ). As on the date of the financial statements, the Company is awaiting the order from the NCLT.
Following companies were merged with the Company by approved schemes and were accounted as per âpooling of interestsâ method in accordance with Appendix C of Ind AS 103 âBusiness Combinationsâ.
⢠All assets and liabilities of Tech Mahindra Growth Factories Limited were taken over as per the scheme approved by National Company Law Tribunal, Mumbai Bench with appointed date as April 1, 2019. Comparatives were restated from the beginning of the previous year i.e. from April 1, 2018 as required by IND AS 103.
⢠All assets and liabilities of Dynacommerce India Private Ltd were taken over as per the scheme approved National Company Law Tribunal, Bengaluru Bench with appointed date as June 1, 2019.
37 DIMINUTION IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2021.
Since the recoverable amount determined was lower than the carrying value of the respective investment, the Company has recognized an impairment loss of '' 1,439 Million for the year ended March 31, 2021 (March 31, 2020''5,554 Million). Details of these investments are:
Estimates of future cash flows used in the value-in-use calculation are specific to the entity based on business plans. The future cash flows consider potential risks given the current economic environment and key assumptions, such as volume forecasts and margins. The discount rate used in the calculation reflects marketâs assessment of the risks specific to the asset as well as time value of money.
With respect to determination of recoverable amount of investment based on fair value less costs of disposal, the fair value measurement of the asset is determined using the market approach and is categorized as Level 1 in the fair value hierarchy (refer note 51).
The financial projections and future cash flows basis which investments have been tested for impairment consider the present economic situation which includes reassessment of the discount rates, revisiting the growth rates factored while arriving at terminal value and subjecting these variables to sensitivity analysis.
38 SALE OF INVESTMENT iN SUBSiDiARiES
i. During the previous year, the Company had sold its entire stake in Fixstream Networks Inc. as on September 30, 2019 for an amount of USD 2 Million ('' 142 Million ). Amount of USD 1.5 Million ('' 106 Million) was received and USD 0.5 Million ('' 36 Million) is in Escrow Account.
ii. During the previous year, the Company had also sold its 100% stake in Mahindra Technologies Services Inc. as on July 1, 2019 to Tech Mahindra Americas Inc. (100% subsidiary) for a consideration of USD 1.2 Million ('' 83 Million).
39 A. CERTAiN MATTERS RELATiNG TO ERSTWHiLE SATYAM COMPUTER SERViCES
LiMiTED (ERSTwHILE SATYAM):
In the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtors position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
In 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD 39.2 Million; and
b) non-realisation and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
Erstwhile Satyam received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed by legal notices from these companies dated August 4 and August 5, 2009, claiming repayment of the alleged advances aggregating '' 12,304 Million stated to be given as temporary advances but without any evidence in support of the nature of these transactions. This was also borne out in the internal forensic investigation. The legal notices also claimed damages/ compensation @18% per annum from the date of the advances till the date of repayment. The erstwhile Satyam has not acknowledged any liability to any of the 37 companies and has replied to the legal notices stating that the claims are legally untenable.
The 37 companies have filed petitions/suits for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court in its Order approving the merger of the erstwhile Satyam with the Company, further held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in their names and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention of the 37 companies that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved beyond doubt which is not so in this case.
The said 37 companies have filed appeals before the Division Bench of the Honâble High Court of Andhra Pradesh, against the Orders of the Honâble High Court of Andhra Pradesh and the Honâble High Court of Bombay sanctioning the scheme of merger of Satyam Computer Services Limited (Satyam) with the Company w.e.f. April 1, 2011, which are yet to be heard. One of the aforesaid companies has also appealed against the Order rejecting the Petition for winding-up of the erstwhile Satyam. These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions. In furtherance to the investigation, certain fixed deposits of the Company with certain banks, then aggregating to '' 8,220 Million were alleged by ED to be âproceeds of crimeâ
and were provisionally attached vide Order dated October 18, 2012 by the ED (the Order). The Honâble High Court of Judicature at Hyderabad quashed the said Provisional attachment Order and directed Banks to release the Fixed deposits to the Company vide its Order dated December 31, 2018. Accordingly, these deposits have been released by the Banks. In a recent development, ED has filed a Special Leave Petition (SLP) before the Honâble Supreme Court of India, against the above Order of the Honâble High Court of Telangana. The Honâble Supreme Court upon hearing the parties upheld the judgement of Honâble High court of Andhra Pradesh and Telangana and consequently dismissed the SLP filed by ED by its order dated February 26, 2021.
Criminal prosecution was initiated by the ED against SCSL, since merged with Tech Mahindra Limited (Company) under Section 3 of The Prevention of Money-Laundering Act, 2002 for alleged money laundering along with 212 accused persons. Upon an application challenging the prosecution against the Company, the Honâble High Court of Andhra Pradesh quashed the proceedings by its Order dated December 22, 2014. The appeal preferred by the ED challenging the order of quashing the prosecution before the Division Bench of the Honâble High Court was dismissed by an order dated March 30, 2017 and confirmed the order of quashing. A Special Leave Petition was filed by ED before the Honâble Supreme Court of India. By an order dated December 8, 2017, the Honâble Supreme Court dismissed the SLP filed by the ED and affirmed the order of the Single Judge quashing the prosecution against the Company.
In view of the aforesaid developments and based on an independent legal opinion, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon is not legally tenable. Consequently, pending the final outcome of the proceedings, as a matter of prudence, the Company has accounted and disclosed the amount of '' 12,304 Million as âSuspense Account (net)â.
40 CLAIMS BY CERTAIN SHAREHOLDERS OF ERSTWHILE SATYAM
In terms of the Settlement of claims made by Aberdeen Asset Management PLC., UK and Aberdeen Claims Administration Inc., USA, (together referred to as âAberdeenâ) the erstwhile Satyam had deposited a total amount of USD 80.16 Million towards the Settlement Amount and interest in an Escrow Account during the financial year ended March 31, 2013.
In the meanwhile, Commissioner of Income Tax Mumbai has filed two writ petitions before the Honâble High Court of Bombay, seeking to set aside the orders of Authority for Advance Ruling dated February 15, 2016, which ruled that no withholding tax is applicable for remittance of Settlement Amount. The above writ petitions have been disposed off by the Prothonotary authority of non-removal of office objections.
Considering the disposal of writs filed by the Commissioner of Income Tax Mumbai and no subsequent action being taken by the Income tax department to restore such writs / file fresh writ petitions before the Honâble High Court of Bombay, the Company is in discussions with Aberdeen trusts to obtain letters of indemnity from the claimants, indemnifying the Company in regard to future actions by Indian Income tax department. Post receipt of such letters, the Company seeks to remit the Settlement amounts to Aberdeen trusts.
41 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London
Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honour the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
In the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad, before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In a related development, in December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
43 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
44 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
45 Based on the information available with the Company, there are below outstanding amounts payable to creditors who have been identified as "suppliersâ within the meaning of "Micro, Small and Medium
Enterprises Development (MSMED) Act 2006â
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠'' 38 Million (March 31, 2020: '' 32 Million) for National Pension Scheme contributions.
⢠'' 357 Million (March 31, 2020: '' 355 Million) for Superannuation Fund contributions; and
⢠''2,771 Million (March 31, 2020: '' 2,658 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The following table sets out the Changes in Defined Benefit Obligation (âDBOâ) and Trust Fund plan assets recognized in the Balance Sheet are as under:
The Company has assessed the impact of the COVID-19 pandemic, amongst other matters, resulting from (i) the possibility of constraints to render services which may require revision of estimations of costs to complete the contract because of additional efforts, (ii) termination or deferment of contracts by customers and (iii) customer disputes in its assessment of recognition of revenue in accordance with IND AS 115.
No single customer represents 10% or more of the Companyâs total revenue during the years ended March 31, 2021 and March 31, 2020.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognised as of the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation for contracts where the entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entityâs performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2021 other than those meeting the exclusion criteria mentioned above, is '' 268,790 Million. Out of this, the Company expects to recognise revenue of around 52% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
(iv) Contract Price
Reconciliation of revenue recognised in the statement of profit and loss with the contracted price:
The Company has recognized revenue of '' 296,409 Million (March 31, 2020''292,254 Million) which is adjusted by discounts of ''12,555 Million (March 31, 2020 '' 11,263 Million) for the year ended March 31, 2021.
The total cash outflow for leases is ''1,262 Million (March 31, 2020''1,145 Million) for the year ended March 31, 2021, including cash outflow for short term and low value leases.
51 FINANCIAL RiSK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
Fair value Hierarchy:
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''189,975 and '' 165,539 Million as of March 31, 2021 and March 31, 2020 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2021 and March 31, 2020. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
a) Foreign currency exchange rate risk
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The carrying amounts of the Companyâs foreign currency denominated monetary assets and monetary liabilities at the end of the year are as follows:
b) Foreign Exchange Contracts and Options
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
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.
âIncludes allowance under section 10AA of Income Tax Act, 1961 and dividend received from subsidiaries.
#Includes the impact on scheduling of deferred taxes on account of section 115BAA under Income Tax Act, 1961
The tax rate used for the above reconciliation is the rate as applicable for the respective period payable by corporate entities in India on taxable profits under the Indian income tax laws.
Current tax for the year ended March 31, 2021 includes tax expense with respect to foreign branches amounting to '' 1,096 Million (year ended March 31, 2020: '' 1,411 Million).
Mar 31, 2021
i) Investment in these entities is not denominated in number of shares as per laws of country of incorporation i.e. The Peopleâs Republic of China and Vietnam.
ii) The number of shares held in Tech Mahindra De Mexico, S.DE R.L.DE C.V. comprise 1 share (March 31, 2020- 1) each of Peso 2,999 and Peso 1; fully paid up of Series A (fixed capital) and 1 share (March 31, 2020 - 1) of Peso 12,931,770 fully paid up of Series B (variable capital).
iii) The number of shares held in Sofgen Holdings Limited comprise 1,065,848 Ordinary shares (March 31, 2020 - 1,065,848) and 27,062 shares of Class A (March 31, 2020 - 27,062).
iv) The number of shares held in The Bio Agency Limited comprise 102,000 Class A Ordinary shares (March 31, 2020 - 102,000) and 18,000 Class B Ordinary shares (March 31, 2020 - 18,000)
v) As per the Scheme of merger of the Company with Mahindra Satyam Computer Services Limited with effect from June 24, 2013, the Company had created TML Benefit Trust (Trust) as per the merger order. As per the scheme, the Company transferred, out of its total holding in Satyam as on April 1, 2011; 204 Million equity shares to the Trust, to hold the shares and any additions thereto exclusively for the benefit of the Company. Post-merger with the Company these shares were converted into Tech Mahindra Limitedâs shares in the ratio of 2: 17. As of date, post bonus and split approved by the shareholders from time to time by the Company; the Trust holds 94,235,629 (March 2020: 94,235,629) shares of the Company.
i) Each equity share entitles the holder to one vote and carries an equal right to dividend.
ii) Refer note 55 for details relating to stock options.
iii) The shareholders at the Annual General Meeting held on July 31,2019 approved dividend of '' 14 per equity share for year ended March 31, 2019 which was subsequently paid. The amount was recognized as distributions to equity shareholders, the total appropriation was''16,152 Million including corporate dividend tax of''2,647 Million. In addition, interim dividend of '' 10 per equity share was paid during the year ended 31 March 2020 amounting to '' 11,370 Million including corporate dividend tax of '' 1,711 Million. On April 30, 2020 the Board of directors of the Company had proposed a final dividend of ''5 per share in respect of year ended March 31,2020 and shareholders at the Annual General Meeting held on July 28, 2020 approved the dividend amounting to '' 4,831 Million. The amount was recognized as distribution to equity shareholders. Further, special dividend of '' 15 per equity share was paid during the period ended 31 December 2020 amounting to '' 14,504 Million. On April 26, 2021 the Board of directors of the company have proposed a special dividend of '' 15 per share and final dividend of ''15 per share in respect of year ended March 31, 2021 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in cash outflow of '' 29,048 Million
iv) During the year ended March 31,2020, the Company bought back 20,585,000 equity shares for an aggregate amount of '' 19,556 Million. The equity shares bought back were extinguished. Capital redemption reserve was created to the extent of equity share capital extinguished of '' 103 Million. Transaction costs of '' 132 Million for buy-back have been adjusted to retained earnings.
v) The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the equity balance. The Company is not subject to any externally imposed capital requirements. The Companyâs risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with capital.
Provision for claims and provision for contingencies represents the cash outflows estimated by the Company against the service claims made by customers and the compliance related contingencies, respectively. The timing of cash outflows in respect of such provision cannot be reasonably determined. Others mainly includes the provisions related to onerous contracts which are recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract.
a. Gross amount required to be spent by the Company during the year is '' 1,052 Million (previous year '' 1,148 million) (calculated at 2% of the average net profits of the Company during the three immediately preceding financial years)
The estimated amount of contracts remaining to be executed on capital account (net of capital advances)
as at March 31, 2021 is '' 2,050 Million (March 31, 2020: '' 2,508 Million).
i) Pursuant to a share purchase agreement, the Company acquired 51% stake in Cerium Systems Private Limited ("Ceriumâ) on April 9, 2020 for a total consideration of '' 1,454 Million, out of which '' 916 Million was paid upfront. Further, the Company has entered into an agreement to purchase the remaining 49% stake over a period of three-year, ending March 31, 2023.
Subsequently, the Company has acquired 6% stake for '' 164 Million. Further, the Company has made earnout payment for first tranche amounting to '' 412 Million. As at March 31, 2021, the contractual obligation towards the acquisition amounts to '' 1,957 Million.
ii) Pursuant to a share purchase agreement, the Company acquired 100% stake in Zen3 Infosolutions Private Limited on April 9, 2020 for a consideration of '' 141 Million. Further, the Company through its wholly owned subsidiary Tech Mahindra (Americas) Inc., acquired 100% stake in Zen3 Infosolutions (America) Inc. on April 9, 2020.
iii) Pursuant to a business purchase agreement, the Company acquired the business of TransSys Technologies Solutions LLC and its group companies ("TransSys Groupâ) in October 2020 for a consideration of USD 4.84 million ('' 354 million) (upfront consideration of USD 3.9 million ('' 291 Million) and contingent consideration linked to financial performance).
iv) Pursuant to a share purchase agreement, the Company acquired 100% stake in Perigord Premedia (India) Private Limited and Perigord Data Solutions (India) Private Limited on March 15, 2021 for a consideration of '' 133 million and '' 101 million, respectively. Further, the Company through its wholly owned subsidiary Mahindra Engineering Services (Europe) Limited, acquired 70% stake in Perigord Asset Holdings Limited on March 15, 2021. Further, Mahindra Engineering Services (Europe) Limited has entered into an agreement to purchase the balance 30% stake over a period of four-years, ending March 31, 2024.
i. Bank Guarantees outstanding as at March 31,2021: '' 22,811 Million (March 31, 2020: '' 23,129 Million).
ii. Letters of support/letters of comfort of USD 94 Million: '' 6,836 Million (March 31, 2020: USD 89 Million, '' 6,692 Million) to banks for loans availed by step down subsidiaries of the Company.
Contingent Liabilities in respect of Income Taxes/ Service Tax/ GST/ Value Added Tax/Customs and
International tax to the extent not provided for
i. Petition before Honâble High Court of Judicature at Hyderabad: Financial years 20022003 to 2007-2008
Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to '' 6,170 Million for the financial years 2002-2003 to 2007-2008 till the correct quantification of income and taxes payable is done for the respective years. In March 2011, the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Honâble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for ''6,170 Million which was complied by erstwhile Satyam. The BG has been extended upto October 14, 2021.
The Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam. Erstwhile Satyam filed a writ petition in the Honâble High Court of Andhra Pradesh that has granted a stay on the provisional attachment order.
ii. Appointment of Special Auditor and re-assessment proceedings
⢠In August, 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of '' 7,948 Million and '' 9,637 Million for the financial years 2001-2002 and 2006-2007, respectively, proposing adjustments to the total income, including adjustments on account of Transfer Pricing. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.
⢠Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-2002, 2002-2003, 2006-2007, 20072008 and 2008-2009 on various dates. Erstwhile Satyam had filed petitions before Honâble High Court of Andhra Pradesh challenging the special audits, which are pending disposal.
i. Claims against erstwhile Satyam not acknowledged as debt: '' 1,458 Million (March 31, 2020 '' 1,443 Million).
ii. Claims made on the Company not acknowledged as debt: ''231 Million (March 31,2020''185 Million).
iii. The Company has received an order passed under section 7A of Employees Provident Fund & Miscellaneous Provisions Act, 1952 ("the Actâ) for the period March 2013 to April 2014 from Employees Provident Fund Organization (EPFO) claiming provident fund contribution amounting to '' 2,448 million for employees deputed to non-SSA (Countries with which India does not have Social Security Agreement) countries.
The Company has assessed that it has legitimate grounds for appeal, and has contested the order by filing an appeal which is pending before Central Government Industrial Tribunal. The Company has also submitted a bank guarantee of '' 500 million towards this order.
In addition, the Company has received a notice based on inquiry under section 7A of the Act for the period May 2014 to March 2016 indicating a claim of '' 5,668 Million on (a) employees deputed to non - SSA countries and (b) certain allowances paid to employees.
The Company has assessed the components to be included in basic salary for the purpose of contribution towards Provident Fund and based on legal advice believes that there would be no additional liability on the Company.
iv. Claim against the Company for transfer of land in SEZ at Nagpur considered by Maharashtra Airport Development Company Limited (MADC) as ânon-formal transferâ as per its Transfer Policy and claiming the transfer fee of '' 152 Million. In addition, for leasehold land at Bhubaneshwar, the transfer is pending in the name of the Company as the department has not yet issued the letter communicating transfer fee.
v. Other contingencies '' 407 Million (March 31, 2020''407 Million).
Pursuant to the Scheme of Amalgamation and Arrangement (âthe Schemeâ) sanctioned by the Honâble High Courts of Andhra Pradesh and Bombay, Venturbay Consultants Private Limited (Venturbay), CanvasM Technologies Limited (CanvasM) and Mahindra Logisoft Business Solutions Limited (Logisoft), the wholly owned subsidiaries of the Company, and Satyam Computer Services Limited (Satyam) (through Venturbay) and C&S System Technologies Private Limited (C&S) a wholly owned subsidiary of erstwhile Satyam, merged with the Company with effect from April 1, 2011 (âthe appointed dateâ). Pursuant to the Scheme, the title deeds for the immovable properties pertaining to the amalgamating companies are pending conveyance in the name of the Company. The gross block and net block of the aforesaid immovable properties pending conveyance is ''665 million and ''614 million respectively as at 31 March 2021. The Company has initiated the name change formalities.
The amounts assessed as contingent liability do not include interest that could be claimed by counter parties
33 CODE OF SOCIAL SECURITY, 2020
The Code on Social Security, 2020 (âCodeâ) relating to employee benefits received the Presidential assent in September 2020. The Ministry of Labour and Employment had released draft rules for the Code on November 13, 2020 and had invited suggestions from stakeholders which are under active consideration by the Ministry. However, the effective date from which the changes are applicable is yet to be notified. The Company will evaluate and will give appropriate impact in the financial statements in the period in which the Code becomes effective and the related rules are published.
36 MERGER/AMALGAMATION OF ENTITIES
The Board of Directors of the Company at its meeting held on January 29, 2021 have approved the scheme of merger of Tech Mahindra Business Services Limited and Born Commerce Private Limited, two wholly owned subsidiaries with the Company. Subsequently, the Company has filed the application with Honâble jurisdictional National Company Law Board Tribunal ("the NCLTâ). As on the date of the financial statements, the Company is awaiting the order from the NCLT.
Following companies were merged with the Company by approved schemes and were accounted as per âpooling of interestsâ method in accordance with Appendix C of Ind AS 103 âBusiness Combinationsâ.
⢠All assets and liabilities of Tech Mahindra Growth Factories Limited were taken over as per the scheme approved by National Company Law Tribunal, Mumbai Bench with appointed date as April 1, 2019. Comparatives were restated from the beginning of the previous year i.e. from April 1, 2018 as required by IND AS 103.
⢠All assets and liabilities of Dynacommerce India Private Ltd were taken over as per the scheme approved National Company Law Tribunal, Bengaluru Bench with appointed date as June 1, 2019.
37 DIMINUTION IN VALUE OF INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES
The Company has investments in subsidiaries and associates. These investments are accounted for at cost less impairment. Management assesses the operations of these entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments.
In case where impairment triggers are identified, the recoverable amount of the investment is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized if the investmentâs carrying amount exceeds the greater of its fair value less costs to sell and value in use.
The performance in few of the subsidiaries and the relevant economic and market indicators have led the Company to reassess recoverable amount in the subsidiaries listed below, as at March 31, 2021.
Since the recoverable amount determined was lower than the carrying value of the respective investment, the Company has recognized an impairment loss of '' 1,439 Million for the year ended March 31, 2021 (March 31, 2020''5,554 Million). Details of these investments are:
Estimates of future cash flows used in the value-in-use calculation are specific to the entity based on business plans. The future cash flows consider potential risks given the current economic environment and key assumptions, such as volume forecasts and margins. The discount rate used in the calculation reflects marketâs assessment of the risks specific to the asset as well as time value of money.
With respect to determination of recoverable amount of investment based on fair value less costs of disposal, the fair value measurement of the asset is determined using the market approach and is categorized as Level 1 in the fair value hierarchy (refer note 51).
The financial projections and future cash flows basis which investments have been tested for impairment consider the present economic situation which includes reassessment of the discount rates, revisiting the growth rates factored while arriving at terminal value and subjecting these variables to sensitivity analysis.
38 SALE OF INVESTMENT iN SUBSiDiARiES
i. During the previous year, the Company had sold its entire stake in Fixstream Networks Inc. as on September 30, 2019 for an amount of USD 2 Million ('' 142 Million ). Amount of USD 1.5 Million ('' 106 Million) was received and USD 0.5 Million ('' 36 Million) is in Escrow Account.
ii. During the previous year, the Company had also sold its 100% stake in Mahindra Technologies Services Inc. as on July 1, 2019 to Tech Mahindra Americas Inc. (100% subsidiary) for a consideration of USD 1.2 Million ('' 83 Million).
39 A. CERTAiN MATTERS RELATiNG TO ERSTWHiLE SATYAM COMPUTER SERViCES
LiMiTED (ERSTwHILE SATYAM):
In the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtors position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (âSFIOâ)/Registrar of Companies (âROCâ), Directorate of Enforcement (âEDâ), Central Bureau of Investigation (âCBIâ) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
In 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which were compounded.
Further, ED issued show-cause notices for certain non-compliances of provisions of the Foreign Exchange Management Act, 1999 (âFEMAâ) and the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 by the erstwhile Satyam. These pertained to
a) alleged non-repatriation of American Depository Receipts (âADRâ) proceeds aggregating to USD 39.2 Million; and
b) non-realisation and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period from July 1997 to December 31, 2002.
These have been responded to by the erstwhile Satyam/the Company, the Company has not received any further communication in this regard and with the passage of time, the Company does not expect any further proceedings in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, were made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Managementâs notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
Erstwhile Satyam received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as âalleged advancesâ). These letters were followed by legal notices from these companies dated August 4 and August 5, 2009, claiming repayment of the alleged advances aggregating '' 12,304 Million stated to be given as temporary advances but without any evidence in support of the nature of these transactions. This was also borne out in the internal forensic investigation. The legal notices also claimed damages/ compensation @18% per annum from the date of the advances till the date of repayment. The erstwhile Satyam has not acknowledged any liability to any of the 37 companies and has replied to the legal notices stating that the claims are legally untenable.
The 37 companies have filed petitions/suits for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), of which one petition has been converted into suit and balance 36 petitions are at various stages of pauperism/suit admission.
The Honâble High Court in its Order approving the merger of the erstwhile Satyam with the Company, further held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in their names and not disclosing them as creditors and in disclosing such amounts as âAmounts pending investigation suspense account (net)â in the financial statements. The Honâble High Court held, inter-alia, that the contention of the 37 companies that Satyam is retaining the money, i.e. the alleged advances, of the âcreditorsâ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved beyond doubt which is not so in this case.
The said 37 companies have filed appeals before the Division Bench of the Honâble High Court of Andhra Pradesh, against the Orders of the Honâble High Court of Andhra Pradesh and the Honâble High Court of Bombay sanctioning the scheme of merger of Satyam Computer Services Limited (Satyam) with the Company w.e.f. April 1, 2011, which are yet to be heard. One of the aforesaid companies has also appealed against the Order rejecting the Petition for winding-up of the erstwhile Satyam. These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions. In furtherance to the investigation, certain fixed deposits of the Company with certain banks, then aggregating to '' 8,220 Million were alleged by ED to be âproceeds of crimeâ
and were provisionally attached vide Order dated October 18, 2012 by the ED (the Order). The Honâble High Court of Judicature at Hyderabad quashed the said Provisional attachment Order and directed Banks to release the Fixed deposits to the Company vide its Order dated December 31, 2018. Accordingly, these deposits have been released by the Banks. In a recent development, ED has filed a Special Leave Petition (SLP) before the Honâble Supreme Court of India, against the above Order of the Honâble High Court of Telangana. The Honâble Supreme Court upon hearing the parties upheld the judgement of Honâble High court of Andhra Pradesh and Telangana and consequently dismissed the SLP filed by ED by its order dated February 26, 2021.
Criminal prosecution was initiated by the ED against SCSL, since merged with Tech Mahindra Limited (Company) under Section 3 of The Prevention of Money-Laundering Act, 2002 for alleged money laundering along with 212 accused persons. Upon an application challenging the prosecution against the Company, the Honâble High Court of Andhra Pradesh quashed the proceedings by its Order dated December 22, 2014. The appeal preferred by the ED challenging the order of quashing the prosecution before the Division Bench of the Honâble High Court was dismissed by an order dated March 30, 2017 and confirmed the order of quashing. A Special Leave Petition was filed by ED before the Honâble Supreme Court of India. By an order dated December 8, 2017, the Honâble Supreme Court dismissed the SLP filed by the ED and affirmed the order of the Single Judge quashing the prosecution against the Company.
In view of the aforesaid developments and based on an independent legal opinion, the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon is not legally tenable. Consequently, pending the final outcome of the proceedings, as a matter of prudence, the Company has accounted and disclosed the amount of '' 12,304 Million as âSuspense Account (net)â.
40 CLAIMS BY CERTAIN SHAREHOLDERS OF ERSTWHILE SATYAM
In terms of the Settlement of claims made by Aberdeen Asset Management PLC., UK and Aberdeen Claims Administration Inc., USA, (together referred to as âAberdeenâ) the erstwhile Satyam had deposited a total amount of USD 80.16 Million towards the Settlement Amount and interest in an Escrow Account during the financial year ended March 31, 2013.
In the meanwhile, Commissioner of Income Tax Mumbai has filed two writ petitions before the Honâble High Court of Bombay, seeking to set aside the orders of Authority for Advance Ruling dated February 15, 2016, which ruled that no withholding tax is applicable for remittance of Settlement Amount. The above writ petitions have been disposed off by the Prothonotary authority of non-removal of office objections.
Considering the disposal of writs filed by the Commissioner of Income Tax Mumbai and no subsequent action being taken by the Income tax department to restore such writs / file fresh writ petitions before the Honâble High Court of Bombay, the Company is in discussions with Aberdeen trusts to obtain letters of indemnity from the claimants, indemnifying the Company in regard to future actions by Indian Income tax department. Post receipt of such letters, the Company seeks to remit the Settlement amounts to Aberdeen trusts.
41 DISPUTE WITH VENTURE GLOBAL ENGINEERING LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (âVGEâ) incorporated Satyam Venture Engineering Services Private Limited (âSVESâ) in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the âSHAâ), to purchase VGEâs shares in SVES. The erstwhile Satyamâs action, disputed by VGE, was upheld in arbitration by the London
Court of International Arbitration vide its award in April 2006 (the âAwardâ). VGE disputed the Award in the Courts in Michigan, USA.
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGEâs challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honour the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyamâs nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
In the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the Honâble High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad, before the Honâble High Court (SVES Appeal).
The Honâble High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The Honâble High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the Honâble High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (âSLPâ) before the Supreme Court of India challenging the judgment of the Honâble High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGEâs challenge to the Award. The said Petitions are pending before the Supreme Court. The Honâble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLPâs before the Chief Justice of India for appropriate further course of action.
In a related development, in December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGEâs petition to amend the complaint. In June 2013, VGEâs appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiffâs Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
43 FOREIGN CURRENCY RECEIVABLES
In respect of overdue foreign currency receivables for the periodâs upto March 31,2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. The Management has fully provided for these receivables.
44 Segment information has been presented in the Consolidated Financial Statements in accordance with Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
45 Based on the information available with the Company, there are below outstanding amounts payable to creditors who have been identified as "suppliersâ within the meaning of "Micro, Small and Medium
Enterprises Development (MSMED) Act 2006â
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Scheme which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
⢠'' 38 Million (March 31, 2020: '' 32 Million) for National Pension Scheme contributions.
⢠'' 357 Million (March 31, 2020: '' 355 Million) for Superannuation Fund contributions; and
⢠''2,771 Million (March 31, 2020: '' 2,658 Million) for Provident Fund contributions.
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the Company operates a scheme of gratuity which is a defined benefit plan. The gratuity plan is partially funded.
The following table sets out the Changes in Defined Benefit Obligation (âDBOâ) and Trust Fund plan assets recognized in the Balance Sheet are as under:
The Company has assessed the impact of the COVID-19 pandemic, amongst other matters, resulting from (i) the possibility of constraints to render services which may require revision of estimations of costs to complete the contract because of additional efforts, (ii) termination or deferment of contracts by customers and (iii) customer disputes in its assessment of recognition of revenue in accordance with IND AS 115.
No single customer represents 10% or more of the Companyâs total revenue during the years ended March 31, 2021 and March 31, 2020.
The remaining performance obligations disclosure provides the aggregate amount of the transaction price yet to be recognised as of the end of the reporting period and an explanation as to when the Company expects to recognise these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation for contracts where the entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entityâs performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2021 other than those meeting the exclusion criteria mentioned above, is '' 268,790 Million. Out of this, the Company expects to recognise revenue of around 52% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessments the occurrence of the same is expected to be remote.
(iv) Contract Price
Reconciliation of revenue recognised in the statement of profit and loss with the contracted price:
The Company has recognized revenue of '' 296,409 Million (March 31, 2020''292,254 Million) which is adjusted by discounts of ''12,555 Million (March 31, 2020 '' 11,263 Million) for the year ended March 31, 2021.
The total cash outflow for leases is ''1,262 Million (March 31, 2020''1,145 Million) for the year ended March 31, 2021, including cash outflow for short term and low value leases.
51 FINANCIAL RiSK MANAGEMENT FRAMEWORK
The Companyâs Board of Directors have an overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
Fair value Hierarchy:
The following table summarises financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities at net market value.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions with high credit ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was ''189,975 and '' 165,539 Million as of March 31, 2021 and March 31, 2020 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on.
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 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 Companyâs exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2021 and March 31, 2020. The concentration of credit risk is limited due to the fact that the customer base is large.
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 Companyâs exposure to market risk is primarily on account of foreign currency exchange currency risk.
a) Foreign currency exchange rate risk
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
The carrying amounts of the Companyâs foreign currency denominated monetary assets and monetary liabilities at the end of the year are as follows:
b) Foreign Exchange Contracts and Options
The Company is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Companyâs foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period upto 3 years.
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.
âIncludes allowance under section 10AA of Income Tax Act, 1961 and dividend received from subsidiaries.
#Includes the impact on scheduling of deferred taxes on account of section 115BAA under Income Tax Act, 1961
The tax rate used for the above reconciliation is the rate as applicable for the respective period payable by corporate entities in India on taxable profits under the Indian income tax laws.
Current tax for the year ended March 31, 2021 includes tax expense with respect to foreign branches amounting to '' 1,096 Million (year ended March 31, 2020: '' 1,411 Million).
Mar 31, 2021
On 31st March 2020, the Company donated Rs. 20.00 crores to the PM CARES Fund for Covid-19 in advance against the CSR spend requirement of the financial year 2020-21. As confirmed by Ministry of Corporate Affairs vide Circular dated 20th May, 2021 allowing set off of the same against the spend requirement of financial year 2020-21 subject to meeting of certain conditions, the Company has complied with those conditions and accordingly considered the amount donated to PM CARES fund as amount spent towards the spend requirement of the current year 2020-21.
Amount recognised as expense in profit or loss is Rs. 92.78 crores (2020 : 126.59 crores).
(c) Donations given to New Democratic Electoral Trust Rs. NIL (2020 : Rs. 23.00 crores).
(d) The foreign exchange gain (net) recognised in profit or loss is Rs. 30.28 crores (2020 : loss of Rs. 0.12 crores).
(e) Short term lease expenses recognised during the year is Rs. 45.13 crores (2020 : Rs. 75.35 crores).
The Company has long-term investments in subsidiaries, associates and joint ventures which are measured at cost less impairment or at fair value through profit or loss. The management assesses the performance of these entities including the future projections and relevant economic and market conditions in which they operate to identify if there is any indicator of impairment in the carrying value of the investments. In case indicators of impairment exist, the impairment loss is measured by estimating the recoverable amounts based on the higher of (i) ''fair value less cost of disposal'' determined using market price information, where available, and (ii) ''value-in-use'' estimates determined using discounted cash flow projections, where available. The fair value less costs of disposal is determined using the market approach. The future cash flow projections are specific to the entity based on its business plan and may not be the same as those of market participants. The future cash flows consider key assumptions such as volume projections, margins, terminal growth rates, etc. with due consideration for the potential risks given the current economic environment in which the entity operates. The discount rates used are pre-tax rates based on weighted average cost of capital and reflects market''s assessment of the risks specific to the asset as well as time value of money. The recoverable amount estimates are based on judgments, estimates, assumptions and market data as on reporting date and ignore subsequent changes in the economic and market conditions.
During the year ended 31st March, 2021, the performance of certain subsidiaries, associates and joint ventures along with the relevant economic and market indicators including the impact of certain capital allocation changes and uncertainties arising from Covid-19 resulted in indicators of impairment in respect of certain entities. Accordingly, the Company determined the recoverable amounts of the long term assets and other exposures related to these entities and recorded a provision of Rs. 3,921.60 crores (2020 : Rs. 3,381.03 crores) for the year ended 31st March, 2021. The value-in-use calculation use discount rates ranging from 12.0% - 25.0% and the terminal growth rates ranging from 2.0% - 7.0%.
31. Employee Benefits
General description of defined benefit plans :
Gratuity
The Company operates a gratuity plan covering qualifying employees. The benefit payable is the greater of the amount calculated as per the Payment of Gratuity Act or the Company scheme applicable to the employee. The benefit vests upon completion of five years of continuous service and once vested it is payable to employees on retirement or on termination of employment. In case of death while in service, the gratuity is payable irrespective of vesting. The Company makes annual contribution to the group gratuity scheme administered by the Life Insurance Corporation of India through its Gratuity Trust Fund.
Post - retirement medical
The Company provides post retirement medical cover to select grade of employees to cover the retiring employee and their spouse upto a specified age through mediclaim policy on which the premiums are paid by the Company. The eligibility of the employee for the benefit as well as the amount of medical cover purchased is determined by the grade of the employee at the time of retirement.
Post - retirement housing allowance
The Company operates a post retirement benefit scheme for a certain grade of employees in which a monthly allowance determined on the basis of the last drawn basic salary at the time of retirement, is paid to the retiring employee in lieu of housing.
Through its defined benefit plans the Company is exposed to a number of risks, the most significant of which are detailed below:
Asset Volatility
The plan liabilities are calculated using a discount rate set with references to government bond yields; if plan assets underperform compared to this yield, this will create or increase a deficit. The defined benefit plans may hold equity type assets, which may carry volatility and associated risk.
Changes in bond yields
A decrease in government bond yields will increase plan liabilities, although this is expected to be partially offset by an increase in the value of the plans'' investment in debt instruments.
Inflation risk
The present value of some of the defined benefit plan obligations are calculated with reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan''s liability. The post retirement medical benefit obligation is sensitive to medical inflation and accordingly, an increase in medical inflation rate would increase the plan''s liability.
Life expectancy
The present value of defined benefit plan obligation is calculated by reference to the best estimate of the mortality of plan participants, both during and after the employment. An increase in the life expectancy of the plan participants will increase the plan''s liability.
32. Employee Stock Option Plan
The Company has allotted 55,24,219 Ordinary (Equity) Shares of Rs. 10 each, 10,00,000 Ordinary (Equity) Shares of Rs. 10 each, 1,73,53,034 Ordinary (Equity) Shares of Rs. 5 each, 19,11,628 Ordinary (Equity) Shares of Rs. 5 each and 52,00,000 Ordinary (Equity) Shares of Rs. 5 each in the years ended 31st March, 2002, 31st March, 2010, 31st March, 2011, 31st March 2014 and 31st March, 2015 respectively to the Mahindra & Mahindra Employees'' Stock Option Trust (âM&M ESOP Trust") set up by the Company. The Trust holds these shares for the benefit of the employees and issues them to the eligible employees as per the recommendations of the Compensation Committee.
Options granted under Mahindra & Mahindra Limited Employees Stock Option Scheme - 2000 (â2000 Scheme") vest in 4 equal instalments on the expiry of 12 months, 24 months, 36 months and 48 months from the date of grant. The options may be exercised on any day over a period of five years from the date of vesting. Number of vested options exercisable is subject to a minimum of 50 or number of options vested whichever is lower.
Options granted under Mahindra & Mahindra Limited Employees Stock Option Scheme - 2010 (â2010 Scheme") vest in
i) 5 equal instalments on the expiry of 12 months, 24 months, 36 months, 48 months and 60 months from the date of grant or
ii) 4 instalments bifurcated as 20% on the expiry of 18 months, 20% on the expiry of 30 months, 30% on the expiry of 42 months and 30%
on the expiry of 54 months or
iii) 3 equal instalments on the expiry of 12 months, 24 months and 36 months. or
iv) 2 equal instalments on the expiry of 12 months and 24 months.
The exercise period of above options range from 1 year to 5 years from the date of vesting. Number of vested options exercisable is subject to a minimum of 50 or number of options vested whichever is lower.
33. Capital Management
The Company''s capital management strategy is to effectively determine, raise and deploy capital so as to create value for its shareholders. The same is done through a mix of either equity and/or preference and/or convertible and/or combination of short term/long term debt as may be appropriate.
The Company determines the amount of capital required on the basis of its product, capital expenditure, operations and strategic investment plans. The same is funded through a combination of capital sources be it either equity and/or preference and/or convertible and/or combination of short term/long term debt as may be appropriate.
The capital structure is monitored on the basis of net debt to equity and maturity profile of overall debt portfolio of the Company.
Net Debt and Equity is given in the table below :
34. Financial instruments
Financial Risk Management Framework
In the course of its business, the Company is exposed to certain financial risks namely credit risk, interest risk, currency risk & liquidity risk. The Company''s primary focus is to achieve better predictability of financial markets and seek to minimize potential adverse effects on its financial performance.
The financial risks are managed in accordance with the Company''s risk management policy which has been approved by its Board of Directors. 1. Market Risk Management
Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates etc. could affect the Company''s income or the value of its holdings of financial instruments including cash flow. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while maximising the return.
(a) Currency Risk
The Company''s exposure to currency risk relates primarily to the Company''s operating activities including anticipated sales, purchases and borrowings where the transactions are denominated in a currency other than the Company''s functional currency.
The Company''s foreign currency exposures are managed in accordance with its Foreign Exchange Risk Management Policy which has been approved by its Board of Directors. The Company hedges its foreign currency risk mainly by way of Forward Covers. Other derivative instruments may be used if deemed appropriate.
34. Financial instruments (contd.)
2. Credit Risk Management
Credit Risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Company''s exposure are continuously monitored.
(a) Financial Guarantees
I n addition, the Company is exposed to credit risk in relation to financial guarantees given to banks. The Company''s maximum exposure in this respect is the maximum amount, the Company would have to pay, if the guarantee is called on. Financial guarantees are accounted as explained in note 2 (k). The amount recognised in Balance Sheet as liabilities and maximum exposure details are as given below:
(b) Trade Receivables
The Company applies the simplified approach to provide for expected credit losses prescribed by Ind AS 109, which permits the use of the lifetime expected loss provision for all trade receivables. The Company has computed expected credit losses based on a provision matrix which uses historical credit loss experience of the Company. Forward-looking information (including macroeconomic information) has been incorporated into the determination of expected credit losses. The Company has taken dealer deposits, bank guarantees etc. which are considered as collateral and these are considered in determination of expected credit losses, where applicable.
The amounts included above for financial guarantee contracts are the maximum amounts the Company could be forced to settle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty to the guarantee. Based on expectations at the end of the reporting period, the Company considers that it is more likely than not that such an amount will not be payable under the arrangement (Other than financial guarantee exposure towards SsangYong Motor Company).
(b) Maturity profile of derivative financial liabilities
The following table details the Company''s liquidity analysis for its derivative financial liabilities other than derivatives on Interest in Subsidiaries, Associates and Joint Ventures . When the amount payable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves at the end of the reporting period.
4. Offsetting of balances: The Company has not offset financial assets and financial liabilities.
5. Collaterals
The Company has availed working capital facilities and other non-fund based facilities viz. bank guarantees and letters of credit, some of which are secured by hypothecation of book debts, receivables, outstanding monies and all other current assets. The company has also availed secured short term loan facilities against lien on non-callable fixed deposits of the equivalent amount.
Information about major customers
During the years ended 31st March, 2021 and 31st March, 2020 no revenues from transactions with a single external customer amount to 10% or more of the Company''s revenues from external customers.
38. Contingent Liability & Commitments:
(A) Contingent Liability:
(a) Claims against the Company not acknowledged as debts comprise of :
(i) Excise Duty, Sales Tax and Service Tax claims disputed by the Company relating to issues of applicability and classification aggregating Rs. 2,292.93 crores (2020 : Rs. 1,993.91 crores) before tax.
(ii) Other matters (excluding claims where amounts are not ascertainable) : Rs. 70.11 crores (2020 : Rs. 33.09 crores) before tax.
(b) Taxation matters:
(i) Demands against the Company not acknowledged as debts and not provided for, in respect of which the Company is in appeal and exclusive of the effect of similar matters in respect of assessments remaining to be completed.
- Income-tax : Rs. 1,345.52 crores (2020 : Rs. 1,265.65 crores), excluding effect of MAT credit offset that may be available.
(ii) Items in respect of which the Company has succeeded in appeal, but the Income-tax Department is pursuing/likely to pursue in appeal/reference and exclusive of the effect of similar matters in respect of assessments remaining to be completed :
- Income-tax matters : Rs. 172.78 crores (2020 : Rs. 99.09 crores).
(c) I n respect of (a) & (b) above, it is not practicable for the Company to estimate the closure of these issues and the consequential timings of cash flows, if any.
(d) Financial guarantee given on behalf of Subsidiaries/Associates/Joint Ventures companies (Refer Note 34 (2) (a)).
(B) Commitments:
The estimated amount of contracts remaining to be executed on capital account and not provided for as at 31st March, 2021 is Rs. 1,658.89 crores (2020 : Rs. 2,265.53 crores) and other commitment as at 31st March, 2021 is Rs. 0.26 crores (2020 : Rs. 58.30 crores).
39. Other information:
(A) Research and Development expenditure
(a) In recognised Research and Development units :
(i) Expensed to Profit or Loss, including certain expenditure based on allocations made by the Company, aggregate
Rs. 775.07 crores (2020 : Rs. 687.18 crores) [excluding depreciation and amortisation of Rs. 987.22 crores (2020 : Rs. 1,006.27 crores)].
(ii) Development expenditure incurred during the year Rs. 980.00 crores (2020 : Rs. 1,626.52 crores).
(iii) Capitalisation of assets Rs. 97.26 crores (2020 : Rs. 259.88 crores).
(b) In other units:
(i) Expensed to Profit or Loss, including certain expenditure based on allocations made by the Company, aggregate
Rs. 78.00 crores (2020 : Rs. 118.56 crores) [excluding depreciation and amortisation of Rs. 116.13 crores (2020 : Rs. 86.05 crores)].
(ii) Development expenditure incurred during the year Rs. 145.89 crores (2020 : Rs. 251.19 crores).
(iii) Capitalisation of assets Rs. 55.12 crores (2020 : Rs. 52.55 crores).
39. Other information: (contd.)
(B) Ssangyong Motor Company (SYMC), a material foreign subsidiary of the Company, filed an application before the Bankruptcy Court for commencement of rehabilitation proceedings on 21st December, 2020 and also applied for the Autonomous Rehabilitation Support Program (âARS") to work on a possible deal with a potential investor. The Court approved the ARS and granted time until 28th February, 2021 to the parties. However, the deal with the potential investor could not be concluded. Consequently, as per the process of rehabilitation, the Court appointed a Receiver to manage the affairs of SYMC.
Pursuant to the admission in the ARS program and following the guidance under Ind AS 110 - Consolidated Financial Statements, the Company has ceased consolidating SYMC as a subsidiary from 28th December, 2020 and has classified the investment to be measured at fair value as per Ind AS 109 - Financial instruments.
Based on the management judgement and best estimate assumptions of the realizable value of the assets relating to SYMC, the Company had fully provided its investment in SYMC before classifying it as an investment under Ind AS 109. Additionally, the Company has recognised an impairment/provision for its exposures to SYMC. The impairment/provision for investment and other exposures aggregating to Rs. 1,653.81 crores recognised during the year ended 31st March, 2021 (2020 : Rs. 1,468.00 crores) have been presented under ''Exceptional items'' in the Statement of Profit and Loss.
(C) The Scheme of merger by absorption of the wholly-owned subsidiary, Mahindra Vehicle Manufacturers Limited with the Company has been approved by the National Company Law Tribunal (NCLT) on 26th April, 2021. The Appointed Date of the Scheme is 1st April, 2019. The Scheme will be given effect upon receipt of other requisite approvals/consent.
(D) The Board of Directors of the Company at its meeting held on 28th May, 2021, have approved the Scheme of Merger by Absorption of its wholly-owned subsidiaries, Mahindra Engineering and Chemical Products Limited, Retail Initiative Holdings Limited and Mahindra Retail Limited, with the Company and their respective Shareholders under sections 230 to 232 and other applicable provisions of the Companies Act, 2013.
The Board of Directors of the Company at its Meeting held on 26th March, 2021 had accorded an in-principle approval for consolidation of Mahindra Electric Mobility Limited, a subsidiary of the Company (âMEML") into the Company and had authorised its Loans & Investment Committee to decide on the mode of consolidation including finalizing the Scheme, Valuation, Swap Ratio, etc. and recommend the same to the Audit Committee and to the Board of Directors for their approval. The Board of Directors of the Company at its Meeting held on 28th May, 2021, have approved the Scheme of Merger by Absorption of MEML with the Company and their respective Shareholders under sections 230 to 232 and other applicable provisions of the Companies Act, 2013.
The Appointed Date of both the schemes of merger would be 1st April, 2021 or such other date as may be approved by NCLT or any other appropriate authority. The Schemes will be given effect upon receipt of requisite approvals/consent.
40. Previous year''s figures have been regrouped/reclassified wherever necessary.
Mar 31, 2019
1. General information
Mahindra & Mahindra Limited (âthe Companyâ) is a limited company incorporated in India. The addresses of its registered office and principal activities of the Company are disclosed in the introduction to the Annual Report.
The Ordinary (Equity) shares of the Company are listed on the National Stock Exchange of India Limited (âNSEâ), the BSE Limited (âBSEâ) in India. The Global Depository Receipts (GDRs) (underlying equity shares) of the Company are listed on the Luxembourg Stock Exchange and are also admitted for trading on International Order Book (IOB) of the London Stock Exchange.
Notes:
a. Additions during the year includes borrowing costs capitalised Rs. 41.24 crores (2018 : Rs. 1.56 crores)
b. Buildings include Rs. * crores (2018 : Rs. * crores) being the value of shares in co-operative housing societies.
* denotes amounts less than Rs. 50,000.
(a) Non-Current Loans to Related Parties includes Loan to a Director of Rs. 9.51 crores (2018 : Rs. 9.06 crores).
(b) Other Current and Non-Current Loans mainly includes loans to employees and loans given to other companies.
(c) Loans given to employees as per the Companyâs policy are not considered for the purposes of disclosure under Section 186(4) of the Companies Act, 2013.
Other Financial Assets include receivables for oil royalty income, scrap sales, incentive receivables and other recoverable expenses.
Derivative financial assets includes foreign currency forwards, commodity derivatives in the nature of forward contracts, interest rate swaps and options.
(a) The amount of inventories recognised as an expense Rs. 43,906.19 crores (2018 : Rs 39,448.41 crores) including Rs. 42.43 crores (2018 : 40.00 crores) in respect of write-down of inventories to net realisable value, and has been reduced by Rs. 14.84 crores (2018 : Rs. 34.30 crores) in respect of the reversal of such write downs. Reversal in provision is due to sale and/or consumption of inventories provided for in earlier years.
(b) The Company has availed working capital facilities and other non-fund based facilities viz. bank guarantees and letters of credit, some of which are secured by hypothecation of inventories.
(c) Mode of valuation of inventories is stated in Note 2(h).
2. Assets held for sale
(a) During March 2019, the Company tendered 47,00,013 equity shares of Tech Mahindra Limited in the share buy-back scheme at Rs. 950 per equity share.
(b) The Company had on 9th February, 2018, entered into an agreement, subject to requisite approvals, to sell 26,36,401 Equity shares of Rs. 10 each in Mahindra Sanyo Special Steel Private Limited (MSSSPL) aggregating 22% of the paid-up Equity Share Capital of MSSSPL, to Sanyo Special Steel Co. Ltd. for a consideration of Rs. 146.32 crores. The shares had since been transferred and the transaction has been concluded during financial year 2018-2019.
b. The Ordinary (Equity) Shares of the Company rank pari-passu in all respects including voting rights and entitlement to dividend.
c. Details of Ordinary (Equity) Shares held by shareholders holding more than 5% of the aggregate shares in the Companyâs Issued, Subscribed and Paid-up:
d. For the period of preceding five years as on the Balance Sheet date, Issued, Subscribed and Paid-up Share Capital includes:
i. Aggregate of 5,03,888 (2018 : 5,03,888) Ordinary (Equity) Shares of Rs. 5 each allotted as fully paid-up pursuant to Scheme of Arrangement without payment being received in cash.
ii. Aggregate of 62,15,96,272 (2018 : 62,15,96,272) Ordinary (Equity) Shares allotted as fully paid up by way of bonus shares.
(b) Term loan from banks comprise of EURO External Commercial Borrowings carrying an average margin of 95 basis points over three month EURO LIBOR and are repayable after five years and one day from the date of respective availment of loan.
(c) Other loans comprise deferred sales tax loans which are interest free and repayable in five equal installments after ten years from the year of availment of respective loan.
Unsecured Borrowings:
Term loan from banks consists of Rupee packing credit facility under Interest equalisation scheme carrying fixed interest rate ranging from 4.50% p.a. to 5.15% p.a. repayable within a year from the date of availment of loan.
Other loan from bank consists of arrangement of debt factoring with recourse carrying fixed interest rate of 7.90% p.a. repayable within a year from the date of availment of loan.
Other liabilities include salaries and wages payable, capital creditors, brand licenses payable and monies adjusted from share capital and reserves & surplus on account of shares held by ESOP Trust pending transfer to the eligible employees.
Others mainly include government dues, taxes payable, GST payable and salary deductions payable.
There are no amounts due and outstanding to be credited to the Investor Education and Protection Fund.
Micro, Small and Medium enterprises have been identified by the Company on the basis of the information available. Total outstanding dues of Micro and Small enterprises, which are outstanding for more than the stipulated period and other disclosures as per the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as âthe MSMED Actâ) are given below:
* The Government of India introduced the Goods and Services Tax (GST) with effect from 1st July 2017. GST is collected on behalf of the Government and no economic benefit flows to the entity and hence Revenue from Operations under GST regime is presented excluding GST as per Ind AS 18 âRevenueâ. However, Revenue from Operations under pre-GST regime included Excise Duty which is now subsumed in GST. Consequently, the figures for the year ended 31st March, 2019 are not comparable with the previous periods presented in the above table.
Other borrowing costs includes discounting charges and unwinding of discount.
The weighted average capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is 4.10% p.a. (2018 : 3.90% p.a.)
(b) Expenditure incurred on Corporate Social Responsibility (CSR) under section 135 of the Companies Act, 2013 Rs. 93.50 crores (2018 : Rs. 81.97 crores).
(c) Donations given to New Democratic Electoral Trust Rs. 1.02 crores (2018 : Nil).
(d) The foreign exchange loss recognised in profit or loss is Rs. 4.62 crores (2018 : loss of Rs. 14.86 crores).
3. Employee Benefits
General description of defined benefit plans:
Gratuity
The Company operates a gratuity plan covering qualifying employees. The benefit payable is the greater of the amount calculated as per the Payment of Gratuity Act or the Company scheme applicable to the employee. The benefit vests upon completion of five years of continuous service and once vested it is payable to employees on retirement or on termination of employment. In case of death while in service, the gratuity is payable irrespective of vesting. The Company makes annual contribution to the group gratuity scheme administered by the Life Insurance Corporation of India through its Gratuity Trust Fund.
Post retirement medical
The Company provides post retirement medical cover to select grade of employees to cover the retiring employee and their spouse upto a specified age through mediclaim policy on which the premiums are paid by the Company. The eligibility of the employee for the benefit as well as the amount of medical cover purchased is determined by the grade of the employee at the time of retirement.
Post retirement housing allowance
The Company operates a post retirement benefit scheme for a certain grade of employees in which a monthly allowance determined on the basis of the last drawn basic salary at the time of retirement, is paid to the retiring employee in lieu of housing.
Through its defined benefit plans the Company is exposed to a number of risks, the most significant of which are detailed below:
Asset Volatility
The plan liabilities are calculated using a discount rate set with references to government bond yields; if plan assets underperform compared to this yield, this will create or increase a deficit. The defined benefit plans may hold equity type assets, which may carry volatility and associated risk.
Changes in bond yields
A decrease in government bond yields will increase plan liabilities, although this is expected to be partially offset by an increase in the value of the plansâ investment in debt instruments.
Inflation risk
The present value of some of the defined benefit plan obligations are calculated with reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the planâs liability. The post retirement medical benefit obligation is sensitive to medical inflation and accordingly, an increase in medical inflation rate would increase the planâs liability.
Life expectancy
The present value of defined benefit plan obligation is calculated by reference to the best estimate of the mortality of plan participants, both during and after the employment. An increase in the life expectancy of the plan participants will increase the planâs liability.
4. The Company has allotted 55,24,219 Ordinary (Equity) Shares of Rs. 10 each, 10,00,000 Ordinary (Equity) Shares of Rs. 10 each, 1,73,53,034 Ordinary (Equity) Shares of Rs. 5 each, 19,11,628 Ordinary (Equity) Shares of Rs. 5 each and 52,00,000 Ordinary (Equity) Shares of Rs. 5 each in the years ended 31st March, 2002, 31st March, 2010, 31st March, 2011, 31st March, 2014 and 31st March, 2015 respectively to the Mahindra & Mahindra Employeesâ Stock Option Trust set up by the Company. The Trust holds these shares for the benefit of the employees and issues them to the eligible employees as per the recommendations of the Compensation Committee.
Options granted under Mahindra & Mahindra Limited Employees Stock Option Scheme - 2000 (â2000 Schemeâ) vest in 4 equal installments on the expiry of 12 months, 24 months, 36 months and 48 months from the date of grant. The options may be exercised on any day over a period of five years from the date of vesting. Number of vested options exercisable is subject to a minimum of 50 or number of options vested whichever is lower.
Options granted under Mahindra & Mahindra Limited Employees Stock Option Scheme - 2010 (â2010 Schemeâ) vest in
i) 5 equal instalments on the expiry of 12 months, 24 months, 36 months, 48 months and 60 months from the date of grant or
ii) 4 instalments bifurcated as 20% on the expiry of 18 months, 20% on the expiry of 30 months, 30% on the expiry of 42 months and 30% on the expiry of 54 months or
iii) 3 instalments bifurcated as 33.33% on the expiry of 12 months, 33.33% on the expiry of 24 months and 33.34% on the expiry of 36 months.
The options may be exercised on any day over a period of 5 years from the date of vesting. Number of vested options exercisable is subject to a minimum of 50 or number of options vested whichever is lower.
In respect of Options granted under the Employee Stock Option Plan the accounting is done as per requirements of Ind AS 102. Consequently, salaries, wages, bonus etc. includes Rs. 89.20 crores (2018 : Rs. 81.93 crores) being expenses on account of share based payments, after adjusting for reversals on account of options forfeited. The amount excludes Rs. 5.31 crores (2018 : Rs. 4.65 crores) charged to subsidiaries, associates or joint ventures for options issued to their employees.
5. Capital management
The Companyâs capital management strategy is to effectively determine, raise and deploy capital so as to create value for its shareholders. The same is done through a mix of either equity and/or preference and/or convertible and/or combination of short term/long term debt as may be appropriate.
The Company determines the amount of capital required on the basis of its product, capital expenditure, operations and strategic investment plans. The same is funded through a combination of capital sources be it either equity and/or preference and/or convertible and/or combination of short term/long term debt as may be appropriate.
The capital structure is monitored on the basis of net debt to equity and maturity profile of overall debt portfolio of the Company.
6. Financial Instruments
Financial Risk Management Framework
In the course of its business, the Company is exposed to certain financial risks namely credit risk, interest risk, currency risk & liquidity risk. The Companyâs primary focus is to achieve better predictability of financial markets and seek to minimize potential adverse effects on its financial performance.
The financial risks are managed in accordance with the Companyâs risk management policy which has been approved by its Board of Directors.
7. Market Risk Management
Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates etc. could affect the Companyâs income or the value of its holdings of financial instruments including cash flow. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while maximising the return.
(a) Currency Risk
The Companyâs exposure to currency risk relates primarily to the Companyâs operating activities including anticipated sales, purchases and borrowings where the transactions are denominated in a currency other than the Companyâs functional currency.
The Companyâs foreign currency exposures are managed in accordance with its Foreign Exchange Risk Management Policy which has been approved by its Board of Directors. The Company hedges its foreign currency risk mainly by way of Forward Covers. Other derivative instruments may be used if deemed appropriate.
The carrying amounts of the Companyâs foreign currency exposure at the end of the reporting period are as follows:
Hedge Accounting - Forwards
Contracts that meet the requirements for hedge accounting are accounted as per the hedge accounting requirements of Ind AS 109 - Financial Instruments, while other contracts are accounted as derivatives measured through profit or loss.
(b) Interest Rate Risk
The Company uses a mix of cash and borrowings to manage the liquidity & fund requirements of its day-to-day operations. Further, certain interest bearing liabilities carry variable interest rates.
Interest Rate Risk on variable rate borrowings is managed by way of interest rate swaps.
Hedge Accounting : Interest Rate Swaps
Interest Rate Swaps entered into by the Company meet the requirements for hedge accounting under Ind AS 109 - Financial Instruments, and thus are accounted as such.
8. Credit Risk Management
Credit Risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Companyâs exposure are continuously monitored.
(a) Financial Guarantees
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks. The Companyâs maximum exposure in this respect is the maximum amount the Company could have to pay if the guarantee is called on. Financial guarantees are accounted as explained in note 2 (k). The amount recognised in Balance Sheet as liabilities is as given below:
(b) Trade Receivables
The Company applies the simplified approach to providing for expected credit losses prescribed by Ind AS 109, which permits the use of the lifetime expected loss provision for all trade receivables. The Company has computed expected credit losses based on a provision matrix which uses historical credit loss experience of the Company. Forward-looking information (including macroeconomic information) has been incorporated into the determination of expected credit losses. The Company has taken dealer deposits, bank guarantees etc. which are considered as collateral and these are considered in determination of expected credit losses, where applicable.
The Companyâs maximum exposure to credit risk in respect of Financial Guarantee contracts are disclosed in Note 34 - 3(a).
In respect of other financial assets, the maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets.
9. Liquidity Risk Management
(a) Maturity profile of financial liabilities
The following tables detail the Companyâs remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows.
The amounts included above for financial guarantee contracts are the maximum amounts the Company could be forced to settle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty to the guarantee. Based on expectations at the end of the reporting period, the Company considers that it is more likely than not that such an amount will not be payable under the arrangement.
(b) Maturity profile of derivative financial liabilities
The following table details the Companyâs liquidity analysis for its derivative financial instruments. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves at the end of the reporting period.
The sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.
(b) Interest Rate sensitivity
The sensitivity analyses below have been determined based on exposure to interest rate for both derivative and non-derivative instruments at the end of reporting period. For floating rate liabilities, analysis is prepared assuming the amount of liability outstanding at the end of the reporting period was outstanding for the whole year.
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected, after the impact of hedge accounting. With all other variables held constant, the Companyâs profit before tax is affected through the impact on floating rate borrowings, as follows:
10. Offsetting of balances: The Company has not offset financial assets and financial liabilities.
10.1. Collaterals
The Company has availed working capital facilities and other non-fund based facilities viz. bank guarantees and letters of credit, some of which are secured by hypothecation of book debts, receivables, outstanding monies and all other current assets.
Note : a) Inter corporate deposits given and repaid during the year amounting to Rs. 435.00 crores (2018 : Rs. 344.55 crores) were given to Mahindra & Mahindra Financial Services Limited (subsidiary), NBS International Limited (subsidiary), Mahindra First Choice Services Limited (subsidiary), Mahindra EPC Irrigation Limited (subsidiary), Mahindra Rural Housing Finance Limited (subsidiary), Mahindra Agri Solutions Limited (subsidiary), Mahindra World City (Jaipur) Limited (joint venture)
b) Above inter corporate deposits and loans have been given for general business purposes (including investment purposes) and guarantees have been given against their borrowing obligation which have been taken for general corporate purpose.
c) Refer note 6 for investments.
11. Segment information
Operating Segments
The reportable segments of the Company are Automotive and Farm Equipment. The segments are largely organised and managed separately according to the organisation structure that is designed based on the nature of products and services and profile of customers. Operating segments are reported in a manner consistent with the internal reporting provided to the Executive Chairman and Managing Director jointly regarded as the Chief Operating Decision Maker (âCODMâ). Description of each of the reportable segments for all periods presented, is as under.
(a) Automotive This segment comprises of sale of automobiles, spares, mobility solutions. Construction Equipment and related services;
(b) Farm Equipment This segment comprises of sale of tractors, implements, spares and related services;
(c) Others This segment comprise of Powerol, Two Wheelers and Spares Business Unit.
The CODM evaluates the Companyâs performance and allocates resources based on an analysis of various performance indicators by operating segments. The CODM reviews revenue and gross profit as the performance indicator for all of the operating segments.
The measurement of each segmentâs revenues, expenses and assets is consistent with the accounting policies that are used in preparation of the financial statements. Segment profit represents the profit before interest and tax.
Revenue from type of products and services
The operating segments are primarily based on nature of products and services and hence the Revenue from external customers of each segment is representative of revenue based on products and services.
Domestic includes sales to customers located in India and service income accrued in India.
Overseas includes sales and services rendered to customers located outside India.
Information about major customers
During the years ended 31st March, 2019 and 31st March, 2018 revenues from transactions with a single external customer did not amount to 10% or more of the Companyâs revenues from external customers.
12. Contingent Liability & Commitments :
(A) Contingent Liability :
(a) Claims against the Company not acknowledged as debts comprise of :
(i) Excise Duty, Sales Tax and Service Tax claims disputed by the Company relating to issues of applicability and classification aggregating Rs. 2,006.90 crores (2018 : Rs. 2,240.66 crores) before tax.
(ii) Other matters (excluding claims where amounts are not ascertainable) : Rs. 27.46 crores (2018 : Rs. 27.38 crores) before tax.
(b) Taxation matters :
(i) Demands against the Company not acknowledged as debts and not provided for, in respect of which the Company is in appeal and exclusive of the effect of similar matters in respect of assessments remaining to be completed.
- Income-tax : Rs. 1,128.52 crores (2018 : Rs. 904.43 crores).
(ii) Items in respect of which the Company has succeeded in appeal, but the Income-tax Department is pursuing/likely to pursue in appeal/reference and exclusive of the effect of similar matters in respect of assessments remaining to be completed :
- Income-tax matters : Rs. 80.39 crores (2018 : Rs. 64.17 crores).
(c) The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) by its order dated 7th December, 2009 has rejected the Companyâs appeal against the order dated 30th March, 2005 passed by the Commissioner of Central Excise (Adjudication), Navi Mumbai confirming the demand made on the Company for payment of differential excise duty (including penalty) of Rs. 304.10 crores in connection with the classification of Companyâs Commander range of vehicles, during the years 1991 to 1996. Whilst the Company had classified the Commander range of vehicles as 10-seater attracting a lower rate of excise duty, the Commissioner of Central Excise (Adjudication), Navi Mumbai, has held that these vehicles could not be classified as 10-seater as they did not fulfil the requirement of 10-seater vehicles, as provided under the Motor Vehicles Act, 1988 (MVA) read with Maharashtra Motor Vehicles Rules, 1989 (MMVR) and as such attracted a higher rate of excise duty. The Company has challenged the CESTAT order in the Supreme Court.
In earlier collateral proceedings on this issue, the CESTAT had, by an order dated 19th July, 2005 settled the controversy in the Companyâs favour. The CESTAT had accepted the Companyâs submission that MVA and MMVR could not be referred to for determining the classification for the purpose of levy of excise duty and rejected the Departmentâs appeal against the order of the Collector, Central Excise classifying the Commander range of vehicles as 10-seater. The Department had challenged the CESTAT order in the Supreme Court.
Without prejudice to the grounds raised in this appeal, the Company has paid an amount of Rs. 40.00 crores in January, 2010. The Supreme Court has admitted the Companyâs appeal and has stayed the recovery of the balance amount till further orders.
Both these orders of the Tribunals were heard and disposed off by the Honorable Supreme Court, in August 2014. Since contrary views were expressed by the Tribunals in two parallel proceedings, the Honorable Supreme Court directed that a larger bench of the Tribunal be constituted to hear the appeals without expressing any opinion on the issues.
The Larger Bench of the CESTAT heard the matter in February, 2015 and by an order dated 27th February, 2015, remanded the matter to the Commissioner of Central Excise for consideration of the case afresh keeping all issues open. The matter is presently pending before the Honorable Commissioner. The Company strongly believes, based on legal advice it has received, that it has a good case on merits and would eventually succeed in the matter. As regards Commander case the matter is still pending adjudication before the Commissioner. However, pending the final outcome, basis the earlier adjudication order, the Company has reflected the above amount aggregating Rs. 304.10 crores (duty penalty) and the interest of Rs. 417.13 crores accrued on the same upto 31st March, 2019, under Note (a)(i) above.
In another case relating to Armada range of vehicles manufactured during the years 1992 to 1996, by the Company at its Nashik facility, the Commissioner of Central Excise, Nashik passed an order dated 20th March, 2006 confirming a demand of Rs. 24.75 crores, on the same grounds as adopted for Commander range of vehicles. This matter was heard by the Honorable Tribunal at Mumbai, which allowed the Companyâs appeal.
(d) In respect of (a) & (b) above, it is not practicable for the Company to estimate the closure of these issues and the consequential timings of cash flows, if any.
(B) Commitments :
The estimated amount of contracts remaining to be executed on capital account and not provided for as at 31st March, 2019 is Rs. 1,587.42 crores (2018 : Rs. 888.09 crores) and other commitment as at 31st March, 2019 is Rs. 5.46 crores (2018 : Rs. 7.50 crores).
(C) In February 2019, the Honorable Supreme Court of India in its judgement opined on the applicability of allowances that should be considered to measure obligations under Employees Provident Fund Act, 1952. The Company has been legally advised that there are interpretative challenges on the application of judgement retrospectively and therefore has currently not considered any probable obligations for past periods.
13. Research and Development expenditure
(a) In recognised Research and Development units :
(i) Expensed to Profit or Loss, including certain expenditure based on allocations made by the Company, aggregate Rs. 812.27 crores (2018 : Rs. 822.00 crores) [excluding depreciation and amortisation of Rs. 833.10 crores (2018 : Rs. 564.24 crores)].
(ii) Development expenditure incurred during the year Rs. 1,299.35 crores (2018 : Rs. 830.39 crores).
(iii) Capitalisation of assets Rs. 165.10 crores (2018 : Rs. 163.97 crores).
(b) In other units :
(i) Expensed to Profit or Loss, including certain expenditure based on allocations made by the Company, aggregate Rs. 97.50 crores (2018 : Rs. 75.05 crores) [excluding depreciation and amortisation of Rs. 34.53 crores (2018 : Rs. 25.88 crores)].
(ii) Development expenditure incurred during the year Rs. 189.56 crores (2018 : Rs. 154.64 crores).
(iii) Capitalisation of assets Rs. 126.52 crores (2018 : Rs. 9.34 crores).
14. Previous yearâs figures have been regrouped/reclassified wherever necessary.
Mar 31, 2019
1. EMPLOYEE STOCK OPTION PLAN
The Company had allotted 48,45,025 Equity shares (face value of Rs.2/- each) under Employee Stock Option Scheme 2010 at par on 3 February 2011 to Mahindra and Mahindra Financial Services Limited Employees'' Stock Option Trust set up by the Company. The Trust holds these shares for the benefit of the employees and issues them to the eligible employees as per the recommendation of the Compensation Committee. The Trust had issued 27,42,055 equity shares to employees up to 31 March 2019 (31 March 2018: 23,42,307 equity shares), of which 3,99,748 equity shares (31 March 2018: 4,35,305 equity shares) were issued during the current year.
a) The terms and conditions of the Employees stock option scheme 2010 are as under :
Rs. in lakhs
Particulars Terms and conditions
Type of arrangement Employees share based payment plan administered through ESOS Trust
Contractual life 3 years from the date of each vesting
Number of vested options exercisable Minimum of 50 or number of options vested whichever is lower
Method of settlement By issue of shares at exercise price
Vesting conditions 20% on expiry of 12 months from the date of grant 20% on expiry of 24 months from the date of grant 20% on expiry of 36 months from the date of grant 20% on expiry of 48 months from the date of grant 20% on expiry of 60 months from the date of grant
f) Determination of expected volatility
The measure of volatility used in the Black-Scholes option pricing model is the annualized standard deviation of the continuously compounded rates of return on the stock over a period of time.
The determination of expected volatility is based on historical volatility of the stock over the most recent period that is generally commensurate with the expected life of the option being valued. The period considered for volatility is adequate to represent a consistent trend in the price movements and the movements due to abnormal events are evened out.
Accordingly, since each vest has been considered as a separate grant, the model considers the volatility for periods, corresponding to the expected lives of different vests, prior to the grant date. Volatility has been calculated based on the daily closing market price of the Company''s stock price on NSE over these years. Similar approach was followed in determination of expected volatility based on historical volatility for all the grants under the scheme.
In respect of stock options granted under Employee Stock Option Scheme 2010, the accounting is done as per the requirements of Ind AS 102. Consequently, Rs.2,255.02 lakhs (31 March 2018: Rs.714.72 lakhs) has been included under ''Employee Benefits Expense'' as ''Share-based payment to employees'' based on respective grant date fair value, after adjusting for reversals on account of options forfeited. The amount includes cost reimbursements to the holding company of Rs.27.40 lakhs (31 March 2018 : 22.66 lakhs) in respect of options granted to employees of the Company and excludes net recovery of Rs.100.36 lakhs (31 March 2018 : Rs.177.29 lakhs) from its subsidiaries for options granted to their employees.
2. EMPLOYEE BENEFITS
General description of defined benefit plans Gratuity
The Company provides for the gratuity, a defined benefit retirement plan covering qualifying employees . The plan provides for lump sum payments to employees upon death while in employment or on separation from employment after serving for the stipulated period mentioned under The Payment of Gratuity Act, 1972. The Company makes annual contribution to the Gratuity scheme administered by the Life Insurance Corporation of India through its Gratuity fund.
Post retirement medical
The Company provides for post retirement medical cover to select grade of employees to cover the retiring employee and their spouse up to a specified age through medic aim policy on which the premiums are paid by the Company. The eligibility of the employee for the benefit as well as the amount of medical cover purchased is determined by the grade of the employee at the time of retirement.
Through its defined benefit plans the Company is exposed to a number of risks, the most significant of which are detailed below:
Asset volatality -
The plan liabilities are calculated using a discount rate set with references to government bond yields; if plan assets underperform compared to this yield, this will create or increase a deficit. The defined benefit plans may hold equity type assets, which may carry volatility and associated risk.
Change in bond yields -
A decrease in government bond yields will increase plan liabilities, although this is expected to be partially offset by an increase in the value of the plan''s investment in debt instruments.
Inflation risk -
The present value of some of the defined benefit plan obligations are calculated with reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan''s liability. The post retirement medical benefit obligation is sensitive to medical inflation and accordingly, an increase in medical inflation rate would increase the plan''s liability.
Life expectancy -
The present value of defined benefit plan obligation is calculated by reference to the best estimate of the mortality of plan participants, both during and after the employment. An increase in the life expectancy of the plan participants will increase the plan''s liability.
The estimate of future salary increases, considered in actuarial valuation, considers inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
The plan assets have been primarily invested in government securities and corporate bonds.
The Company''s contribution to Gratuity aggregating Rs.889.60 Lakhs (31 March 2018: Rs.381.19 lakhs) has been recognized in Statement of Profit and Loss under the head Employee Benefits Expense.
38 FRESH ISSUE OF EQUITY SHARE CAPITAL
During the year ended 31 March 2018, the Company had raised funds amounting to Rs. 211100.00 lakhs through allotment of fresh equity shares. The Board of Directors of the Company, at its meeting held on 1 November 2017, and special resolution passed by the members at the Extraordinary General Meeting held on 29 November 2017 had approved the infusion of share capital.
Pursuant to the passing of the above resolutions and in accordance with Chapter VIII of Securities & Exchange Board of India (Issue of Capital & Disclosure requirements) Regulations, 2009, as amended, following capital issuances were made.
a) Preferential allotment of 2,50,00,000 equity shares of face value of Rs. 2.00 each, at a price of Rs.422.00 each, for cash, including a premium of Rs.420.00 per equity share, aggregating to Rs.105500.00 lakhs, to Mahindra & Mahindra Limited, the Holding Company;
b) Qualified Institutional Placement (QIP) of 2,40,00,000 equity shares of face value of Rs. 2.00 each, at a price of Rs.440.00 each, for cash, including a premium of Rs.438.00 per equity share, aggregating to Rs.105600.00 lakhs, to Qualified Institutional Buyers (QIB''s). The Company has utilized the entire proceeds (net of issue related expenses) from issue of equity shares through QIP for the purposes as stated in its ''Placement Document''.
The share issue expenses of Rs.1,310.13 lakhs has been adjusted against securities premium reserve as per the accounting policy. These equity shares were allotted on 7 December 2017.
The fresh allotment of equity shares through preferential allotment and QIP as stated above have resulted in an increase of equity share capital by Rs. 980.00 lakhs and securities premium reserve by Rs. 210120.00 lakhs.
There was no fresh issuance of equity share capital during the current financial year.
3. FUNDS RAISED BY ISSUE OF DEBT INSTRUMENTS THROUGH PUBLIC ISSUE
During the year ended 31 March 2019, the Company has raised an amount of Rs. 2,14,699.47 lakhs (31 March 2018: Rs. 1,15,053.13 lakhs) by way of Public Issuance of Secured Redeemable Non-Convertible Debentures (NCD''s) and Unsecured Subordinated Redeemable Non-Convertible Debentures of the face value of Rs.1,000.00 each. The NCD''s issued during the current year were allotted on 18 January 2019 and those issued during the previous financial year were allotted on 24 July 2017 and these were listed on the BSE. The entire amount of proceeds from these issuances were used for the purposes as stated in its ''Placement Document'' and there was no unutilized amount pertaining to these issuances. The issue expenses of Rs.2100.00 lakhs (31 March 2018: Rs. 1215.07 lakhs) has been adjusted against underlying NCD liabilities for amortization at effective interest rate over the tenor of respective NCDs as per the accounting policy. The details are as follows.
In terms of the requirements as per Section 71 (4) of the Companies Act, 2013 read with The Companies (Share capital and Debentures) Rules 2014, Rule no.18 (7) and applicable SEBI (Issue and Listing of Debt Securities) Regulations, 2008, the Company has transferred Rs.14,667.61 lakhs (31 March 2018: Rs.5,053.12 Lakhs) to Debenture Redemption Reserve (DRR) on a prorata basis on total NCDs outstanding as at 31 March 2019, including the amount of fresh issuance during the year to create adequate DRR over the tenor of the debentures.
40 CAPITAL MANAGEMENT
T.e Company''s capital management strategy is to effectively determine, raise and deploy capital so as to create value for its shareholders. The same is done through a mix of either equity and/or convertible and/or combination of short term/long term debt as may be appropriate.
The company determines the amount of capital required on the basis of operations, capital expenditure and strategic investment plans. The capital structure is monitored on the basis of net debt to equity and maturity profile of overall debt portfolio.
The Company is subject to the capital adequacy requirements of the Reserve Bank of India (RBI). Under RBI''s capital adequacy guidelines, the Company is required to maintain a capital adequacy ratio consisting of Tier I and Tier II Capital. The total of Tier II Capital at any point of time, shall not exceed 100 percent of Tier I Capital. The minimum capital ratio as prescribed by RBI guidelines and applicable to the Company, consisting of Tier I and Tier II capital, shall not be less than 15 percent of its aggregate risk weighted assets on-balance sheet and of risk adjusted value of off-balance sheet.
The Company has complied with all regulatory requirements related capital and capital adequacy ratios as prescribed by RBI.
"Tier I Capitalâ means owned fund as reduced by investment in shares of other non-banking financial companies and in shares, debentures, bonds, outstanding loans and advances including hire purchase and lease finance made to and deposits with subsidiaries and companies in the same group exceeding, in aggregate, ten per cent of the owned fund.
"Owned Fundâ means paid up equity capital, preference shares which are compulsorily convertible into equity, free reserves, balance in share premium account and capital reserves representing surplus arising out of sale proceeds of asset, excluding reserves created by revaluation of asset, as reduced by accumulated loss balance, book value of intangible assets and deferred revenue expenditure, if any.
Tier II capitalâ includes the following -
(a) preference shares other than those which are compulsorily convertible into equity;
(b) revaluation reserves at discounted rate of fifty five percent;
(c) General provisions (including that for Standard Assets) and loss reserves to the extent these are not attributable to actual diminution in value or identifiable potential loss in any specific asset and are available to meet unexpected losses, to the extent of one and one fourth percent of risk weighted assets
(d) hybrid debt capital instruments; and
(e) subordinated debt to he extent the aggregate does not exceed Tier I capital.
Aggregate Risk Weighted Assets -
Under RBI Guidelines, degrees of credit risk expressed as percentage weight ages have been assigned to each of the on-balance sheet assets and off- balance sheet assets. Hence, the value of each of the on-balance sheet assets and off- balance sheet assets requires to be multiplied by the relevant risk weights to arrive at risk adjusted value of assets. The aggregate shall be taken into account for reckoning the minimum capital ratio.â
5. LEASES
In the cases where assets are given on operating lease (as lessor) -Key terms are as below :
i) New vehicles to retail customers for a maximum period of 48 months with a minimum holding period of 24 months.
ii) Used and refurbished vehicles to travel operators / taxi aggregators with a initial agreement validity period of 36 months to 48 months and provision for extention for such period and on such terms and conditions as may be agreed by both the parties. The lease agreement also provides for minimum lock in period 6 months from the date of execution and cancellation with 3 months'' notice from either parties. The consideration payable by the lessee is either minimum commitment charges or variable rental charges based on usage, make/model of the vehicle and certain other terms and conditions forming part of the lease agreement.
Rental income arising from these operating leases is accounted for on a straight-line basis over the lease terms and is included in rental income in the Statement of profit and loss. Costs, including depreciation, incurred in earning the lease income are recognized as an expense.
Since there is no contingent rent applicable in respect of these lease arrangements, the Company has not recognized any income as contingent income during the year.
6. OPERATING SEGMENTS
There is no separate reportable segment as per Ind AS 108 on ''Operating Segments'' in respect of the Company.
The Company operates in single segment only. There are no operations outside India and hence there is no external revenue or assets which require disclosure.
No revenue from transactions with a single external customer amounted to 10% or more of the Company''s total revenue in year ended 31 March 2019 or 31 March 2018.
43 FRAUDS REPORTED DURING THE YEAR
There were 123 cases (31 March 2018: 143 cases, 31 March 2017: 176 cases) of frauds amounting to Rs.768.18 lakhs (31 March 2018: Rs.230.08 lakhs, 31 March 2017: Rs 397.06 lakhs) reported during the year. The Company has recovered an amount of Rs.76.20 lakhs (31 March 2018: Rs.77.60 lakhs, 31 March 2017: Rs 125.98 lakhs) and has initiated appropriate legal actions against the individuals involved. The claims for the un-recovered losses have been lodged with the insurance companies on merit basis.
The Company''s pending litigations comprise of claims against the Company primarily by the customers and proceedings pending with Income Tax, sales tax / VAT and other authorities. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed the contingent liabilities where applicable, in its financial statements. The amount of provisions / contingent liabilities is based on management''s estimate, and no significant liability is expected to arise out of the same.
Recent clarification on applicability of allowances for provident fund contributions under Employees Provident Fund Act, 1952
In February 2019, the Supreme Court of India in its judgments clarified the applicability of allowances that should be considered to measure obligations under Employees Provident Fund Act, 1952. The Company has been legally advised that there are interpretative challenges on the application of judgments retrospectively and as such does not consider there is any probable obligations for past periods. Accordingly, based on legal advice the Company has made a provision for provident fund contribution from the date of the Supreme Court order.
7. TRANSFER OF FINANCIAL ASSETS
Transferred financial assets that are not derecognized in their entirety
The Company has transferred certain pools of fixed rate loan receivables backed by underlying assets in the form of tractors, vehicles, equipments etc. by entering in to securitization transactions with the Special Purpose Vehicle Trusts ("SPV Trustâ) sponsored by Commercial banks for consideration received in cash at the inception of the transaction.
The Company, being Originator of these loan receivables, also acts as Servicer with a responsibility of collection of receivables from its borrowers and depositing the same in Collection and Payout Account maintained by the SPV Trust for making scheduled payouts to the investors in Pass Through Certificates (PTCs) issued by the SPV Trust. These securitization transactions also requires the Company to provide for first loss credit enhancement in various forms, such as corporate guarantee, cash collateral, subscription to subordinated PTCs. as credit support in the event of shortfall in collections from underlying loan contracts. By virtue of existence of credit enhancement, the Company is exposed to credit risk, being the expected losses that will be incurred on the transferred loan receivables to the extent of the credit enhancement provided.
In view of the above, the Company has retained substantially all the risks and rewards of ownership of the financial asset and thereby does not meet the derecognition criteria as set out in Ind AS 109. Consideration received in this transaction is presented as "Associated liability related to Securitization transactionsâ under Note no.17.
The following table provide a summary of financial assets that have been transferred in such a way that part or all of the transferred financial assets do not qualify for derecognition, together with the associated liabilities:
8. CORPORATE SOCIAL RESPONSIBILITY (CSR)
During the year ended 31 March 2019, the Company has incurred an expenditure of Rs.2,502.95 lakhs (31 March 2018 : Rs. 2,557.55 lakhs) towards CSR activities which includes contribution / donations made to the trusts which are engaged in activities prescribed under Section 135 of the Companies Act, 2013 read with Schedule VII to the said Act and expense of Rs.168.56 lakhs (31 March 2018: Rs. 145.99 lakhs) towards the CSR activities undertaken by the Company.
Detail of amount spent towards CSR activities :
a) Gross amount required to be spent by the Company during the year is Rs.2,681.34 lakhs (31 March 2018: Rs. 2,706.75 lakhs).
The above expenditure includes Rs.15.79 lakhs (31 March 2018: Rs.12.25 lakhs) as salary cost in respect of certain employees who have been exclusively engaged in CSR administrative activities which qualifies as CSR expenditure under Section 135 of the Companies Act, 2013.
9. During the year ended 31 March 2019, the Company had made a contribution of Rs.240.00 lakhs (31 March 2018: Nil) to New Democratic Electoral Trust, a Trust approved by the Central Board of Direct Taxes under Electoral Trust Scheme, 2013 to enable Electoral Trust to make contributions to political party/parties duly registered with the Election Commission, in such manner and at such times as it may decide from time to time. This contribution was as per the provisions of Section 182 of the Companies Act, 2013.
10.The Company has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision as required under any law / accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of accounts.
11. FINANCIAL RISK MANAGEMENT FRAMEWORK
In the course of its business, the Company is exposed to certain financial risks namely credit risk, interest risk, currency risk & liquidity risk.The Company''s primary focus is to achieve better predictability of financial markets and seek to minimize potential adverse effects on its financial performance.
The financial risks are managed in accordance with the Company''s risk management policy which has been approved by its Board of Directors.
Board of Directors of the Company have established Asset and Liability Management Committee (ALCO), which is responsible for developing and monitoring risk management policies for its business. The Company''s financial services businesses are exposed to high credit risk given the unbanked rural customer base and diminishing value of collateral. The credit risk is managed through credit norms established based on historical experience.
50.1 MARKET RISK
Market Risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates, etc. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while maximizing the return.
a) Pricing Risk
The Company''s Investment in Mutual Funds is exposed to pricing risk. Other financial instruments held by the company does not possess any risk associated with trading. A 5 percent increase in Net Assets Value (NAV) would increase profit before tax by approximately Rs 3,177 lakhs (31st March 2018 : Rs 36 lakhs). A similar percentage decrease would have resulted equivalent opposite impact.
b) Currency Risk
Currency Risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Foreign currency risk arise majorly on account of foreign currency borrowings. The Company''s foreign currency exposures are managed in accordance with its Foreign Exchange Risk Management Policy which has been approved by its Board of Directors. Company manages its foreign currency risk by entering into forward contract and cross currency swaps.
c) Interest Rate Risk
The company uses a mix of cash and borrowings to manage the liquidity & fund requirements of its day-to-day operations. Further, certain interest bearing liabilities carry variable interest rates.
Interest Rate risk on variable rate borrowings is managed by way of interest rate swaps.
Interest Rate sensitivity
The sensitivity analysis below have been determined based on exposure to interest rate for both derivative and non-derivative instruments at the end of reporting period. For floating rate liabilities, analysis is prepared assuming the amount of liability outstanding at the end of the reporting period was outstanding for the whole year.
12.CREDIT RISK MANAGEMENT
Credit risk is the risk that the Company will incur a loss because its customers fail to discharge their contractual obligations. The Company has a comprehensive framework for monitoring credit quality of its retail and other loans primarily based on days past due monitoring at period end. Repayment by individual customers and portfolio is tracked regularly and required steps for recovery are taken through follow ups and legal recourse.
Credit Quality of Financial Loans and Investments
The following table sets out information about credit quality of loans and investments measured at amortized cost based on days past due information. The amount represents gross carrying amount.
The Company reviews the credit quality of its loans based on the ageing of the loan at the period end. Since the company is into retail lending business, there is no significant credit risk of any individual customer that may impact company adversely, and hence the Company has calculated its ECL allowances on a collective basis.
Inputs considered in the ECL model
In assessing the impairment of financial loans under Expected Credit Loss (ECL) Model, the assets have been segmented into three stages. The three stages reflect the general pattern of credit deterioration of a financial instrument. The differences in accounting between stages, relate to the recognition of expected credit losses and the measurement of interest income.
The Company categorizes loan assets into stages primarily based on the Months Past Due status.
Stage 1 : 0-30 days past due Stage 2 : 31-90 days past due Stage 3 : More than 90 days past due
The Company applies the simplified approach to providing for expected credit losses prescribed by Ind AS 109, which permits the use of the lifetime expected loss provision for trade advances. The Company has computed expected credit losses based on a provision matrix which uses historical credit loss experience of the Company.
(i) Definition of default
The Company considers a financial asset to be in "defaultâ and therefore Stage 3 (credit impaired) for ECL
calculations when the borrower becomes 90 days past due on its contractual payments.
(ii) Exposure at default
"Exposure at Defaultâ (EAD) represents the gross carrying amount of the assets subject to impairment
calculation. Future Expected Cash flows (Principal and Interest) for future years has been used as exposure
for Stage 2.
(iii) Estimations and assumptions considered in the ECL model
The Company has made the following assumptions in the ECL Model:
a. "Loss given defaultâ (LGD) is common for all three Stages and is based on loss in past portfolio. Actual cash flows on the past portfolio are discounted at portfolio EIR rate for arriving loss rate.
b. ââProbability of Defaultâ (PD) is applied on Stage 1 and Stage 2 on portfolio basis and for Stage 3 PD at 100%. This is calculated as an average of the last 60 months yearly movement of default rates and future adjustment for macro-economic factor.
(iv) Measurement of ECL
ECL is measured as follows:
- financial assets that are not credit impaired at the reporting date: for Stage 1, gross exposure is multiplied by PD and LGD percenatge to arrive at the ECL. For Stage 2, future Expected Cash flows (Principal and Interest) for respective future years is multiplied by respective years Marginal PDs and LGD percentage and thus arrived ECL is then discounted with the respective loan EIR to calculate the present value of ECL. In addition, in case of Bills discounting and Channel finance, as the average lifetime is of 90 days, a time to maturity factor of 0.25 is used in the ECL computation.
- financial assets that are credit impaired at the reporting date: the difference between the gross exposure at reporting date and computed carrying amount considering EAD net of LGD and actual cash flows till reporting date;
- undrawn loan commitments: as the present value of the difference between the contractual cash flows that are due to the Company if the commitment is drawn down and the cash flows that the Company expects to receive.
(v) Forward Looking Information
Historical PDs has been converted into forward looking PD which incorporates the forward looking economic outlook. Considering that major chunk of borrowers in the retail portfolio is from rural area, Agriculture (real change % p.a.) is used as a macroeconomic variable. Agriculture (real change % p.a.) stands for Percentage change in real agricultural value-added, including livestock, forestry and fishing, over previous year. In case of SME and Bills Discounting portfolio, Real GDP (% change p.a.) is used as the macroeconomic variable.
The macroeconomic variables considered by the Company are robust reflections of the state of economy which result into systematic risk for the respective portfolio segments.
Additionally, three different scenarios have been considered for ECL calculation. Along with the actual numbers (considered for Base case scenario), other scenarios take care of the worsening as well as improving forward looking economic outlook.
(vi) Assessment of significant increase in credit risk
When determining whether the credit risk has increased significantly since initial recognition, the Company considers both quantitative and qualitative information and analysis based on the Company''s historical experience, including forward-looking information. The Company considers reasonable and supportable information that is relevant and available without undue cost and effort. The Company''s accounting policy is not to use the practical expedient that the financial assets with ''low'' credit risk at the reporting date are deemed not to have had a significant increase in credit risk. As a result the Company monitors all financial assets and loan commitments that are subject to impairment for significant increase in credit risk.
As a part of the qualitative assessment of whether a customer is in default, the Company also considers a variery of instances that may indicate unlikeliest to pay. In such instances, the Company treats the customer at default and therefore assesses such loans as Stage 3 for ECL calculations, following are such instances:
- A Stage 3 customer having other loans which are in Stage 1 or 2.
- Customers who have failed to pay their first EMI.
- Physical verification status of the repossessed asset related to the loan.
- Cases where Company suspects fraud and legal proceedings are initated.
(vii) Policy for write off of Loan Assets
The gross carrying amount of a financial asset is written off when there is no realistic prospect of further recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities under the Company''s recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognized in profit or loss.
(viii) Analysis of inputs to the ECL model with respect to macroeconomic variable
The below table shows the values of the forward looking macroeconomic variable used in each of the scenarios for the ECL calculations. For this purpose, the Company has used the data source of Economist Intelligence Unit. The upside and downside % change has been derived using historical standard deviation from the base sceanrio based on previous 8 years change in the variable.
The contractual amount outstanding on financial assets that has been written off by the Company during the year ended 31 March 2019 and that were still subject to enforcement activity was Rs 1,18,264.00 lakhs (31 March 2018 : Rs 63,647.58 lakhs).
The decrease in ECL of the portfolio was on account of better recoveries during the year and appropriation of ECL provision of written off assets.
The contractual amount outstanding on financial assets that has been written off by the Company during the year ended 31 March 2019 and that were still subject to enforcement activity was Rs 4,051.38 lakhs (31 March 2018 :Nil).
The decrease in ECL of the portfolio was on account of better recoveries during the year and appropriation of ECL provision of written off assets.
The contractual amount outstanding on financial investments that has been written off by the Company during the year ended 31 March 2019 and that were still subject to enforcement activity was nil (31 March 2018 : nil).
The decrease in ECL of the portfolio was on account of decrease in the size of the portfolio.
Significant changes in the gross carrying value that contributed to change in loss allowance
The company mostly provide loans to retail individual customers in Rural and Semi urban area which is of small ticket size. Change in any single customer repayment will not impact significantly to Company''s provisioning. All customers are being monitored based on past due and corrective actions are taken accordingly to limit the Company''s risk.
Concentration of Credit Risk
Company''s loan portfolio is predominantly to finance retail automobile loans. The Company manages concentration of risk primarily by geographical region in India. The following tables show the geographical concentrations of trade advances and loans:
Maximum Exposure to credit Risk
The maximum exposure to credit risk of loans and investment securities is their carrying amount. The maximum exposure is before considering both the effect of mitigation through collateral.
Narrative Description of Collateral
Collateral primarily include vehicles purchased by retail loan customers and machinery & property in case of SME customers. The financial investments are secured by way of a first ranking pari-passu and charge created by way of hypothecation on the receivables of the other company.
Quantitative Information of Collateral
The Company monitors its exposure to loan portfolio using the Loan To Value (LTV) ratio, which is calculated as the ratio of the gross amount of the loan to the value of the collateral. The value of the collateral for retail loans is derived by writing down the asset cost at origination by 20% p.a on reducing balance basis. And the value of the collateral of Stage 3 retail loans is based on the Indian Blue Book value for the particular asset. The value of collateral of SME loans is based on fair market value of the collaterals held.
13. LIQUIDITY RISK MANAGEMENT
Ultimate responsibility for liquidity risk management rests with the board of directors, which has established Asset and Liability Management Committee (ALCO) for the management of the Company''s short, medium and long-term funding and liquidity management 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.
a) Maturity profile of non-derivative financial liabilities
The following tables detail the Company''s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The amount disclosed in the tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows.
b) Maturity profile of derivative financial liabilities
The following table details the Company''s liquidity analysis for its derivative financial instruments. The table has been drawn up based on the undiscounted gross inflows and outflows on those derivatives that require gross settlement. There is no derivative instruments that is settled on a net basis. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves at the end of the reporting period.
There are no disposal of investment during the year ended 31 March 2019 and 2018 respectively.
Valuation methodologies of financial instruments not measured at fair value
Below are the methodologies and assumptions used to determine fair values for the above financial instruments which are not recorded and measured at fair value in the Company''s financial statements. These fair values were calculated for disclosure purposes only.
Short-term financial assets and liabilities
For financial assets and financial liabilities that have a short-term maturity (less than twelve months), the carrying amounts, which are net of impairment, are a reasonable approximation of their fair value. Such instruments include: cash and balances, trade receivables, balances other than cash and cash equivalents, trade payables and investment & borrowings in commercial papers. Such amounts have been classified as Level 2 on the basis that no adjustments have been made to the balances in the balance sheet.
Loans and advances to customers
The fair values of loans and receivables are calculated using a portfolio-based approach, grouping loans as far as possible into homogenous groups based on similar characteristics. The fair value is then extrapolated to the portfolio using discounted cash flow models that incorporate interest rate estimates considering all significant characteristics of the loans. This fair value is then reduced by impairment allowance which is already calculated incorporating probability of defaults and loss given defaults to arrive at fair value net of risk.
Financial Investments
For Government Securities, the market value of the respective Government Stock as on date of reporting has been considered for fair value computations. And since market quotes are not available in the absence of any trades, the carrying amount of Secured redeemable non-convertible debentures is considered as the fair value.
Issued debt
The fair value of issued debt is estimated by a discounted cash flow model incorporating interest rate estimates from market-observable data such as secondary prices for its traded debt itself.
Deposits from public
The fair value of deposits received from public is estimated by discounting the future cash flows considering the interest rate applicable on the reporting date for that class of deposits segregated by their tenure and cumulative/ non-cumulative scheme.
Except for the above, carrying value of other financial assets/liabilities represent reasonable estimate of fair value.
14. RELATED PARTY DISCLOSURES:
i) As per Ind AS 24 on âRelated party disclosures'', the related parties of the Company are as follows:
a) Holding Company Mahindra & Mahindra Limited
b) Subsidiary Companies: Mahindra Insurance Brokers Limited (entities on whom control is exercised) Mahindra Rural Housing Finance Limited
Mahindra Asset Management Co.Pvt. Ltd.
Mahindra Trustee Co. Pvt. Ltd.
Mahindra & Mahindra Financial Services Ltd Employees1 Stock Option Trust
c) Fellow Subsidiaries: Mahindra USA, Inc (entities with whom the Company has NBS International Limited transactions) Mahindra First Choice Wheels Limited
Mahindra Defence Systems Ltd.
Mahindra Retail Private Limited Mahindra Integrated Business Solutions Ltd.
Mahindra Vehicle Manufacturers Limited Mahindra Construction Co. Ltd.
Bristlecone India Limited Mahindra Water Utilities Limited Orizonte Business Solutions Limited Gromax Agri Equipment Limited Mahindra First Choice Services Limited Mahindra Agri Solutions Limited Mahindra Intertrade Limited New Democratic Electoral Trust
d) Associate: Mahindra Finance USA, Inc
e) Associates of Holding Company: Tech Mahindra Limited
Swaraj Engines Ltd.
f) Key Management Personnel: Mr. Ramesh Iyer
g) Relatives of Key Management Ms. Janaki Iyer
Personnel Ms. Ramlaxmi Iyer
(where there are transactions)
Mr. Risheek Iyer Ms. Girija Subramaniam
iv) Details of related party transactions with Key Management Personnel (KMP) are as under :
Key management personnel are those individuals who have the authority and responsibility for planning and exercising power to directly or indirectly control the activities of the Company or its employees. The Company considers its Managing Director to be key management personnel for the purposes of IND AS 24 Related Party Disclosures.
The material adjustment to the Statement of cash flows under Ind AS is primarily on account of reclassification of payments made to Special Purpose Vehices under securitization transactions from Loans and advances (forming part of operating activities) under Previous GAAP to borrowings (forming part of financing activities) under Ind AS.
Material adjustments on adoption of Ind AS are explained below:
1 Interest income and expense measured using effective interest method
a) Under Previous GAAP, origination fees and transaction costs charged to customers was recognized upfront. Under Ind AS, such fees and costs is amortized over the expected life of the loan assets and recognized as interest income using effective interest method. Under previous GAAP, interest income on non performing assets (i.e. loans that are 90 days past due) was not accrued. Under Ind AS interest income on such loans are recognized on their net carrying amount.
b) Under Previous GAAP, the transaction costs related to borrowings including fixed deposits accepted were recognized upfront in the Statement of profit and loss/ securities premium. Under Ind AS, such costs are amortized over the contractual term of the borrowing and recognized as interest expense using effective interest method in the Statement of profit and loss.
2 Impairment Allowance for expected credit loss
Under Previous GAAP the provisioning on overdue assets was as per management estimates, subject to the minimum provision required as per Master Direction- Non Banking Financial Company - Systematically Important Non Deposit taking Company and Deposit Taking Company (Reserve Bank) Directions, 2016. Under Ind AS, impairment allowance is calculated as per expected credit loss method.
3 Impact on derecognition of loans
Under Previous GAAP financial assets were derecognized if the control criteria is met in accordance with relevant RBI guidelines. Under Ind AS, financial assets are derecognized only when the Company transfers substantially all the risks and rewards related to the cash flows.
4 Reclassification of actuarial loss / [gain), arising out of employee benefit schemes, to Other Comprehensive Income [OCI]
Actuarial gain and losses are recognized in other comprehensive income under Ind AS. Under Previous GAAP these were recognized in Statement of profit and loss.
5 Net gain on fair value changes
Under Previous GAAP investment in Mutual Funds was carried at lower of cost or net realisable value. Under Ind AS, these investments are measured at FVTPL.
6 Derivatives
Under Previous GAAP the forward contract premium was amortized over the term of the contract. Under Ind AS, such contracts are measured at FVTPL.
7 Employee stock option scheme
Under Previous GAAP the cost of Employee Stock Options was recognized at intrinsic value. Under Ind AS, the same is recognized on the basis of fair value.
8 Deferred tax adjustments
Deferred tax effect of all adjustments has been recognized on transition date and during the year ended 31 March 2018.
54 Schedule to the Balance Sheet of a Non-Banking Financial Company as required under Master Direction â Non Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016.
Exchange Traded Interest Rate (IR) Derivative
The Company has not entered into any exchange traded derivative.
b) Exchange Traded Interest Rate (IR) Derivatives
The Company is not carrying out any activity of providing Derivative cover to third parties
c) Disclosures on Risk Exposure in Derivatives
Qualitative Disclosures -
i) The Company undertakes the derivatives transaction to prudently hedge the risk in context of a particular borrowing or to diversify sources of borrowing and to maintain fixed and floating borrowing mix. The Company does not indulge into any derivative trading transactions. The Company reviews, the proposed transaction and outline any considerations associated with the transaction, including identification of the benefits and potential risks (worst case scenarios); an independent analysis of potential savings from the proposed transaction. The Company evaluates all the risks inherent in the transaction viz., counter party risk, Market Risk, Operational Risk, basis risk etc.
ii) Credit risk is controlled by restricting the counterparties that the Company deals with, to those who either have banking relationship with the Company or are internationally renowned or can provide sufficient information. Market/Price risk arising from the fluctuations of interest rates and foreign exchange rates or from other factors shall be closely monitored and controlled. Normally transaction entered for hedging, will run till its life, irrespective of profit or loss. However in case of exceptions it has to be un-winded only with prior approval of M.D/CFO/Treasurer Liquidity risk is controlled by restricting counterparties to those who have adequate facility, sufficient information, and sizable trading capacity and capability to enter into transactions in any markets around the world.
iii) The respective functions of trading, confirmation and settlement should be performed by different personnel. The front office and back-office role is well defined and segregated. All the derivatives transactions is quarterly monitored and reviewed by CFO and Treasurer. All the derivative transactions have to be reported to the board of directors on every quarterly board meetings including their financial positions.
d) Details of non-performing financial assets purchased / sold
i) Details of non-performing financial assets purchased:
During the current year and the previous year the Company has not purchased any non -performing financial assets.
ii) Details of Non-performing Financial Assets sold:
During the current year and the previous year the Company has not sold any non -performing financial assets.
V) Exposures
a) Exposure to Real Estate Sector
During the current year and the previous the Company has no Exposure to Real estate sector.
b) Exposure to Capital Market
c) Details of financing of parent company products
Of the total financing activity undertaken by the Company during the financial year 2018-19, 41% (31 March 2018: 43%) of the financing was towards parent company products.
d) Details of Single Borrower Limit (SGL) /Group Borrower Limit (GBL) exceeded by the NBFC
During the current year and the previous year, the Company has not exceeded the prudential exposure limits.
e) Unsecured Advances
As at 31 March 2019, the amount of unsecured advances stood at Rs. 3,29,945.84 Lakhs (31 March 2018: Rs.2,41,498.29 Lakhs).
VI) Miscellaneous
a) Registration obtained from other financial sector regulators
During the current year and the previous year, the Company has not obtained any registration from other financial sector regulators.
b) Disclosure of Penalties imposed by RBI and other regulators
During the current year and the previous year, there are no penalties imposed by RBI and other regulators
c) Related Party Transactions
(refer note 52)
d) Rating assigned by credit rating agencies and migration of ratings during the year
Credit Rating -
During the year under review, CRISIL Limited (CRISIL), has reaffirmed the rating to the Company''s Longterm Debt Instruments and Bank Facilities as ''CRISIL AA / Stable'' and the Company''s Fixed Deposit Programme as ''FAAA/Stable'', respectively. The ''AA /Stable'' rating indicates a high degree of safety with regard to timely payment of financial obligations. The rating on the Company''s Short-term Bank Loans and Cash Credit facility has been reaffirmed at ''CRISIL A1 '' which is the highest level of rating.
During the year under review, India Ratings & Research Private Limited (IND), which is part of Fitch Group, reaffirmed the rating of Company''s Long-term instrument and Subordinated Debt programme to ''IND AAA/Stable''. The Company''s Short Term Commercial Paper has been rated at IND A1 .
During the year under review, Credit Analysis & Research Limited (CARE), also reaffirmed the ''CARE AAA/ Stable'' rating to Company''s Long-term debt instrument and Subordinated Debt programme.
During the year under review, Brickwork Ratings India Private Limited (BWR) has, reaffirmed the ''BWR AAA/stable'' rating of the Company''s Long-term Subordinated Debt Issue.
The ''AAA'' ratings denote the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
VII) Net Profit of Loss for the period ,prior period items and change in accounting policies
There are no such material items which require disclosures in the notes to Account in terms of the relevant Accounting Standard.
VIII) Revenue Recognition
(Refer note no. 2.7 under Summary of Significant Accounting Policies)
IX) Accounting Standard 21- Consolidated Financial Statements (CFS)
All the subsidiaries of the Company have been consolidated as per Accounting Standard 21. Refer consolidated financial statements (CFS)
Additional Disclosures :
All the subsidiaries of the Company have been consolidated as per Accounting Standard 21. Refer consolidated financial statements (CFS)
XIII) Off-balance Sheet SPVs sponsored (which are required to be consolidated as per accounting norms)
Name of the SPV sponsored -
15. EVENTS AFTER THE REPORTING DATE
The dividends proposed for the current financial year ended 31 March 2019 shall be paid to shareholders on approval of the members of the Company at the forthcoming Annual General Meeting and hence has been treated as a non adjusting event (refer note no. 23). There have been no other events after the reporting date that require disclosure in these financial statements.
Mar 31, 2019
1. EMPLOYEE STOCK OPTION PLAN
The Company had allotted 48,45,025 Equity shares (face value of Rs.2/- each) under Employee Stock Option Scheme 2010 at par on 3 February 2011 to Mahindra and Mahindra Financial Services Limited Employees'' Stock Option Trust set up by the Company. The Trust holds these shares for the benefit of the employees and issues them to the eligible employees as per the recommendation of the Compensation Committee. The Trust had issued 27,42,055 equity shares to employees up to 31 March 2019 (31 March 2018: 23,42,307 equity shares), of which 3,99,748 equity shares (31 March 2018: 4,35,305 equity shares) were issued during the current year.
a) The terms and conditions of the Employees stock option scheme 2010 are as under :
Rs. in lakhs
Particulars Terms and conditions
Type of arrangement Employees share based payment plan administered through ESOS Trust
Contractual life 3 years from the date of each vesting
Number of vested options exercisable Minimum of 50 or number of options vested whichever is lower
Method of settlement By issue of shares at exercise price
Vesting conditions 20% on expiry of 12 months from the date of grant 20% on expiry of 24 months from the date of grant 20% on expiry of 36 months from the date of grant 20% on expiry of 48 months from the date of grant 20% on expiry of 60 months from the date of grant
f) Determination of expected volatility
The measure of volatility used in the Black-Scholes option pricing model is the annualized standard deviation of the continuously compounded rates of return on the stock over a period of time.
The determination of expected volatility is based on historical volatility of the stock over the most recent period that is generally commensurate with the expected life of the option being valued. The period considered for volatility is adequate to represent a consistent trend in the price movements and the movements due to abnormal events are evened out.
Accordingly, since each vest has been considered as a separate grant, the model considers the volatility for periods, corresponding to the expected lives of different vests, prior to the grant date. Volatility has been calculated based on the daily closing market price of the Company''s stock price on NSE over these years. Similar approach was followed in determination of expected volatility based on historical volatility for all the grants under the scheme.
In respect of stock options granted under Employee Stock Option Scheme 2010, the accounting is done as per the requirements of Ind AS 102. Consequently, Rs.2,255.02 lakhs (31 March 2018: Rs.714.72 lakhs) has been included under ''Employee Benefits Expense'' as ''Share-based payment to employees'' based on respective grant date fair value, after adjusting for reversals on account of options forfeited. The amount includes cost reimbursements to the holding company of Rs.27.40 lakhs (31 March 2018 : 22.66 lakhs) in respect of options granted to employees of the Company and excludes net recovery of Rs.100.36 lakhs (31 March 2018 : Rs.177.29 lakhs) from its subsidiaries for options granted to their employees.
2. EMPLOYEE BENEFITS
General description of defined benefit plans Gratuity
The Company provides for the gratuity, a defined benefit retirement plan covering qualifying employees . The plan provides for lump sum payments to employees upon death while in employment or on separation from employment after serving for the stipulated period mentioned under The Payment of Gratuity Act, 1972. The Company makes annual contribution to the Gratuity scheme administered by the Life Insurance Corporation of India through its Gratuity fund.
Post retirement medical
The Company provides for post retirement medical cover to select grade of employees to cover the retiring employee and their spouse up to a specified age through medic aim policy on which the premiums are paid by the Company. The eligibility of the employee for the benefit as well as the amount of medical cover purchased is determined by the grade of the employee at the time of retirement.
Through its defined benefit plans the Company is exposed to a number of risks, the most significant of which are detailed below:
Asset volatality -
The plan liabilities are calculated using a discount rate set with references to government bond yields; if plan assets underperform compared to this yield, this will create or increase a deficit. The defined benefit plans may hold equity type assets, which may carry volatility and associated risk.
Change in bond yields -
A decrease in government bond yields will increase plan liabilities, although this is expected to be partially offset by an increase in the value of the plan''s investment in debt instruments.
Inflation risk -
The present value of some of the defined benefit plan obligations are calculated with reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan''s liability. The post retirement medical benefit obligation is sensitive to medical inflation and accordingly, an increase in medical inflation rate would increase the plan''s liability.
Life expectancy -
The present value of defined benefit plan obligation is calculated by reference to the best estimate of the mortality of plan participants, both during and after the employment. An increase in the life expectancy of the plan participants will increase the plan''s liability.
The estimate of future salary increases, considered in actuarial valuation, considers inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
The plan assets have been primarily invested in government securities and corporate bonds.
The Company''s contribution to Gratuity aggregating Rs.889.60 Lakhs (31 March 2018: Rs.381.19 lakhs) has been recognized in Statement of Profit and Loss under the head Employee Benefits Expense.
38 FRESH ISSUE OF EQUITY SHARE CAPITAL
During the year ended 31 March 2018, the Company had raised funds amounting to Rs. 211100.00 lakhs through allotment of fresh equity shares. The Board of Directors of the Company, at its meeting held on 1 November 2017, and special resolution passed by the members at the Extraordinary General Meeting held on 29 November 2017 had approved the infusion of share capital.
Pursuant to the passing of the above resolutions and in accordance with Chapter VIII of Securities & Exchange Board of India (Issue of Capital & Disclosure requirements) Regulations, 2009, as amended, following capital issuances were made.
a) Preferential allotment of 2,50,00,000 equity shares of face value of Rs. 2.00 each, at a price of Rs.422.00 each, for cash, including a premium of Rs.420.00 per equity share, aggregating to Rs.105500.00 lakhs, to Mahindra & Mahindra Limited, the Holding Company;
b) Qualified Institutional Placement (QIP) of 2,40,00,000 equity shares of face value of Rs. 2.00 each, at a price of Rs.440.00 each, for cash, including a premium of Rs.438.00 per equity share, aggregating to Rs.105600.00 lakhs, to Qualified Institutional Buyers (QIB''s). The Company has utilized the entire proceeds (net of issue related expenses) from issue of equity shares through QIP for the purposes as stated in its ''Placement Document''.
The share issue expenses of Rs.1,310.13 lakhs has been adjusted against securities premium reserve as per the accounting policy. These equity shares were allotted on 7 December 2017.
The fresh allotment of equity shares through preferential allotment and QIP as stated above have resulted in an increase of equity share capital by Rs. 980.00 lakhs and securities premium reserve by Rs. 210120.00 lakhs.
There was no fresh issuance of equity share capital during the current financial year.
3. FUNDS RAISED BY ISSUE OF DEBT INSTRUMENTS THROUGH PUBLIC ISSUE
During the year ended 31 March 2019, the Company has raised an amount of Rs. 2,14,699.47 lakhs (31 March 2018: Rs. 1,15,053.13 lakhs) by way of Public Issuance of Secured Redeemable Non-Convertible Debentures (NCD''s) and Unsecured Subordinated Redeemable Non-Convertible Debentures of the face value of Rs.1,000.00 each. The NCD''s issued during the current year were allotted on 18 January 2019 and those issued during the previous financial year were allotted on 24 July 2017 and these were listed on the BSE. The entire amount of proceeds from these issuances were used for the purposes as stated in its ''Placement Document'' and there was no unutilized amount pertaining to these issuances. The issue expenses of Rs.2100.00 lakhs (31 March 2018: Rs. 1215.07 lakhs) has been adjusted against underlying NCD liabilities for amortization at effective interest rate over the tenor of respective NCDs as per the accounting policy. The details are as follows.
In terms of the requirements as per Section 71 (4) of the Companies Act, 2013 read with The Companies (Share capital and Debentures) Rules 2014, Rule no.18 (7) and applicable SEBI (Issue and Listing of Debt Securities) Regulations, 2008, the Company has transferred Rs.14,667.61 lakhs (31 March 2018: Rs.5,053.12 Lakhs) to Debenture Redemption Reserve (DRR) on a prorata basis on total NCDs outstanding as at 31 March 2019, including the amount of fresh issuance during the year to create adequate DRR over the tenor of the debentures.
40 CAPITAL MANAGEMENT
T.e Company''s capital management strategy is to effectively determine, raise and deploy capital so as to create value for its shareholders. The same is done through a mix of either equity and/or convertible and/or combination of short term/long term debt as may be appropriate.
The company determines the amount of capital required on the basis of operations, capital expenditure and strategic investment plans. The capital structure is monitored on the basis of net debt to equity and maturity profile of overall debt portfolio.
The Company is subject to the capital adequacy requirements of the Reserve Bank of India (RBI). Under RBI''s capital adequacy guidelines, the Company is required to maintain a capital adequacy ratio consisting of Tier I and Tier II Capital. The total of Tier II Capital at any point of time, shall not exceed 100 percent of Tier I Capital. The minimum capital ratio as prescribed by RBI guidelines and applicable to the Company, consisting of Tier I and Tier II capital, shall not be less than 15 percent of its aggregate risk weighted assets on-balance sheet and of risk adjusted value of off-balance sheet.
The Company has complied with all regulatory requirements related capital and capital adequacy ratios as prescribed by RBI.
"Tier I Capitalâ means owned fund as reduced by investment in shares of other non-banking financial companies and in shares, debentures, bonds, outstanding loans and advances including hire purchase and lease finance made to and deposits with subsidiaries and companies in the same group exceeding, in aggregate, ten per cent of the owned fund.
"Owned Fundâ means paid up equity capital, preference shares which are compulsorily convertible into equity, free reserves, balance in share premium account and capital reserves representing surplus arising out of sale proceeds of asset, excluding reserves created by revaluation of asset, as reduced by accumulated loss balance, book value of intangible assets and deferred revenue expenditure, if any.
Tier II capitalâ includes the following -
(a) preference shares other than those which are compulsorily convertible into equity;
(b) revaluation reserves at discounted rate of fifty five percent;
(c) General provisions (including that for Standard Assets) and loss reserves to the extent these are not attributable to actual diminution in value or identifiable potential loss in any specific asset and are available to meet unexpected losses, to the extent of one and one fourth percent of risk weighted assets
(d) hybrid debt capital instruments; and
(e) subordinated debt to he extent the aggregate does not exceed Tier I capital.
Aggregate Risk Weighted Assets -
Under RBI Guidelines, degrees of credit risk expressed as percentage weight ages have been assigned to each of the on-balance sheet assets and off- balance sheet assets. Hence, the value of each of the on-balance sheet assets and off- balance sheet assets requires to be multiplied by the relevant risk weights to arrive at risk adjusted value of assets. The aggregate shall be taken into account for reckoning the minimum capital ratio.â
5. LEASES
In the cases where assets are given on operating lease (as lessor) -Key terms are as below :
i) New vehicles to retail customers for a maximum period of 48 months with a minimum holding period of 24 months.
ii) Used and refurbished vehicles to travel operators / taxi aggregators with a initial agreement validity period of 36 months to 48 months and provision for extention for such period and on such terms and conditions as may be agreed by both the parties. The lease agreement also provides for minimum lock in period 6 months from the date of execution and cancellation with 3 months'' notice from either parties. The consideration payable by the lessee is either minimum commitment charges or variable rental charges based on usage, make/model of the vehicle and certain other terms and conditions forming part of the lease agreement.
Rental income arising from these operating leases is accounted for on a straight-line basis over the lease terms and is included in rental income in the Statement of profit and loss. Costs, including depreciation, incurred in earning the lease income are recognized as an expense.
Since there is no contingent rent applicable in respect of these lease arrangements, the Company has not recognized any income as contingent income during the year.
6. OPERATING SEGMENTS
There is no separate reportable segment as per Ind AS 108 on ''Operating Segments'' in respect of the Company.
The Company operates in single segment only. There are no operations outside India and hence there is no external revenue or assets which require disclosure.
No revenue from transactions with a single external customer amounted to 10% or more of the Company''s total revenue in year ended 31 March 2019 or 31 March 2018.
43 FRAUDS REPORTED DURING THE YEAR
There were 123 cases (31 March 2018: 143 cases, 31 March 2017: 176 cases) of frauds amounting to Rs.768.18 lakhs (31 March 2018: Rs.230.08 lakhs, 31 March 2017: Rs 397.06 lakhs) reported during the year. The Company has recovered an amount of Rs.76.20 lakhs (31 March 2018: Rs.77.60 lakhs, 31 March 2017: Rs 125.98 lakhs) and has initiated appropriate legal actions against the individuals involved. The claims for the un-recovered losses have been lodged with the insurance companies on merit basis.
The Company''s pending litigations comprise of claims against the Company primarily by the customers and proceedings pending with Income Tax, sales tax / VAT and other authorities. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed the contingent liabilities where applicable, in its financial statements. The amount of provisions / contingent liabilities is based on management''s estimate, and no significant liability is expected to arise out of the same.
Recent clarification on applicability of allowances for provident fund contributions under Employees Provident Fund Act, 1952
In February 2019, the Supreme Court of India in its judgments clarified the applicability of allowances that should be considered to measure obligations under Employees Provident Fund Act, 1952. The Company has been legally advised that there are interpretative challenges on the application of judgments retrospectively and as such does not consider there is any probable obligations for past periods. Accordingly, based on legal advice the Company has made a provision for provident fund contribution from the date of the Supreme Court order.
7. TRANSFER OF FINANCIAL ASSETS
Transferred financial assets that are not derecognized in their entirety
The Company has transferred certain pools of fixed rate loan receivables backed by underlying assets in the form of tractors, vehicles, equipments etc. by entering in to securitization transactions with the Special Purpose Vehicle Trusts ("SPV Trustâ) sponsored by Commercial banks for consideration received in cash at the inception of the transaction.
The Company, being Originator of these loan receivables, also acts as Servicer with a responsibility of collection of receivables from its borrowers and depositing the same in Collection and Payout Account maintained by the SPV Trust for making scheduled payouts to the investors in Pass Through Certificates (PTCs) issued by the SPV Trust. These securitization transactions also requires the Company to provide for first loss credit enhancement in various forms, such as corporate guarantee, cash collateral, subscription to subordinated PTCs. as credit support in the event of shortfall in collections from underlying loan contracts. By virtue of existence of credit enhancement, the Company is exposed to credit risk, being the expected losses that will be incurred on the transferred loan receivables to the extent of the credit enhancement provided.
In view of the above, the Company has retained substantially all the risks and rewards of ownership of the financial asset and thereby does not meet the derecognition criteria as set out in Ind AS 109. Consideration received in this transaction is presented as "Associated liability related to Securitization transactionsâ under Note no.17.
The following table provide a summary of financial assets that have been transferred in such a way that part or all of the transferred financial assets do not qualify for derecognition, together with the associated liabilities:
8. CORPORATE SOCIAL RESPONSIBILITY (CSR)
During the year ended 31 March 2019, the Company has incurred an expenditure of Rs.2,502.95 lakhs (31 March 2018 : Rs. 2,557.55 lakhs) towards CSR activities which includes contribution / donations made to the trusts which are engaged in activities prescribed under Section 135 of the Companies Act, 2013 read with Schedule VII to the said Act and expense of Rs.168.56 lakhs (31 March 2018: Rs. 145.99 lakhs) towards the CSR activities undertaken by the Company.
Detail of amount spent towards CSR activities :
a) Gross amount required to be spent by the Company during the year is Rs.2,681.34 lakhs (31 March 2018: Rs. 2,706.75 lakhs).
The above expenditure includes Rs.15.79 lakhs (31 March 2018: Rs.12.25 lakhs) as salary cost in respect of certain employees who have been exclusively engaged in CSR administrative activities which qualifies as CSR expenditure under Section 135 of the Companies Act, 2013.
9. During the year ended 31 March 2019, the Company had made a contribution of Rs.240.00 lakhs (31 March 2018: Nil) to New Democratic Electoral Trust, a Trust approved by the Central Board of Direct Taxes under Electoral Trust Scheme, 2013 to enable Electoral Trust to make contributions to political party/parties duly registered with the Election Commission, in such manner and at such times as it may decide from time to time. This contribution was as per the provisions of Section 182 of the Companies Act, 2013.
10.The Company has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision as required under any law / accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of accounts.
11. FINANCIAL RISK MANAGEMENT FRAMEWORK
In the course of its business, the Company is exposed to certain financial risks namely credit risk, interest risk, currency risk & liquidity risk.The Company''s primary focus is to achieve better predictability of financial markets and seek to minimize potential adverse effects on its financial performance.
The financial risks are managed in accordance with the Company''s risk management policy which has been approved by its Board of Directors.
Board of Directors of the Company have established Asset and Liability Management Committee (ALCO), which is responsible for developing and monitoring risk management policies for its business. The Company''s financial services businesses are exposed to high credit risk given the unbanked rural customer base and diminishing value of collateral. The credit risk is managed through credit norms established based on historical experience.
50.1 MARKET RISK
Market Risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates, etc. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while maximizing the return.
a) Pricing Risk
The Company''s Investment in Mutual Funds is exposed to pricing risk. Other financial instruments held by the company does not possess any risk associated with trading. A 5 percent increase in Net Assets Value (NAV) would increase profit before tax by approximately Rs 3,177 lakhs (31st March 2018 : Rs 36 lakhs). A similar percentage decrease would have resulted equivalent opposite impact.
b) Currency Risk
Currency Risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Foreign currency risk arise majorly on account of foreign currency borrowings. The Company''s foreign currency exposures are managed in accordance with its Foreign Exchange Risk Management Policy which has been approved by its Board of Directors. Company manages its foreign currency risk by entering into forward contract and cross currency swaps.
c) Interest Rate Risk
The company uses a mix of cash and borrowings to manage the liquidity & fund requirements of its day-to-day operations. Further, certain interest bearing liabilities carry variable interest rates.
Interest Rate risk on variable rate borrowings is managed by way of interest rate swaps.
Interest Rate sensitivity
The sensitivity analysis below have been determined based on exposure to interest rate for both derivative and non-derivative instruments at the end of reporting period. For floating rate liabilities, analysis is prepared assuming the amount of liability outstanding at the end of the reporting period was outstanding for the whole year.
12.CREDIT RISK MANAGEMENT
Credit risk is the risk that the Company will incur a loss because its customers fail to discharge their contractual obligations. The Company has a comprehensive framework for monitoring credit quality of its retail and other loans primarily based on days past due monitoring at period end. Repayment by individual customers and portfolio is tracked regularly and required steps for recovery are taken through follow ups and legal recourse.
Credit Quality of Financial Loans and Investments
The following table sets out information about credit quality of loans and investments measured at amortized cost based on days past due information. The amount represents gross carrying amount.
The Company reviews the credit quality of its loans based on the ageing of the loan at the period end. Since the company is into retail lending business, there is no significant credit risk of any individual customer that may impact company adversely, and hence the Company has calculated its ECL allowances on a collective basis.
Inputs considered in the ECL model
In assessing the impairment of financial loans under Expected Credit Loss (ECL) Model, the assets have been segmented into three stages. The three stages reflect the general pattern of credit deterioration of a financial instrument. The differences in accounting between stages, relate to the recognition of expected credit losses and the measurement of interest income.
The Company categorizes loan assets into stages primarily based on the Months Past Due status.
Stage 1 : 0-30 days past due Stage 2 : 31-90 days past due Stage 3 : More than 90 days past due
The Company applies the simplified approach to providing for expected credit losses prescribed by Ind AS 109, which permits the use of the lifetime expected loss provision for trade advances. The Company has computed expected credit losses based on a provision matrix which uses historical credit loss experience of the Company.
(i) Definition of default
The Company considers a financial asset to be in "defaultâ and therefore Stage 3 (credit impaired) for ECL
calculations when the borrower becomes 90 days past due on its contractual payments.
(ii) Exposure at default
"Exposure at Defaultâ (EAD) represents the gross carrying amount of the assets subject to impairment
calculation. Future Expected Cash flows (Principal and Interest) for future years has been used as exposure
for Stage 2.
(iii) Estimations and assumptions considered in the ECL model
The Company has made the following assumptions in the ECL Model:
a. "Loss given defaultâ (LGD) is common for all three Stages and is based on loss in past portfolio. Actual cash flows on the past portfolio are discounted at portfolio EIR rate for arriving loss rate.
b. ââProbability of Defaultâ (PD) is applied on Stage 1 and Stage 2 on portfolio basis and for Stage 3 PD at 100%. This is calculated as an average of the last 60 months yearly movement of default rates and future adjustment for macro-economic factor.
(iv) Measurement of ECL
ECL is measured as follows:
- financial assets that are not credit impaired at the reporting date: for Stage 1, gross exposure is multiplied by PD and LGD percenatge to arrive at the ECL. For Stage 2, future Expected Cash flows (Principal and Interest) for respective future years is multiplied by respective years Marginal PDs and LGD percentage and thus arrived ECL is then discounted with the respective loan EIR to calculate the present value of ECL. In addition, in case of Bills discounting and Channel finance, as the average lifetime is of 90 days, a time to maturity factor of 0.25 is used in the ECL computation.
- financial assets that are credit impaired at the reporting date: the difference between the gross exposure at reporting date and computed carrying amount considering EAD net of LGD and actual cash flows till reporting date;
- undrawn loan commitments: as the present value of the difference between the contractual cash flows that are due to the Company if the commitment is drawn down and the cash flows that the Company expects to receive.
(v) Forward Looking Information
Historical PDs has been converted into forward looking PD which incorporates the forward looking economic outlook. Considering that major chunk of borrowers in the retail portfolio is from rural area, Agriculture (real change % p.a.) is used as a macroeconomic variable. Agriculture (real change % p.a.) stands for Percentage change in real agricultural value-added, including livestock, forestry and fishing, over previous year. In case of SME and Bills Discounting portfolio, Real GDP (% change p.a.) is used as the macroeconomic variable.
The macroeconomic variables considered by the Company are robust reflections of the state of economy which result into systematic risk for the respective portfolio segments.
Additionally, three different scenarios have been considered for ECL calculation. Along with the actual numbers (considered for Base case scenario), other scenarios take care of the worsening as well as improving forward looking economic outlook.
(vi) Assessment of significant increase in credit risk
When determining whether the credit risk has increased significantly since initial recognition, the Company considers both quantitative and qualitative information and analysis based on the Company''s historical experience, including forward-looking information. The Company considers reasonable and supportable information that is relevant and available without undue cost and effort. The Company''s accounting policy is not to use the practical expedient that the financial assets with ''low'' credit risk at the reporting date are deemed not to have had a significant increase in credit risk. As a result the Company monitors all financial assets and loan commitments that are subject to impairment for significant increase in credit risk.
As a part of the qualitative assessment of whether a customer is in default, the Company also considers a variery of instances that may indicate unlikeliest to pay. In such instances, the Company treats the customer at default and therefore assesses such loans as Stage 3 for ECL calculations, following are such instances:
- A Stage 3 customer having other loans which are in Stage 1 or 2.
- Customers who have failed to pay their first EMI.
- Physical verification status of the repossessed asset related to the loan.
- Cases where Company suspects fraud and legal proceedings are initated.
(vii) Policy for write off of Loan Assets
The gross carrying amount of a financial asset is written off when there is no realistic prospect of further recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities under the Company''s recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognized in profit or loss.
(viii) Analysis of inputs to the ECL model with respect to macroeconomic variable
The below table shows the values of the forward looking macroeconomic variable used in each of the scenarios for the ECL calculations. For this purpose, the Company has used the data source of Economist Intelligence Unit. The upside and downside % change has been derived using historical standard deviation from the base sceanrio based on previous 8 years change in the variable.
The contractual amount outstanding on financial assets that has been written off by the Company during the year ended 31 March 2019 and that were still subject to enforcement activity was Rs 1,18,264.00 lakhs (31 March 2018 : Rs 63,647.58 lakhs).
The decrease in ECL of the portfolio was on account of better recoveries during the year and appropriation of ECL provision of written off assets.
The contractual amount outstanding on financial assets that has been written off by the Company during the year ended 31 March 2019 and that were still subject to enforcement activity was Rs 4,051.38 lakhs (31 March 2018 :Nil).
The decrease in ECL of the portfolio was on account of better recoveries during the year and appropriation of ECL provision of written off assets.
The contractual amount outstanding on financial investments that has been written off by the Company during the year ended 31 March 2019 and that were still subject to enforcement activity was nil (31 March 2018 : nil).
The decrease in ECL of the portfolio was on account of decrease in the size of the portfolio.
Significant changes in the gross carrying value that contributed to change in loss allowance
The company mostly provide loans to retail individual customers in Rural and Semi urban area which is of small ticket size. Change in any single customer repayment will not impact significantly to Company''s provisioning. All customers are being monitored based on past due and corrective actions are taken accordingly to limit the Company''s risk.
Concentration of Credit Risk
Company''s loan portfolio is predominantly to finance retail automobile loans. The Company manages concentration of risk primarily by geographical region in India. The following tables show the geographical concentrations of trade advances and loans:
Maximum Exposure to credit Risk
The maximum exposure to credit risk of loans and investment securities is their carrying amount. The maximum exposure is before considering both the effect of mitigation through collateral.
Narrative Description of Collateral
Collateral primarily include vehicles purchased by retail loan customers and machinery & property in case of SME customers. The financial investments are secured by way of a first ranking pari-passu and charge created by way of hypothecation on the receivables of the other company.
Quantitative Information of Collateral
The Company monitors its exposure to loan portfolio using the Loan To Value (LTV) ratio, which is calculated as the ratio of the gross amount of the loan to the value of the collateral. The value of the collateral for retail loans is derived by writing down the asset cost at origination by 20% p.a on reducing balance basis. And the value of the collateral of Stage 3 retail loans is based on the Indian Blue Book value for the particular asset. The value of collateral of SME loans is based on fair market value of the collaterals held.
13. LIQUIDITY RISK MANAGEMENT
Ultimate responsibility for liquidity risk management rests with the board of directors, which has established Asset and Liability Management Committee (ALCO) for the management of the Company''s short, medium and long-term funding and liquidity management 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.
a) Maturity profile of non-derivative financial liabilities
The following tables detail the Company''s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The amount disclosed in the tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows.
b) Maturity profile of derivative financial liabilities
The following table details the Company''s liquidity analysis for its derivative financial instruments. The table has been drawn up based on the undiscounted gross inflows and outflows on those derivatives that require gross settlement. There is no derivative instruments that is settled on a net basis. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves at the end of the reporting period.
There are no disposal of investment during the year ended 31 March 2019 and 2018 respectively.
Valuation methodologies of financial instruments not measured at fair value
Below are the methodologies and assumptions used to determine fair values for the above financial instruments which are not recorded and measured at fair value in the Company''s financial statements. These fair values were calculated for disclosure purposes only.
Short-term financial assets and liabilities
For financial assets and financial liabilities that have a short-term maturity (less than twelve months), the carrying amounts, which are net of impairment, are a reasonable approximation of their fair value. Such instruments include: cash and balances, trade receivables, balances other than cash and cash equivalents, trade payables and investment & borrowings in commercial papers. Such amounts have been classified as Level 2 on the basis that no adjustments have been made to the balances in the balance sheet.
Loans and advances to customers
The fair values of loans and receivables are calculated using a portfolio-based approach, grouping loans as far as possible into homogenous groups based on similar characteristics. The fair value is then extrapolated to the portfolio using discounted cash flow models that incorporate interest rate estimates considering all significant characteristics of the loans. This fair value is then reduced by impairment allowance which is already calculated incorporating probability of defaults and loss given defaults to arrive at fair value net of risk.
Financial Investments
For Government Securities, the market value of the respective Government Stock as on date of reporting has been considered for fair value computations. And since market quotes are not available in the absence of any trades, the carrying amount of Secured redeemable non-convertible debentures is considered as the fair value.
Issued debt
The fair value of issued debt is estimated by a discounted cash flow model incorporating interest rate estimates from market-observable data such as secondary prices for its traded debt itself.
Deposits from public
The fair value of deposits received from public is estimated by discounting the future cash flows considering the interest rate applicable on the reporting date for that class of deposits segregated by their tenure and cumulative/ non-cumulative scheme.
Except for the above, carrying value of other financial assets/liabilities represent reasonable estimate of fair value.
14. RELATED PARTY DISCLOSURES:
i) As per Ind AS 24 on âRelated party disclosures'', the related parties of the Company are as follows:
a) Holding Company Mahindra & Mahindra Limited
b) Subsidiary Companies: Mahindra Insurance Brokers Limited (entities on whom control is exercised) Mahindra Rural Housing Finance Limited
Mahindra Asset Management Co.Pvt. Ltd.
Mahindra Trustee Co. Pvt. Ltd.
Mahindra & Mahindra Financial Services Ltd Employees1 Stock Option Trust
c) Fellow Subsidiaries: Mahindra USA, Inc (entities with whom the Company has NBS International Limited transactions) Mahindra First Choice Wheels Limited
Mahindra Defence Systems Ltd.
Mahindra Retail Private Limited Mahindra Integrated Business Solutions Ltd.
Mahindra Vehicle Manufacturers Limited Mahindra Construction Co. Ltd.
Bristlecone India Limited Mahindra Water Utilities Limited Orizonte Business Solutions Limited Gromax Agri Equipment Limited Mahindra First Choice Services Limited Mahindra Agri Solutions Limited Mahindra Intertrade Limited New Democratic Electoral Trust
d) Associate: Mahindra Finance USA, Inc
e) Associates of Holding Company: Tech Mahindra Limited
Swaraj Engines Ltd.
f) Key Management Personnel: Mr. Ramesh Iyer
g) Relatives of Key Management Ms. Janaki Iyer
Personnel Ms. Ramlaxmi Iyer
(where there are transactions)
Mr. Risheek Iyer Ms. Girija Subramaniam
iv) Details of related party transactions with Key Management Personnel (KMP) are as under :
Key management personnel are those individuals who have the authority and responsibility for planning and exercising power to directly or indirectly control the activities of the Company or its employees. The Company considers its Managing Director to be key management personnel for the purposes of IND AS 24 Related Party Disclosures.
The material adjustment to the Statement of cash flows under Ind AS is primarily on account of reclassification of payments made to Special Purpose Vehices under securitization transactions from Loans and advances (forming part of operating activities) under Previous GAAP to borrowings (forming part of financing activities) under Ind AS.
Material adjustments on adoption of Ind AS are explained below:
1 Interest income and expense measured using effective interest method
a) Under Previous GAAP, origination fees and transaction costs charged to customers was recognized upfront. Under Ind AS, such fees and costs is amortized over the expected life of the loan assets and recognized as interest income using effective interest method. Under previous GAAP, interest income on non performing assets (i.e. loans that are 90 days past due) was not accrued. Under Ind AS interest income on such loans are recognized on their net carrying amount.
b) Under Previous GAAP, the transaction costs related to borrowings including fixed deposits accepted were recognized upfront in the Statement of profit and loss/ securities premium. Under Ind AS, such costs are amortized over the contractual term of the borrowing and recognized as interest expense using effective interest method in the Statement of profit and loss.
2 Impairment Allowance for expected credit loss
Under Previous GAAP the provisioning on overdue assets was as per management estimates, subject to the minimum provision required as per Master Direction- Non Banking Financial Company - Systematically Important Non Deposit taking Company and Deposit Taking Company (Reserve Bank) Directions, 2016. Under Ind AS, impairment allowance is calculated as per expected credit loss method.
3 Impact on derecognition of loans
Under Previous GAAP financial assets were derecognized if the control criteria is met in accordance with relevant RBI guidelines. Under Ind AS, financial assets are derecognized only when the Company transfers substantially all the risks and rewards related to the cash flows.
4 Reclassification of actuarial loss / [gain), arising out of employee benefit schemes, to Other Comprehensive Income [OCI]
Actuarial gain and losses are recognized in other comprehensive income under Ind AS. Under Previous GAAP these were recognized in Statement of profit and loss.
5 Net gain on fair value changes
Under Previous GAAP investment in Mutual Funds was carried at lower of cost or net realisable value. Under Ind AS, these investments are measured at FVTPL.
6 Derivatives
Under Previous GAAP the forward contract premium was amortized over the term of the contract. Under Ind AS, such contracts are measured at FVTPL.
7 Employee stock option scheme
Under Previous GAAP the cost of Employee Stock Options was recognized at intrinsic value. Under Ind AS, the same is recognized on the basis of fair value.
8 Deferred tax adjustments
Deferred tax effect of all adjustments has been recognized on transition date and during the year ended 31 March 2018.
54 Schedule to the Balance Sheet of a Non-Banking Financial Company as required under Master Direction â Non Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016.
Exchange Traded Interest Rate (IR) Derivative
The Company has not entered into any exchange traded derivative.
b) Exchange Traded Interest Rate (IR) Derivatives
The Company is not carrying out any activity of providing Derivative cover to third parties
c) Disclosures on Risk Exposure in Derivatives
Qualitative Disclosures -
i) The Company undertakes the derivatives transaction to prudently hedge the risk in context of a particular borrowing or to diversify sources of borrowing and to maintain fixed and floating borrowing mix. The Company does not indulge into any derivative trading transactions. The Company reviews, the proposed transaction and outline any considerations associated with the transaction, including identification of the benefits and potential risks (worst case scenarios); an independent analysis of potential savings from the proposed transaction. The Company evaluates all the risks inherent in the transaction viz., counter party risk, Market Risk, Operational Risk, basis risk etc.
ii) Credit risk is controlled by restricting the counterparties that the Company deals with, to those who either have banking relationship with the Company or are internationally renowned or can provide sufficient information. Market/Price risk arising from the fluctuations of interest rates and foreign exchange rates or from other factors shall be closely monitored and controlled. Normally transaction entered for hedging, will run till its life, irrespective of profit or loss. However in case of exceptions it has to be un-winded only with prior approval of M.D/CFO/Treasurer Liquidity risk is controlled by restricting counterparties to those who have adequate facility, sufficient information, and sizable trading capacity and capability to enter into transactions in any markets around the world.
iii) The respective functions of trading, confirmation and settlement should be performed by different personnel. The front office and back-office role is well defined and segregated. All the derivatives transactions is quarterly monitored and reviewed by CFO and Treasurer. All the derivative transactions have to be reported to the board of directors on every quarterly board meetings including their financial positions.
d) Details of non-performing financial assets purchased / sold
i) Details of non-performing financial assets purchased:
During the current year and the previous year the Company has not purchased any non -performing financial assets.
ii) Details of Non-performing Financial Assets sold:
During the current year and the previous year the Company has not sold any non -performing financial assets.
V) Exposures
a) Exposure to Real Estate Sector
During the current year and the previous the Company has no Exposure to Real estate sector.
b) Exposure to Capital Market
c) Details of financing of parent company products
Of the total financing activity undertaken by the Company during the financial year 2018-19, 41% (31 March 2018: 43%) of the financing was towards parent company products.
d) Details of Single Borrower Limit (SGL) /Group Borrower Limit (GBL) exceeded by the NBFC
During the current year and the previous year, the Company has not exceeded the prudential exposure limits.
e) Unsecured Advances
As at 31 March 2019, the amount of unsecured advances stood at Rs. 3,29,945.84 Lakhs (31 March 2018: Rs.2,41,498.29 Lakhs).
VI) Miscellaneous
a) Registration obtained from other financial sector regulators
During the current year and the previous year, the Company has not obtained any registration from other financial sector regulators.
b) Disclosure of Penalties imposed by RBI and other regulators
During the current year and the previous year, there are no penalties imposed by RBI and other regulators
c) Related Party Transactions
(refer note 52)
d) Rating assigned by credit rating agencies and migration of ratings during the year
Credit Rating -
During the year under review, CRISIL Limited (CRISIL), has reaffirmed the rating to the Company''s Longterm Debt Instruments and Bank Facilities as ''CRISIL AA / Stable'' and the Company''s Fixed Deposit Programme as ''FAAA/Stable'', respectively. The ''AA /Stable'' rating indicates a high degree of safety with regard to timely payment of financial obligations. The rating on the Company''s Short-term Bank Loans and Cash Credit facility has been reaffirmed at ''CRISIL A1 '' which is the highest level of rating.
During the year under review, India Ratings & Research Private Limited (IND), which is part of Fitch Group, reaffirmed the rating of Company''s Long-term instrument and Subordinated Debt programme to ''IND AAA/Stable''. The Company''s Short Term Commercial Paper has been rated at IND A1 .
During the year under review, Credit Analysis & Research Limited (CARE), also reaffirmed the ''CARE AAA/ Stable'' rating to Company''s Long-term debt instrument and Subordinated Debt programme.
During the year under review, Brickwork Ratings India Private Limited (BWR) has, reaffirmed the ''BWR AAA/stable'' rating of the Company''s Long-term Subordinated Debt Issue.
The ''AAA'' ratings denote the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
VII) Net Profit of Loss for the period ,prior period items and change in accounting policies
There are no such material items which require disclosures in the notes to Account in terms of the relevant Accounting Standard.
VIII) Revenue Recognition
(Refer note no. 2.7 under Summary of Significant Accounting Policies)
IX) Accounting Standard 21- Consolidated Financial Statements (CFS)
All the subsidiaries of the Company have been consolidated as per Accounting Standard 21. Refer consolidated financial statements (CFS)
Additional Disclosures :
All the subsidiaries of the Company have been consolidated as per Accounting Standard 21. Refer consolidated financial statements (CFS)
XIII) Off-balance Sheet SPVs sponsored (which are required to be consolidated as per accounting norms)
Name of the SPV sponsored -
15. EVENTS AFTER THE REPORTING DATE
The dividends proposed for the current financial year ended 31 March 2019 shall be paid to shareholders on approval of the members of the Company at the forthcoming Annual General Meeting and hence has been treated as a non adjusting event (refer note no. 23). There have been no other events after the reporting date that require disclosure in these financial statements.
Mar 31, 2018
Notes:
a. Additions during the year includes borrowing costs capitalised during the year Rs. 1.56 crores (2017 : Rs. 8.42 crores).
b. Buildings include Rs. * crores (2017 : Rs. * crores) being the value of shares in co-operative housing societies.
* denotes amounts less than Rs. 50,000.
(a) The amount of inventories recognized as an expense Rs. 39,448.41 crores (2017 : Rs 39,329.79 crores) including Rs. 40.00 crores (2017 : Rs. 58.12 crores) in respect of write-down of inventory to net realisable value and has been reduced by Rs. 34.30 crores (2017 : Rs 27.11 crores) in respect of the reversal of such write downs. Reversal in provision is due to sale and/or consumption of inventory provided for in earlier years.
(b) The Company has availed working capital facilities and other non-fund based facilities viz. bank guarantees and letters of credit, some of which are secured by hypothecation of inventories.
(c) Mode of valuation of inventories is stated in note 2(h).
1. The Company has on 9th February, 2018, entered into an agreement, subject to requisite approvals, to sell 26,36,401 Equity shares of Rs. 10 each in Mahindra Sanyo Special Steel Private Limited (MSSSPL) aggregating 22% of the paid-up Equity Share Capital of MSSSPL, to Sanyo Special Steel Co. Ltd. for a consideration of Rs. 146.32 crores.
b. The Ordinary (Equity) Shares of the Company rank pari-passu in all respects including voting rights and entitlement to dividend.
c. Details of Ordinary (Equity) Shares held by shareholders holding more than 5% of the aggregate shares in the Company :
d. For the period of preceding five years as on the Balance Sheet date, Issued, Subscribed and Paid-up Share Capital includes :
i. Aggregate of 5,03,888 (2017 : 5,917) Ordinary (Equity) Shares of Rs. 5 each allotted as fully paid-up pursuant to Scheme of Arrangement without payment being received in cash.
ii. Aggregate of 62,15,96,272 (2017 : Nil) Ordinary (Equity) Shares allotted as fully paid-up by way of bonus shares.
2. Other Equity :
Description of the nature and purpose of Other Equity :
Capital Reserve : Capital Reserve mainly represents the amount of net assets acquired over and above consideration paid consequent to the Scheme of Arrangement (refer note 40).
Securities Premium Account : The Securities Premium is created on issue of shares.
General Reserve : The General Reserve comprises of transfer of profits from retained earnings for appropriation purposes. The reserve can be distributed/utilized by the Company in accordance with the Companies Act, 2013.
Debenture Redemption Reserve : Debenture Redemption Reserve is a Statutory Reserve (as per Companies Act, 2013) created out of profits of the Company available for payment of dividend for the purpose of redemption of Debentures issued by the Company. On completion of redemption, the reserve is transferred to retained earnings.
Employee Stock Options Reserve : The Employee Stock Options Reserve represents reserve in respect of equity settled share options granted to the Company''s employees in pursuance of the Employee Stock Option Plan.
(b) Term loan from banks comprise of EURO External Commercial Borrowings carrying an average margin of 95 basis points over three month EURO LIBOR and are repayable after five years and one day from the date of respective a ailment of loan.
(c) Other loans comprise deferred sales tax loans which are interest free and repayable in five equal installments after ten years from the year of a ailment of respective loan.
Other liabilities include salaries and wages payable, capital creditors, brand licenses payable and monies adjusted from share capital and reserves & surplus on account of shares held by ESOP Trust pending transfer to the eligible employees.
Provision for warranty relates to provision made in respect of sale of certain products, the estimated cost of which is accrued at the time of sale. The products are generally covered under a free warranty period ranging from 6 months to 5 years.
The movement in provision for warranty and service coupon is as follows :
(b) Expenditure incurred on Corporate Social Responsibility (CSR) under Section 135 of the Companies Act, 2013 Rs. 81.97 crores (2017 : Rs. 83.57 crores).
(c) Donations given to New Democratic Electoral Trust Rs. Nil (2017 : Rs. 6.03 crores).
(d) The foreign exchange loss recognized in profit or loss is Rs. 14.86 crores. (2017 : gain of Rs. 13.14 crores).
3. Exceptional Items (net) recognized in profit or loss
Exceptional items of Rs. 433.61 crores (2017 : Rs. 548.46 crores) comprise of :
a) profit on sale of certain long term investments Rs. 406.61 crores (2017 : Rs. 679.46 crores).
b) profit on transfer of agri business Rs. Nil (2017 : Rs. 91.00 crores).
c) During the year ended 31st March, 2018, the Company has recognized reversal of impairment loss on an investment Rs. 27.00 crores. During the year ended 31st March, 2017, the Company had recognized an aggregate impairment loss of Rs. 222.00 crores on certain investments in subsidiaries and joint ventures considering the performance of these companies and their future projections.
During the year, the Company allotted 62,15,96,272 Ordinary (Equity) Shares of Rs. 5 each as fully paid-up Bonus (Equity) Shares in the ratio of 1:1 [i.e. 1 (One) fully paid-up Bonus Ordinary (Equity) Share of Rs. 5 each for every 1 (One) fully paid-up Ordinary (Equity) Share of Rs. 5 each held] to all registered shareholders as on the record date. Consequently, in accordance with Ind AS 33 "Earnings per Share", the basic and diluted earnings per share for the previous year have been adjusted to give effect to the aforesaid issue of Bonus Shares.
4. Employee Benefits
General description of defined benefit plans :
Gratuity
The Company operates a gratuity plan covering qualifying employees. The benefit payable is the greater of the amount calculated as per the Payment of Gratuity Act or the Company scheme applicable to the employee. The benefit vests upon completion of five years of continuous service and once vested it is payable to employees on retirement or on termination of employment. In case of death while in service, the gratuity is payable irrespective of vesting. The Company makes annual contribution to the group gratuity scheme administered by the Life Insurance Corporation of India through its Gratuity Trust Fund.
Post retirement medical
The Company provides post retirement medical cover to select grade of employees to cover the retiring employees and their spouse up to a specified age through medic aim policy on which the premiums are paid by the Company. The eligibility of the employee for the benefit as well as the amount of medical cover purchased is determined by the grade of the employee at the time of retirement.
Post retirement housing allowance
The Company operates a post retirement benefit scheme for a certain grade of employees in which a monthly allowance determined on the basis of the last drawn basic salary at the time of retirement, is paid to the retiring employee in lieu of housing.
Through its defined benefit plans the Company is exposed to a number of risks, the most significant of which are detailed below:
Asset Volatility
The plan liabilities are calculated using a discount rate set with references to government bond yields; if plan assets underperform compared to this yield, this will create or increase a deficit. The defined benefit plans may hold equity type assets, which may carry volatility and associated risk.
Changes in bond yields
A decrease in government bond yields will increase plan liabilities, although this is expected to be partially offset by an increase in the value of the plan''s investment in debt instruments.
Inflation risk
The present value of some of the defined benefit plan obligations are calculated with reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan''s liability. The post retirement medical benefit obligation is sensitive to medical inflation and accordingly, an increase in medical inflation rate would increase the plan''s liability.
Life expectancy
The present value of defined benefit plan obligation is calculated by reference to the best estimate of the mortality of plan participants, both during and after the employment. An increase in the life expectancy of the plan participants will increase the plan''s liability.
The plan assets have been primarily invested in government securities and corporate bonds.
The Company''s contribution to Provident Fund and Superannuation fund aggregating Rs. 134.66 crores (2017 : Rs. 128.30 crores) has been recognized in Profit or Loss under the head Employee Benefits Expense.
5. The Company has allotted 55,24,219 Ordinary (Equity) Shares of Rs. 10 each, 10,00,000 Ordinary (Equity) Shares of Rs. 10 each, 1,73,53,034 Ordinary (Equity) Shares of Rs. 5 each, 19,11,628 Ordinary (Equity) Shares of Rs. 5 each and 52,00,000 Ordinary (Equity) Shares of Rs. 5 each in the years ended 31st March, 2002, 31st March, 2010, 31st March, 2011, 31st March, 2014 and 31st March, 2015 respectively to the Mahindra & Mahindra Employees'' Stock Option Trust set up by the Company. The trust holds these shares for the benefit of the employees and issues them to the eligible employees as per the recommendation of the Compensation Committee.
Options granted under Mahindra & Mahindra Limited Employees Stock Option Scheme - 2000 ("2000 Scheme") vest in 4 equal installments on the expiry of 12 Months, 24 Months, 36 Months and 48 Months from the date of grant. The options may be exercised on any day over a period of five years from the date of vesting. Number of vested options exercisable is subject to a minimum of 50 or number of options vested whichever is lower.
Options granted under Mahindra & Mahindra Limited Employees Stock Option Scheme - 2010 ("2010 Scheme") vest in
i) 5 equal installments on the expiry of 12 Months, 24 Months, 36 Months, 48 Months and 60 Months from the date of grant. OR
ii) 4 instilments bifurcated as 20% on the expiry of 18 months, 20% on the expiry of 30 months, 30% on the expiry of 42 months and 30% on the expiry of 54 months. after adjusting for reversals on account of options forfeited. The amount excludes Rs. 4.65 crores (2017 : Rs. 8.46 crores) charged to its subsidiaries for options issued to their employees.
6. Capital management
The Company''s capital management strategy is to effectively determine, raise and deploy capital so as to create value for its shareholders. The same is done through a mix of either equity and/or preference and/or convertible and/or combination of short term/long term debt as may be appropriate.
The Company determines the amount of capital required on the basis of its products, capital expenditure, operations and strategic investment plans. The same is funded through a combination of capital sources be it either equity and/or preference and/or convertible and/ or combination of short term/long term debt as may be appropriate.
7. Financial Risk Management Framework
I n the course of its business, the Company is exposed to certain financial risks namely credit risk, interest risk, currency risk & liquidity risk. The Company''s primary focus is to achieve better predictability of financial markets and seek to minimize potential adverse effects on its financial performance.
The financial risks are managed in accordance with the Company''s risk management policy which has been approved by its Board of Directors. Market Risk
Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates etc. could affect the Company''s income or the value of its holdings of financial instruments including cash flow. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while maximizing the return.
Currency Risk
The Company''s exposure to currency risk relates primarily to the Company''s operating activities including anticipated sales, purchases and borrowings where the transactions are denominated in a currency other than the Company''s functional currency.
The Company''s foreign currency exposures are managed in accordance with its Foreign Exchange Risk Management Policy which has been approved by its Board of Directors. The Company hedges its foreign currency risk mainly by way of Forward Covers. Other derivative instruments may be used if deemed appropriate.
b) Interest Rate Risk
The Company uses a mix of cash and borrowings to manage the liquidity and fund requirements of its day-to-day operations. Further, certain interest bearing liabilities carry variable interest rates.
Interest Rate risk on variable rate borrowings is managed by way of interest rate swaps.
Hedge Accounting : Interest Rate Swaps
Interest Rate Swaps entered into by the Company meet the requirements for hedge accounting under Ind AS 109 - Financial Instruments, and thus are accounted as such.
d) Credit Risk Management
Credit Risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Company''s exposure are continuously monitored.
e) Financial Guarantees
I n addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Company''s maximum exposure in this respect is the maximum amount the Company could have to pay if the guarantee is called on. However, financial guarantees are accounted as explained in note 2 (k).
f) Trade Receivables
The Company applies the simplified approach to providing for expected credit losses prescribed by Ind AS 109, which permits the use of the lifetime expected loss provision for all trade receivables. The Company has computed expected credit losses based on a provision matrix which uses historical credit loss experience of the Company. Forward-looking information (including macroeconomic information) has been incorporated into the determination of expected credit losses. The Company has taken dealer deposits, bank guarantees etc. which are considered as collateral and these are considered in determination of expected credit losses, where applicable.
g) The Company''s maximum exposure to credit risk in respect of Financial Guarantee contracts are disclosed in note 35 (h).
I n respect of other financial assets, the maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets.
h) Liquidity Risk Management Maturity profile of financial liabilities
The following tables detail the Company''s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows.
The amounts included above for financial guarantee contracts are the maximum amounts the Company could be forced to settle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty to the guarantee. Based on expectations at the end of the reporting period, the Company considers that it is more likely than not that such an amount will not be payable under the arrangement.
The following table details the Company''s liquidity analysis for its derivative financial instruments. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves at the end of the reporting period.
I f the change in rates decline by a similar percentage, there will be opposite impact of similar amount on Profit Before Tax and Pre-tax Equity.
The sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.
Interest Rate sensitivity
The sensitivity analysis below have been determined based on exposure to interest rate for both derivative and non-derivative instruments at the end of reporting period. For floating rate liabilities, analysis is prepared assuming the amount of liability outstanding at the end of the reporting period was outstanding for the whole year.
I f the change in rates decline by a similar percentage, there will be opposite impact of similar amount on Profit Before Tax and Pre-tax Equity.
j) Offsetting of balances
The Company has not offset financial assets and financial liabilities.
k) Collaterals
The Company has availed working capital facilities and other non-fund based facilities viz. bank guarantees and letters of credit, which are secured by hypothecation of book debts, receivables, outstanding monies and all other current assets.
Except for the above, carrying value of Other financial assets/liabilities represent reasonable estimate of fair value. There were no transfers between Level 1 and Level 2 during the year.
36. Related Party Disclosures |
||||
(a) |
Related parties where control exists : Subsidiaries : |
|||
Sl. No. |
Name of the Company |
Sl. No. |
Name of the Company |
|
1 |
2 x 2 Logistics Private Limited (w.e.f. 10th November, 2017) |
48 |
Infinity Hospitality Group Company Limited |
|
2 |
Anthurium Developers Limited |
49 |
Ki |
nteisto Oy Himoksen Tahti 2 |
3 |
Arabian Dreams Hotel Apartments LLC |
50 |
Ki |
nteisto Oy Himos Gardens |
4 |
Are Villa 3 AB (w.e.f. 26th January, 2018) (Formerly known as |
51 |
Ki |
nteisto Oy Katinnurkka |
Visionsbolaget 12191 AB) |
52 |
Ki |
nteisto Oy Kuusamon Pulkkajarvi 1 |
|
5 |
Are Villa 4 AB (w.e.f. 26th January, 2018) (Formerly known as |
53 |
Ki |
nteisto Oy Kylpylantorni 1 |
Visionsbolaget 12192 AB) (Upto 8th March, 2018) |
54 |
Ki |
nteisto Oy Mallosniemi |
|
6 |
Are Villas 1 AB |
|||
55 |
Ki |
nteisto Oy Rauhan Liikekiinteistot 1 |
||
7 |
Are Villas 2 AB |
|||
Astra Solren Private Limited |
56 |
Ki |
nteisto Oy Rauhan Ranta 1 |
|
8 |
||||
Auto Digitech Private Limited |
57 |
Ki |
nteisto Oy Rauhan Ranta 2 |
|
9 |
||||
Bristlecone (Malaysia) Sdn. Bhd. |
58 |
Ki |
nteisto Oy Spa Lofts 2 |
|
10 |
||||
11 |
Bristlecone (Singapore) Pte. Limited |
59 |
Ki |
nteisto Oy Spa Lofts 3 |
12 |
Bristlecone Consulting Limited |
60 |
Ki |
nteisto Oy Tenetinlahti |
13 |
Bristlecone GmbH |
61 |
Ki |
nteisto Oy Tiurunniemi |
14 |
Bristlecone Inc. |
62 |
Ki |
nteisto Oy Vanha Ykkostii |
15 |
Bristlecone India Limited |
63 |
Kismat Developers Private Limited (Upto 28th December, 2017) |
|
16 |
Bristlecone International AG |
64 |
Knowledge Township Limited |
|
17 |
Bristlecone Limited |
65 |
Kota Farm Services Limited |
|
18 |
Bristlecone Middle East DMCC |
66 |
Lords Freight (India) Private Limited (w.e.f. 10th November, 2017) |
|
19 |
Bristlecone UK Limited |
67 |
M&M Benefit Trust |
|
20 |
BSA Company Limited (Upto 30th June, 2017) |
68 |
Mahindra & Mahindra ESOP Trust |
|
21 |
Classic Legends Private Limited (Upto 30th June, 2017) |
69 |
Mahindra Consulting Engineers Limited ESOP Trust |
|
22 |
Cleansolar Renewable Energy Private Limited |
70 |
MachinePulse Tech Private Limited |
|
23 |
Covington S.a.r.l. |
71 |
Mahindra & Mahindra Contech Limited |
|
24 |
Daiya Computer Services Co., Ltd. |
72 |
Mahindra & Mahindra Financial Services Limited |
|
25 |
Daiya Kikou Co., Ltd. (Upto 27th October, 2017) |
73 |
Mahindra Agri Solutions Limited |
|
26 |
Deep Mangal Developers Private Limited |
74 |
Mahindra Airways Limited |
|
27 |
Defence Land Systems India Limited (Upto 18th October, 2017) |
75 |
Mahindra and Mahindra South Africa (Proprietary) Limited |
|
28 |
Divine Solren Private Limited |
76 |
Mahindra Asset Management Company Private Limited |
|
29 |
EPC Industrie Limited |
77 |
Mahindra Auto Steel Private Limited |
|
30 |
Erkunt Sanayi A.S. (w.e.f. 1st December, 2017) |
78 |
Mahindra Automobile Distributor Private Limited |
|
31 |
Erkunt Traktor Sanayii A.S. (w.e.f. 1st December, 2017) |
79 |
Mahindra Automotive Australia Pty. Limited |
|
32 |
Gables Promoters Private Limited |
80 |
Mahindra Automotive North America Inc. (w.e.f. 25th April, 2017) |
|
33 |
Gateway Housing Company Limited (Upto 27th February, 2018) |
81 |
Mahindra Construction Company Limited |
|
34 |
Gromax Agri Equipment Limited (Formerly known as Mahindra Gujarat Tractor Limited) |
82 |
Mahindra Consulting Engineers Limited |
|
35 |
HCR Management Oy |
83 |
Mahindra Defence Naval Systems Limited (Formerly known as Mahindra Defence Naval Systems Private Limited) |
|
36 |
Heritage Bird (M) Sdn. Bhd. |
|||
84 |
Mahindra Defence Systems Limited |
|||
37 |
Hisarlar ithalat ihracat Pazarlama Anonim §irketi |
|||
38 |
Hisarlar Makina Sanayi ve Ticaret Anonim §irketi |
85 |
Mahindra do Brasil Industrial Ltda. |
|
39 |
Holiday Club Canarias Investments S.L.U. |
86 |
Mahindra ''Electoral Trust'' Company |
|
40 |
Holiday Club Canarias Resort Management S.L.U. |
87 |
Mahindra Electric Mobility Limited |
|
41 |
Holiday Club Canarias Sales & Marketing S.L.U. |
88 |
Mahindra Electrical Steel Private Limited |
|
42 |
Holiday Club Resorts Oy |
89 |
Mahindra eMarket Limited |
|
43 |
Holiday Club Resorts Rus LLC |
90 |
Mahindra Emirates Vehicle Armouring FZ-LLC |
|
44 |
Holiday Club Sport and Spahotels AB |
(w.e.f. 15th October, 2017) |
||
45 |
Holiday Club Sweden Ab |
91 |
Mahindra Engineering and Chemical Products Limited |
|
46 |
Industrial Cluster Private Limited (Upto 17th September, 2017) |
92 |
Mahindra Europe S.r.l. |
|
47 |
Industrial Township (Maharashtra) Limited |
93 |
Mahindra First Choice Wheels Limited ESOP Trust |
36. Related Party Disclosures (contd.) |
|||
Sl. No. |
Name of the Company |
Sl. No. |
Name of the Company |
94 |
Mahindra First Choice Services Limited |
142 |
Mega Suryaurja Private Limited (Formerly known as Mahindra |
95 |
Mahindra First Choice Wheels Limited |
Suryaurja Private Limited) |
|
96 |
Mahindra Fresh Fruits Distribution Holding Company (Europe) |
143 |
MH Boutique Hospitality Limited |
B.V. (w.e.f. 17th November, 2017) |
144 |
MHR Holdings (Mauritius) Limited |
|
97 |
Mahindra Graphic Research Design S.r.l. |
145 |
Mahindra Holidays & Resorts India Limited ESOP Trust |
98 |
Mahindra Greenyard Private Limited |
146 |
Mitsubishi Mahindra Agricultural Machinery Co., Ltd. |
99 |
Mahindra Heavy Engines Limited |
147 |
Mitsubishi Noki Hanbai Co., Ltd. |
100 |
Mahindra Holdings Limited |
148 |
Mahindra & Mahindra Financial Services Limited ESOP Trust |
101 |
Mahindra Holidays & Resorts India Limited |
149 |
Moonshine Construction Private Limited |
102 |
Mahindra Hotels and Residences India Limited |
150 |
Mumbai Mantra Media Limited |
103 |
Mahindra HZPC Private Limited |
151 |
NBS International Limited |
104 |
Mahindra Infrastructure Developers Limited |
152 |
Neo Solren Private Limited |
105 |
Mahindra Insurance Brokers Limited |
153 |
OFD Holding B.V. |
106 |
Mahindra Integrated Business Solutions Private Limited |
||
154 |
Officemartindia.com Limited |
||
107 |
Mahindra Integrated Township Limited |
||
108 |
Mahindra International UK Limited |
155 |
Origin Direct Asia (Shanghai) Trading Company Limited |
109 |
Mahindra Intertrade Limited |
156 |
Origin Direct Asia Ltd. |
110 |
Mahindra Lifespace Developers Limited |
157 |
Origin Fruit Direct B.V. |
111 |
Mahindra Logistics Limited (w.e.f. 10th November, 2017) |
158 |
Origin Fruit Services South America SpA |
112 |
Mahindra Marine Private Limited |
159 |
Orizonte Business Solutions Limited |
113 |
Mahindra Mexico, S. de. R. L. |
160 |
Ownership Services Sweden Ab |
114 |
Mahindra MiddleEast Electrical Steel Service Centre (FZC) |
161 |
Peugeot Motocycles Deutschland GmbH |
115 |
Mahindra MSTC Recycling Private Limited |
162 |
Peugeot Motocycles Italia S.p.A. |
116 |
Mahindra Namaste Limited |
163 |
Peugeot Motocycles S.A.S. |
117 |
Mahindra North American Technical Center, Inc. |
164 |
Raigad Industrial & Business Park Limited |
118 |
Mahindra Overseas Investment Company (Mauritius) Limited |
(Upto 28th December, 2017) |
|
119 |
Mahindra Racing S.p.A. |
165 |
Rathna Bhoomi Enterprises Private Limited |
120 |
Mahindra Racing UK Limited |
166 |
Retail Initiative Holdings Limited |
121 |
Mahindra Renewables Private Limited |
167 |
Ryono Asset Management Co., Ltd. |
122 |
Mahindra Residential Developers Limited |
168 |
Ryono Engineering Co., Ltd. |
123 |
Mahindra Retail Private Limited |
169 |
Ryono Factory Co., Ltd. |
124 |
Mahindra Rural Housing Finance Limited |
170 |
Ssangyong European Parts Center B.V. |
125 |
Mahindra Steel Service Centre Limited |
171 |
Ssangyong Motor (Shanghai) Company Limited |
126 |
Mahindra Susten Private Limited |
172 |
Ssangyong Motor Company |
127 |
Mahindra Telecom Energy Management Services Limited |
173 |
ST-42-Jupiter Trust A Jan 13-Axis/ITSL (Upto 26th May, 2017) |
(w.e.f 25th June, 2017) |
174 |
ST-43-MM TRUST MAR 13 I-IDBI/ITSL (Upto 29th May, 2017) |
|
128 |
Mahindra Telecommunications Investment Private Limited |
175 |
ST-44-MM TRUST MAR 13 II-Citi/ITSL (Upto 29th May, 2017) |
(Upto 27th February, 2018) |
176 |
ST-46-MM TRUST MAR 13 IV-HDFC/ITSL (Upto 29th May, 2017) |
|
129 |
Mahindra Tractor Assembly Inc. |
||
177 |
ST-47-MM TRUST MARCH 14 I-IDBI/ITSL (Upto 29th May, 2017) |
||
130 |
Mahindra Trucks and Buses Limited |
||
Mahindra Trustee Company Private Limited |
178 |
ST-48-MM TRUST MARCH 14 II-YES/ITSL (Upto 26th May, 2017) |
|
131 |
|||
Mahindra Two Wheelers Europe Holdings S.a.r.l. |
179 |
ST-49-MM TRUST MARCH 14 III-HDFC/ITSL (Upto 29th May, 2017) |
|
132 |
|||
133 |
Mahindra Two Wheelers Limited |
180 |
ST-51-MM TRUST SEPTEMBER 14 -YES/ITSL |
134 |
Mahindra USA Inc. |
181 |
ST-52-MM TRUST NOVEMBER 14 I-ICICI/ITSL |
135 |
Mahindra Vehicle Manufacturers Limited |
182 |
ST-53-MM TRUST Feb 15-ICICI/ITSL |
136 |
Mahindra Vehicle Sales and Service Inc. (w.e.f. 6th June, 2017) |
183 |
ST-54-MM TRUST Mar 15 I-ICICI/ITSL |
137 |
Mahindra Water Utilities Limited |
184 |
ST-55-MM TRUST Mar 15 II-HDFC/ITSL |
138 |
Mahindra West Africa Limited |
185 |
Sunrise Initiatives Trust |
139 |
Mahindra World City (Maharashtra) Limited |
186 |
Suomen Vapaa-aikakiinteistot Oy LKV |
140 |
Mahindra Waste To Energy Solutions Limited (w.e.f 25th June, 2017) |
187 |
Supermarket Capri Oy |
(Formerly known as Mahindra Waste Energy Solutions Limited) |
188 |
Topical Builders Private Limited (Upto 28th December, 2017) |
|
141 |
Marvel Solren Private Limited |
189 |
Trringo.com Limited |
Note: a) Inter corporate deposits given and repaid during the year amounting to Rs. 344.55 crores (2017 : Rs. 324.24 crores) were given to Mahindra HZPC Private Limited (subsidiary), Mahindra Lifespace Developers Limited (subsidiary), Mahindra Trucks and Buses Limited (subsidiary), Trringo.com Limited (subsidiary), Orizonte Business Solutions Limited (subsidiary), Mahindra World City (Jaipur) Limited (joint venture), Kotak Mahindra Prime Limited and Kotak Mahindra Investment Limited.
b) Refer note 6 for investments.
Domestic includes sales to customers located in India and service income accrued in India.
Overseas includes sales and services rendered to customers located outside India.
Information about major customers
During the year ended 31st March, 2018 revenues from transactions with a single external customer did not amount to 10% or more of the Company''s revenues from external customers.
8. Contingent Liability & Commitments :
(A) Contingent Liability :
(a) Claims against the Company not acknowledged as debts comprise of :
(i) Excise Duty, Sales Tax and Service Tax claims disputed by the Company relating to issues of applicability and classification aggregating Rs. 2,240.66 crores (2017 : Rs. 3,536.07 crores) before tax.
(ii) Other matters (excluding claims where amounts are not ascertainable) : Rs. 27.38 crores (2017 : Rs. 28.79 crores) before tax.
(b) Taxation matters:
(i) Demands against the Company not acknowledged as debts and not provided for, in respect of which the Company is in appeal and exclusive of the effect of similar matters in respect of assessments remaining to be completed.
â Income-tax : Rs. 904.43 crores (2017 : Rs. 627.66 crores).
(ii) Items in respect of which the Company has succeeded in appeal, but the Income-tax Department is pursuing/likely to pursue in appeal/reference and exclusive of the effect of similar matters in respect of assessments remaining to be completed :
â Income-tax matters : Rs. 64.17 crores (2017 : Rs. 110.78 crores).
(c) The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) by its order dated 7th December, 2009 has rejected the Company''s appeal against the order dated 30th March, 2005 passed by the Commissioner of Central Excise (Adjudication), Navi Mumbai confirming the demand made on the Company for payment of differential excise duty (including penalty) of Rs. 304.10 crores in connection with the classification of Company''s Commander range of vehicles, during the years 1991 to 1996. Whilst the Company had classified the Commander range of vehicles as 10-seater attracting a lower rate of excise duty, the Commissioner of Central Excise (Adjudication), Navi Mumbai, has held that these vehicles could not be classified as 10-seater as they did not fulfil the requirement of 10-seater vehicles, as provided under the Motor Vehicles Act, 1988 (MVA) read with Maharashtra Motor Vehicles Rules, 1989 (MMVR) and as such attracted a higher rate of excise duty. The Company has challenged the CESTAT order in the Supreme Court.
I n earlier collateral proceedings on this issue, the CESTAT had, by an order dated 19th July, 2005 settled the controversy in the Company''s favour. The CESTAT had accepted the Company''s submission that MVA and MMVR could not be referred to for determining the classification for the purpose of levy of excise duty and rejected the Department''s appeal against the order of the Collector, Central Excise classifying the Commander range of vehicles as 10-seater. The Department had challenged the CESTAT order in the Supreme Court.
Without prejudice to the grounds raised in this appeal, the Company has paid an amount of Rs. 40.00 crores in January, 2010. The Supreme Court has admitted the Company''s appeal and has stayed the recovery of the balance amount till further orders.
Both these orders of the Tribunals were heard and disposed off by the Honorable Supreme Court, in August 2014. Since contrary views were expressed by the Tribunals in two parallel proceedings, the Honorable Supreme Court directed that a larger bench of the Tribunal be constituted to hear the appeals without expressing any opinion on the issues.
The Larger Bench of the CESTAT heard the matter in February, 2015 and by an order dated 27th February, 2015, remanded the matter to the Commissioner of Central Excise for consideration of the case afresh keeping all issues open. The matter is presently pending before the Honorable Commissioner. The Company strongly believes, based on legal advice it has received, that it has a good case on merits and would eventually succeed in the matter. As regards Commander case the matter is still pending adjudication before the Commissioner. However, pending the final outcome, basis the earlier adjudication order, the Company has reflected the above amount aggregating Rs. 304.10 crores ( duty penalty) and the interest of Rs. 390.72 crores accrued on the same upto 31st March, 2018, under note (a)(i) above.
I n another case relating to Armada range of vehicles manufactured during the years 1992 to 1996, by the Company at its Nashik facility, the Commissioner of Central Excise, Nashik passed an order dated 20th March, 2006 confirming a demand of Rs. 24.75 crores, on the same grounds as adopted for Commander range of vehicles. This matter was heard by the Honorable Tribunal at Mumbai, which was pleased to allow the Company''s appeal.
(d) I n respect of (a) & (b) above, it is not practicable for the Company to estimate the closure of these issues and the consequential timings of cash flows, if any.
(B) Commitments :
The estimated amount of contracts remaining to be executed on capital account and not provided for as at 31st March, 2018 is Rs. 888.09 crores (2017 : Rs. 965.43 crores) and other commitment as at 31st March, 2018 is Rs. 7.50 crores (2017 : Rs. 7.50 crores).
9. Research and Development expenditure
(a) In recognized Research and Development units :
(i) Expensed to Profit or Loss, including certain expenditure based on allocations made by the Company, aggregate Rs. 822.00 crores (2017 : Rs. 804.56 crores) [excluding depreciation and amortization of Rs. 564.24 crores (2017 : Rs. 474.88 crores)].
(ii) Development expenditure incurred during the year Rs. 830.39 crores (2017 : Rs. 716.42 crores).
(iii) Capitalization of assets Rs. 163.97 crores (2017 : Rs. 120.12 crores).
(b) In other units :
(i) Expensed to Profit or Loss, including certain expenditure based on allocations made by the Company, aggregate Rs. 75.05 crores (2017 : Rs. 84.12 crores) [excluding depreciation and amortization of Rs. 25.88 crores (2017 : Rs. 29.33 crores)].
(ii) Development expenditure incurred during the year Rs. 154.64 crores (2017 : Rs. 101.88 crores).
(iii) Capitalization of assets Rs. 9.34 crores (2017 : Rs. 29.97 crores).
10. The Scheme of Arrangement (''The Scheme'') for merger of Two Wheeler business of the Company''s subsidiary, Mahindra Two Wheelers Limited (MTWL), with the Company has been approved by the Mumbai Bench of National Company Law Tribunal and on completion of the required formalities on 25th October, 2017, the Scheme has become effective from appointed date i.e., 1st October, 2016. The merger has been accounted under the ''pooling of interests'' method in accordance with Appendix C of Ind AS 103 ''Business Combinations'' and comparatives have been restated for merger from the beginning of the previous year i.e. 1st April, 2016. Further, in terms of the Scheme, 5,03,888 Ordinary (Equity) shares (pre-bonus) of Rs. 5 each of the Company have been issued and allotted as fully paid up to the minority shareholders of MTWL in the ratio of 1 (One) Ordinary (Equity) Share of Rs. 5 each fully paid-up in the capital of the Company for every 461 (Four Hundred and Sixty One) fully paid-up Equity Shares held in MTWL. Consequently, an amount of Rs. 335.87 crores representing difference between the consideration issued and value of net identifiable assets acquired has been transferred to Capital Reserve.
11. Previous year''s figures have been regrouped/reclassified wherever necessary.
Mar 31, 2018
1.Certain matters relating to erstwhile Satyam Computer Services Limited (erstwhile Satyam):
In the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtors position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (''SFIO'')/Registrar of Companies (''ROC''), Directorate of Enforcement (''ED''), Central Bureau of Investigation (''CBI'') had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
In 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which have since been compounded. Further, certain non-compliances/breaches of various laws and regulations by the erstwhile Satyam under the former Management (prior to Government nominated Board) were identified by various agencies. These have been responded to/appropriately addressed by the erstwhile Satyam/the Company and the Company does not expect any further proceedings in this regard.
On May 22, 2013, the ED had issued a show-cause notice to the erstwhile Satyam for contravention of provisions of the Foreign Exchange Management Act, 1999 (''FEMA'') for alleged non-repatriation of American Depository Receipts (''ADR'') proceeds aggregating to USD 39.2 Million. The Company has responded to the ED''s show-cause notice on March 28, 2014 and has not received any further communication in this regard.
The ED had also issued a show-cause notice to the erstwhile Satyam on April 28, 2011 for contravention of the provisions of FEMA and the Foreign Exchange Management (Realization, Repatriation and Surrender of Foreign Exchange) Regulations, 2000, in respect of the non-realization and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period July 1997 to December 31, 2002. The erstwhile Satyam has responded to the show-cause notice and has not received any further communication in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, had been made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Management''s notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
Proceedings in relation to ''Alleged Advances'':
Pursuant to the aforesaid letter dated January 7, 2009, the erstwhile Satyam received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as ''alleged advances''). These letters were followed by legal notices from these companies dated August 4/5, 2009, claiming repayment of the alleged advances aggregating Rs, 12,304 Million stated to be given as temporary advances but without any evidence in support of the nature of these transactions. This is also borne out in the internal forensic investigation. The legal notices also claimed damages/compensation @18% per annum from the date of the advances till the date of repayment. The erstwhile Satyam has not acknowledged any liability to any of the 37 companies and has replied to the legal notices stating that the claims are legally untenable.
The 37 companies have filed petitions/suits for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), with a prayer that these companies be declared as indigent persons for seeking exemption from payment of requisite court fees.
One petition where court fees have been paid, the pauper petition was converted into a suit which is pending disposal. The petitions filed by remaining 36 companies are before the Court, at various stages of rejection of pauperism/trial of pauperism/inquiry. In one petition, the delay in submission of the petition has been condoned by the Court and the Company has obtained an interim stay Order from the Hon''ble High Court of Andhra Pradesh, which has remanded the matter to the lower Court directing to consider the application afresh. The Lower Court upon hearing the application has condoned the delay in re-submission of pauper petition. The Company has challenged the said order in Revision before the High Court of Andhra Pradesh, which is pending hearing. In another development, the Company has also filed a Revision against the orders of the Lower Court in the application filed by the Company to recall the Order in numbering the pauper petition as Original Petition. Hon''ble High Court has been pleased to stay the proceedings until further orders.
The Hon''ble High Court in its Order approving the merger of the erstwhile Satyam with the Company, further held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in their names and not disclosing them as creditors and in disclosing such amounts as ''Amounts pending investigation suspense account (net)'' in the financial statements. The Hon''ble High Court held, inter-alia, that the contention of the 37 companies that Satyam is retaining the money, i.e. the alleged advances, of the ''creditors'' and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved beyond doubt which is not so in this case.
The said 37 companies have filed appeals before the Division Bench of the Hon''ble High Court of Andhra Pradesh, against the Orders of the Hon''ble High Court of Andhra Pradesh and the Hon''ble High Court of Judicature at Bombay sanctioning the scheme of merger of Satyam Computer Services Limited (Satyam) with the Company w.e.f. April 1, 2011, which are yet to be heard. One of the aforesaid companies has also appealed against the Order rejecting the Petition for winding-up of the erstwhile Satyam. These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions. In furtherance to the investigation, certain fixed deposits of the Company with certain banks, then aggregating to '' 8,220 Million were alleged by ED to be ''proceeds of crime'' and were provisionally attached vide Order dated October 18, 2012 by the ED (the Order). The Hon''ble High Court of Andhra Pradesh (the Court) had, pending further Orders in the Writ Petition, granted stay of the said Order and all proceedings thereto vide its Order dated December 11, 2012. The main Writ Petition is pending for final hearing. Meanwhile, the ED had challenged this interim Order passed by the Single Judge before the Division Bench of the Court. Vide order dated December 31, 2014, the Hon''ble High Court upon hearing the matter, has dismissed the appeal filed by ED and affirmed the stay granted by the Single Judge. Consequently, out of the aforesaid fixed deposits which were attached, fixed deposits aggregating Rs, 3,570 Million have been redeemed. Certain banks have not honored the redemption claim and the Company is pursuing the matter legally.
Criminal prosecution was initiated by the ED against SCSL, since merged with Tech Mahindra Limited (Company) under Section 3 of The Prevention of Money-Laundering Act, 2002 for alleged money laundering along with 212 accused person. Upon an application challenging the prosecution against the Company, the Hon''ble High Court of Andhra Pradesh quashed the proceedings by its Order dated December 22, 2014. The appeal preferred by the ED challenging the order of quashing the prosecution before the Division Bench of the High Court was dismissed by an order dated March 30, 2017 and confirmed the order of quashing.
A Special Leave Petition was filed by ED before the Hon''ble Supreme Court of India. By an order dated December 8, 2017, the Hon''ble Supreme Court dismissed the SLP filed by the ED and affirmed the order of the Single Judge quashing the prosecution against the Company.
In view of the aforesaid developments and based on an independent legal opinion the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon is not legally tenable. Consequently, pending the final outcome of the proceedings, as a matter of prudence, the Company has accounted and disclosed the amount of Rs, 12,304 Million as ''Suspense Account (net)''. Although remote, in the event that these cases are decided against the Company, there would be no effect on the financial results or financial position of the Company.
2. Claims by certain Shareholders of erstwhile Satyam
In terms of the Settlement of claims made by Aberdeen Asset Management PLC., UK and Aberdeen Claims Administration Inc., USA, (together referred to as ''Aberdeen'') the erstwhile Satyam has deposited a total amount of USD 80.16 Million towards the Settlement Amount and interest in an Escrow Account during the financial year ended March 31, 2013.
The Commissioner of Income Tax, Mumbai has filed two writ petitions before the Hon''ble High Court of Bombay, seeking to set aside the orders of Authority for Advance Ruling (''AAR'') dated February 15, 2016, which ruled that no withholding tax is applicable for remittance of the Settlement Amount. The above writ petitions have been disposed off for non-removal of office objections vide order dated August 8, 2017. The Company has communicated with Aberdeen requesting for an indemnity (if the AAR decision is reversed by a higher authority) prior to remitting the funds.
3. Details of the investment property and its fair value
The Company has obtained the fair valuation of its investment property situated at Vizag and Bahadurpally as at March 31, 2018 from a Government registered independent valuer who holds recognized and relevant professional qualification and has experience in the location and category of the investment property being valued.
During the year ended March 31, 2018, the Company has leased out a commercial building with related fixtures at Vizag and accordingly has reclassified Rs, 538 Million from property, plant & equipment to investment property.
4. Dispute with Venture Global Engineering LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (''VGE'') incorporated Satyam Venture Engineering Services Private Limited (''SVES'') in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the ''SHA''), to purchase VGE''s shares in SVES. The erstwhile Satyam''s action, disputed by VGE, was upheld in arbitration by the London Court of International Arbitration vide its award in April 2006 (the ''Award'').
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGE''s challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honour the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyam''s nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
In the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad, before the High Court (SVES Appeal).
The High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (''SLP'') before the Supreme Court of India challenging the judgment of the High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGE''s challenge to the Award. The said Petitions are pending before the Supreme Court. The Hon''ble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLP''s before the Chief Justice of India for appropriate further course of action.
In a related development, in December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGE''s petition to amend the complaint. In June 2013, VGE''s appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiff''s Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
5.Foreign currency receivables
In respect of overdue foreign currency receivables for the period''s up to March 31, 2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. Erstwhile Satyam under the Management post Government nominated Board has fully provided for these receivables.
6. Details of employee benefits as required by the IND AS-19 - Employee Benefits are as under:
i. Defined Contribution Plans
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension
Scheme Fund which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
- Rs, 2,279 Million (March 31, 2017: Rs, 2,211 Million) for Provident Fund contributions;
- Rs, 395 Million (March 31, 2017: Rs, 415 Million) for Superannuation Fund contributions; and
- Rs, 25 Million (March 31, 2017: Rs, 22 Million) for National Pension Scheme contributions.
- The discount rate is based on the prevailing market yields of Indian Government Bonds as at the balance sheet date for the estimated terms of the obligations.
- The estimate of future salary increase takes into account inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
The sensitivity results above determine their individual impact on Defined Benefit Obligation. In reality, the plan is subject to multiple external experience items which may move the defined Benefit Obligation in similar or opposite directions, while the Plan''s sensitivity to such changes can vary over time.
* Includes an amount of Rs, 13 Million (March 31, 2017: Rs, 61 Million) paid to the erstwhile auditors.
7. Segment information has been presented in the Consolidated Financial Statements as permitted by Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
8. Based on the information available with the Company, there are no outstanding amounts payable to creditors who have been identified as "suppliers" within the meaning of "Micro, Small and Medium Enterprises Development (MSMED) Act, 2006".
9.Financial Risk Management Framework
Tech Mahindra Limited is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company''s Board of Directors has overall responsibility for the establishment and oversight of the Company''s risk management framework. The Company''s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
*The fair value of cash and cash equivalents, other balances with bank, trade receivables, unbilled revenues, loans, trade payables, borrowings and certain other financial assets and liabilities approximate their carrying amount largely due to the short term nature of these instruments.
Fair value Hierarchy:
The following table summarizes financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions 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, 141,581 and Rs, 119,710 Million as of March 31, 2018 and March 31, 2017 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Company''s maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on. (Refer Note 31.5 above).
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 Company''s exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2018 and March 31, 2017. The concentration of credit risk is limited due to the fact that the customer base is large.
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 currency risk.
a) Foreign Currency exchange rate risk
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great
Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
b) Forward Exchange/Contracts
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Company''s foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period between 1 day and 2 years.
Current tax for the year ended March 31, 2018 includes tax expense with respect to foreign branches amounting to '' 1,310 Million (year ended March 31, 2017: '' 1,214 Million).
Current tax expense for the year ended March 31, 2018 is net of reversal of provision of '' 1,805 Million (year ended March 31, 2017: '' 632 Million) pertaining to earlier periods written back.
Deferred Tax:
The following is the analysis of Deferred Tax Assets presented in the Balance Sheet:
10. Employee Stock Option Scheme
i. ESOP 2000 & ESOP 2010:
The Company has instituted ''Employee Stock Option Plan 2000'' (ESOP 2000) and ''Employee Stock Option Plan 2010'' (ESOP 2010) for eligible employees and Directors of the Company and its subsidiaries. The vesting pattern of the schemes has been provided below. The options can be exercised over a period of 5 years from the date of the grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Company at the time of grant for ESOP 2000 and exercise price as determined by the Nomination and remuneration Committee for ESOP 2010.
ii. ESOP 2006 & ESOP 2014:
The Company has instituted ''Employee Stock Option Plan 2006'' (ESOP 2006) and ''Employee Stock Option Plan 2014'' (ESOP 2014) for eligible employees and Directors of the Company and its subsidiaries. In terms of the said plan, the Nomination and Remuneration Committee has granted options to the employees of the Company and its subsidiaries. The maximum exercise period is 7 years from the date of grant for ESOP 2006 and options can be exercised over a period of 5 years from the date of each vesting for ESOP 2014.
iii. TML ESOP - B 2013:
Erstwhile Satyam has established a scheme ''Associate Stock Option Plan - B'' (ASOP - B) under which 28,925,610 options were available for grant/exercise at the time the Scheme of Amalgamation became effective. Post-merger, these options were adjusted in terms of the approved Scheme of Amalgamation. Each option entitles the holder one equity share of the Company. These options vest over a period of 1 to 4 years from the date of the grant. Upon vesting, employees have 5 years to exercise the options. Post-merger, the name of the ESOP scheme has been changed to ''TML ESOP B 2013''.
iv. TML- RSU:
The erstwhile Satyam has established a scheme ''Associate Stock Option Plan - Restricted Stock Units (ASOP - RSUs)'' to be administered by the Administrator of the ASOP - RSUs, a committee appointed by the Board of Directors of the erstwhile Satyam in May 2000. Under the scheme, 1,529,412 equity shares (equivalent number of equity shares post-merger) are reserved to be issued to eligible associates at a price to be determined by the Administrator which shall not be less than the face value of the share. These RSUs vest over a period of 1 to 4 years from the date of the grant. The maximum time available to exercise the options upon vesting is five years from the date of each vesting. Post-merger, the name of the ESOP scheme has been changed to TML RSU.
v. ESOP - A:
Erstwhile Satyam had established an ESOP scheme viz., ''Associate Stock Option Plan - A'' (ASOP - A) formulated prior to the SEBI Guidelines on ESOP and ESPS issued in 1999. This plan was administered through a Trust viz., Satyam Associates Trust (Satyam Trust). At the time the Scheme of Amalgamation and Arrangement became effective, the Satyam Trust was holding 2,055,320 shares of erstwhile Satyam, which post amalgamation were converted into 241,802 shares of the Company at the approved share exchange ratio and this scheme has been transitioned and renamed as ESOP-A. Satyam Trust grants warrants to the employees of the Company with an exercise price and terms of vesting advised by the Nomination and Remuneration Committee of the Company. Each warrant shall entitle the warrant holder to one equity share. The exercise period is 180 days from the date of each vesting.
vi. Employee Stock Option Scheme - ESOS:
Erstwhile MESL has established Employee Stock Option Scheme (ESOS) - ESOS for which 1,400,000 equity shares were earmarked. ESOS Scheme is administered through a Trust viz., MES Employees Stock Option Trust. The options under this Scheme vest over a period of 1 to 3 years from the date of the grant. Upon vesting, employees have 7 years to exercise the options. As on the effective date of amalgamation, 18,084 options were outstanding under ESOS, which were converted into equivalent 30,144 options of the Company giving effect to approved share exchange ratio, split and bonus.
xi. The employee stock compensation cost for the Employee Stock Option Plan 2010, Employee Stock Option Plan 2000, Employee Stock Option Plan- B 2013, ESOP-A, ESOP 2014 and TML-RSU schemes has been computed by reference to the fair value of share options granted and amortized over each vesting period. For the year ended March 31, 2018, the Company has accounted for employee stock compensation cost (equity settled) amounting to Rs, 713 Million (March 31, 2017: Rs, 1,066 Million). This amount is net of cost of options granted to employees of subsidiaries.
The Black and Scholes valuation model has been used for computing the weighted average fair value.
Basic earnings per share is calculated by dividing the profit attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the year including vested option exercisable for little or no consideration.
11. The previous year figures have been audited by a firm other than B S R & Co. LLP.
12. The disclosures regarding details of specified bank notes held and transacted during November 8, 2016 to December 30, 2016 has not been made since the requirement does not pertain to financial year ended March 31, 2018. Corresponding disclosure as appearing in the audited Standalone Ind AS financial statements for the period ended March 31, 2017 have been disclosed below:
"Pursuant to MCA notification dated March 30, 2017 read with Section 143 and Section 469 (1) (2) of Companies Act, 2013, the Company had not dealt in Specified Bank Notes and other notes in the form of any deposit, withdrawal, payment or receipt during the period from November 8, 2016 to December 30, 2016".
13. Previous year figures have been regrouped wherever necessary, to correspond with the current period''s classification / disclosure.
Mar 31, 2018
1.Certain matters relating to erstwhile Satyam Computer Services Limited (erstwhile Satyam):
In the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtors position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (''SFIO'')/Registrar of Companies (''ROC''), Directorate of Enforcement (''ED''), Central Bureau of Investigation (''CBI'') had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.
In 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which have since been compounded. Further, certain non-compliances/breaches of various laws and regulations by the erstwhile Satyam under the former Management (prior to Government nominated Board) were identified by various agencies. These have been responded to/appropriately addressed by the erstwhile Satyam/the Company and the Company does not expect any further proceedings in this regard.
On May 22, 2013, the ED had issued a show-cause notice to the erstwhile Satyam for contravention of provisions of the Foreign Exchange Management Act, 1999 (''FEMA'') for alleged non-repatriation of American Depository Receipts (''ADR'') proceeds aggregating to USD 39.2 Million. The Company has responded to the ED''s show-cause notice on March 28, 2014 and has not received any further communication in this regard.
The ED had also issued a show-cause notice to the erstwhile Satyam on April 28, 2011 for contravention of the provisions of FEMA and the Foreign Exchange Management (Realization, Repatriation and Surrender of Foreign Exchange) Regulations, 2000, in respect of the non-realization and repatriation of export proceeds to the extent of foreign exchange equivalent to '' 506 Million for invoices raised during the period July 1997 to December 31, 2002. The erstwhile Satyam has responded to the show-cause notice and has not received any further communication in this regard.
As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, had been made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Management''s notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.
Proceedings in relation to ''Alleged Advances'':
Pursuant to the aforesaid letter dated January 7, 2009, the erstwhile Satyam received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as ''alleged advances''). These letters were followed by legal notices from these companies dated August 4/5, 2009, claiming repayment of the alleged advances aggregating Rs, 12,304 Million stated to be given as temporary advances but without any evidence in support of the nature of these transactions. This is also borne out in the internal forensic investigation. The legal notices also claimed damages/compensation @18% per annum from the date of the advances till the date of repayment. The erstwhile Satyam has not acknowledged any liability to any of the 37 companies and has replied to the legal notices stating that the claims are legally untenable.
The 37 companies have filed petitions/suits for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), with a prayer that these companies be declared as indigent persons for seeking exemption from payment of requisite court fees.
One petition where court fees have been paid, the pauper petition was converted into a suit which is pending disposal. The petitions filed by remaining 36 companies are before the Court, at various stages of rejection of pauperism/trial of pauperism/inquiry. In one petition, the delay in submission of the petition has been condoned by the Court and the Company has obtained an interim stay Order from the Hon''ble High Court of Andhra Pradesh, which has remanded the matter to the lower Court directing to consider the application afresh. The Lower Court upon hearing the application has condoned the delay in re-submission of pauper petition. The Company has challenged the said order in Revision before the High Court of Andhra Pradesh, which is pending hearing. In another development, the Company has also filed a Revision against the orders of the Lower Court in the application filed by the Company to recall the Order in numbering the pauper petition as Original Petition. Hon''ble High Court has been pleased to stay the proceedings until further orders.
The Hon''ble High Court in its Order approving the merger of the erstwhile Satyam with the Company, further held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in their names and not disclosing them as creditors and in disclosing such amounts as ''Amounts pending investigation suspense account (net)'' in the financial statements. The Hon''ble High Court held, inter-alia, that the contention of the 37 companies that Satyam is retaining the money, i.e. the alleged advances, of the ''creditors'' and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved beyond doubt which is not so in this case.
The said 37 companies have filed appeals before the Division Bench of the Hon''ble High Court of Andhra Pradesh, against the Orders of the Hon''ble High Court of Andhra Pradesh and the Hon''ble High Court of Judicature at Bombay sanctioning the scheme of merger of Satyam Computer Services Limited (Satyam) with the Company w.e.f. April 1, 2011, which are yet to be heard. One of the aforesaid companies has also appealed against the Order rejecting the Petition for winding-up of the erstwhile Satyam. These matters have been combined for hearing.
The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions. In furtherance to the investigation, certain fixed deposits of the Company with certain banks, then aggregating to '' 8,220 Million were alleged by ED to be ''proceeds of crime'' and were provisionally attached vide Order dated October 18, 2012 by the ED (the Order). The Hon''ble High Court of Andhra Pradesh (the Court) had, pending further Orders in the Writ Petition, granted stay of the said Order and all proceedings thereto vide its Order dated December 11, 2012. The main Writ Petition is pending for final hearing. Meanwhile, the ED had challenged this interim Order passed by the Single Judge before the Division Bench of the Court. Vide order dated December 31, 2014, the Hon''ble High Court upon hearing the matter, has dismissed the appeal filed by ED and affirmed the stay granted by the Single Judge. Consequently, out of the aforesaid fixed deposits which were attached, fixed deposits aggregating Rs, 3,570 Million have been redeemed. Certain banks have not honored the redemption claim and the Company is pursuing the matter legally.
Criminal prosecution was initiated by the ED against SCSL, since merged with Tech Mahindra Limited (Company) under Section 3 of The Prevention of Money-Laundering Act, 2002 for alleged money laundering along with 212 accused person. Upon an application challenging the prosecution against the Company, the Hon''ble High Court of Andhra Pradesh quashed the proceedings by its Order dated December 22, 2014. The appeal preferred by the ED challenging the order of quashing the prosecution before the Division Bench of the High Court was dismissed by an order dated March 30, 2017 and confirmed the order of quashing.
A Special Leave Petition was filed by ED before the Hon''ble Supreme Court of India. By an order dated December 8, 2017, the Hon''ble Supreme Court dismissed the SLP filed by the ED and affirmed the order of the Single Judge quashing the prosecution against the Company.
In view of the aforesaid developments and based on an independent legal opinion the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon is not legally tenable. Consequently, pending the final outcome of the proceedings, as a matter of prudence, the Company has accounted and disclosed the amount of Rs, 12,304 Million as ''Suspense Account (net)''. Although remote, in the event that these cases are decided against the Company, there would be no effect on the financial results or financial position of the Company.
2. Claims by certain Shareholders of erstwhile Satyam
In terms of the Settlement of claims made by Aberdeen Asset Management PLC., UK and Aberdeen Claims Administration Inc., USA, (together referred to as ''Aberdeen'') the erstwhile Satyam has deposited a total amount of USD 80.16 Million towards the Settlement Amount and interest in an Escrow Account during the financial year ended March 31, 2013.
The Commissioner of Income Tax, Mumbai has filed two writ petitions before the Hon''ble High Court of Bombay, seeking to set aside the orders of Authority for Advance Ruling (''AAR'') dated February 15, 2016, which ruled that no withholding tax is applicable for remittance of the Settlement Amount. The above writ petitions have been disposed off for non-removal of office objections vide order dated August 8, 2017. The Company has communicated with Aberdeen requesting for an indemnity (if the AAR decision is reversed by a higher authority) prior to remitting the funds.
3. Details of the investment property and its fair value
The Company has obtained the fair valuation of its investment property situated at Vizag and Bahadurpally as at March 31, 2018 from a Government registered independent valuer who holds recognized and relevant professional qualification and has experience in the location and category of the investment property being valued.
During the year ended March 31, 2018, the Company has leased out a commercial building with related fixtures at Vizag and accordingly has reclassified Rs, 538 Million from property, plant & equipment to investment property.
4. Dispute with Venture Global Engineering LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (''VGE'') incorporated Satyam Venture Engineering Services Private Limited (''SVES'') in India with an objective to provide engineering services to the automotive industry.
On March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the ''SHA''), to purchase VGE''s shares in SVES. The erstwhile Satyam''s action, disputed by VGE, was upheld in arbitration by the London Court of International Arbitration vide its award in April 2006 (the ''Award'').
The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGE''s challenge of the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honour the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyam''s nominees were appointed on the Board of SVES and SVES confirmed their appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary with effect from that date.
In the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to the interests of VGE. The said suit filed by VGE is still pending before the Civil Court. The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad, before the High Court (SVES Appeal).
The High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The High Court as an interim measure ordered status quo with regard to transfer of shares. VGE has filed special leave petition against the said Order before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the High Court Order of status-quo on the transfer of shares. The Company has also filed a Special Leave Petition (''SLP'') before the Supreme Court of India challenging the judgment of the High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGE''s challenge to the Award. The said Petitions are pending before the Supreme Court. The Hon''ble Bench of Supreme Court, in view of the difference of opinion by an order dated November 1, 2017 has directed the registry to place the SLP''s before the Chief Justice of India for appropriate further course of action.
In a related development, in December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGE''s petition to amend the complaint. In June 2013, VGE''s appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiff''s Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by VGE and the Company.
5.Foreign currency receivables
In respect of overdue foreign currency receivables for the period''s up to March 31, 2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs as appropriate. Erstwhile Satyam under the Management post Government nominated Board has fully provided for these receivables.
6. Details of employee benefits as required by the IND AS-19 - Employee Benefits are as under:
i. Defined Contribution Plans
The Company makes contributions to Provident Fund, Superannuation Fund and National Pension
Scheme Fund which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.
The Company has recognized as an expense in the Statement of Profit and Loss the following:
- Rs, 2,279 Million (March 31, 2017: Rs, 2,211 Million) for Provident Fund contributions;
- Rs, 395 Million (March 31, 2017: Rs, 415 Million) for Superannuation Fund contributions; and
- Rs, 25 Million (March 31, 2017: Rs, 22 Million) for National Pension Scheme contributions.
- The discount rate is based on the prevailing market yields of Indian Government Bonds as at the balance sheet date for the estimated terms of the obligations.
- The estimate of future salary increase takes into account inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
The sensitivity results above determine their individual impact on Defined Benefit Obligation. In reality, the plan is subject to multiple external experience items which may move the defined Benefit Obligation in similar or opposite directions, while the Plan''s sensitivity to such changes can vary over time.
* Includes an amount of Rs, 13 Million (March 31, 2017: Rs, 61 Million) paid to the erstwhile auditors.
7. Segment information has been presented in the Consolidated Financial Statements as permitted by Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.
8. Based on the information available with the Company, there are no outstanding amounts payable to creditors who have been identified as "suppliers" within the meaning of "Micro, Small and Medium Enterprises Development (MSMED) Act, 2006".
9.Financial Risk Management Framework
Tech Mahindra Limited is exposed primarily to fluctuations in foreign currency exchange rates, credit risk and liquidity risk which may impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential effects on the financial performance of the Company.
The Company''s Board of Directors has overall responsibility for the establishment and oversight of the Company''s risk management framework. The Company''s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions.
*The fair value of cash and cash equivalents, other balances with bank, trade receivables, unbilled revenues, loans, trade payables, borrowings and certain other financial assets and liabilities approximate their carrying amount largely due to the short term nature of these instruments.
Fair value Hierarchy:
The following table summarizes financial assets and liabilities measured at fair value on a recurring basis and financial assets that are not measured at fair value on a recurring basis (but fair value disclosure are required):
The different levels have been defined as follows:
Level-1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level-2 - Inputs other than quoted prices included within level-1 that are observable for asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level- 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.
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 of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risk. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.
Financial instruments that are subject to concentration of credit risk principally consist of trade receivables, investments, 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 deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations and non-convertible debentures issued by institutions 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, 141,581 and Rs, 119,710 Million as of March 31, 2018 and March 31, 2017 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Company''s maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on. (Refer Note 31.5 above).
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 Company''s exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2018 and March 31, 2017. The concentration of credit risk is limited due to the fact that the customer base is large.
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 currency risk.
a) Foreign Currency exchange rate risk
The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, 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 US Dollar, Euro, Great
Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currency of the Company. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange currency risk.
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.
The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 1% against the respective functional currency of the Company.
Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.
b) Forward Exchange/Contracts
The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Company''s foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. These contracts are for a period between 1 day and 2 years.
Current tax for the year ended March 31, 2018 includes tax expense with respect to foreign branches amounting to '' 1,310 Million (year ended March 31, 2017: '' 1,214 Million).
Current tax expense for the year ended March 31, 2018 is net of reversal of provision of '' 1,805 Million (year ended March 31, 2017: '' 632 Million) pertaining to earlier periods written back.
Deferred Tax:
The following is the analysis of Deferred Tax Assets presented in the Balance Sheet:
10. Employee Stock Option Scheme
i. ESOP 2000 & ESOP 2010:
The Company has instituted ''Employee Stock Option Plan 2000'' (ESOP 2000) and ''Employee Stock Option Plan 2010'' (ESOP 2010) for eligible employees and Directors of the Company and its subsidiaries. The vesting pattern of the schemes has been provided below. The options can be exercised over a period of 5 years from the date of the grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Company at the time of grant for ESOP 2000 and exercise price as determined by the Nomination and remuneration Committee for ESOP 2010.
ii. ESOP 2006 & ESOP 2014:
The Company has instituted ''Employee Stock Option Plan 2006'' (ESOP 2006) and ''Employee Stock Option Plan 2014'' (ESOP 2014) for eligible employees and Directors of the Company and its subsidiaries. In terms of the said plan, the Nomination and Remuneration Committee has granted options to the employees of the Company and its subsidiaries. The maximum exercise period is 7 years from the date of grant for ESOP 2006 and options can be exercised over a period of 5 years from the date of each vesting for ESOP 2014.
iii. TML ESOP - B 2013:
Erstwhile Satyam has established a scheme ''Associate Stock Option Plan - B'' (ASOP - B) under which 28,925,610 options were available for grant/exercise at the time the Scheme of Amalgamation became effective. Post-merger, these options were adjusted in terms of the approved Scheme of Amalgamation. Each option entitles the holder one equity share of the Company. These options vest over a period of 1 to 4 years from the date of the grant. Upon vesting, employees have 5 years to exercise the options. Post-merger, the name of the ESOP scheme has been changed to ''TML ESOP B 2013''.
iv. TML- RSU:
The erstwhile Satyam has established a scheme ''Associate Stock Option Plan - Restricted Stock Units (ASOP - RSUs)'' to be administered by the Administrator of the ASOP - RSUs, a committee appointed by the Board of Directors of the erstwhile Satyam in May 2000. Under the scheme, 1,529,412 equity shares (equivalent number of equity shares post-merger) are reserved to be issued to eligible associates at a price to be determined by the Administrator which shall not be less than the face value of the share. These RSUs vest over a period of 1 to 4 years from the date of the grant. The maximum time available to exercise the options upon vesting is five years from the date of each vesting. Post-merger, the name of the ESOP scheme has been changed to TML RSU.
v. ESOP - A:
Erstwhile Satyam had established an ESOP scheme viz., ''Associate Stock Option Plan - A'' (ASOP - A) formulated prior to the SEBI Guidelines on ESOP and ESPS issued in 1999. This plan was administered through a Trust viz., Satyam Associates Trust (Satyam Trust). At the time the Scheme of Amalgamation and Arrangement became effective, the Satyam Trust was holding 2,055,320 shares of erstwhile Satyam, which post amalgamation were converted into 241,802 shares of the Company at the approved share exchange ratio and this scheme has been transitioned and renamed as ESOP-A. Satyam Trust grants warrants to the employees of the Company with an exercise price and terms of vesting advised by the Nomination and Remuneration Committee of the Company. Each warrant shall entitle the warrant holder to one equity share. The exercise period is 180 days from the date of each vesting.
vi. Employee Stock Option Scheme - ESOS:
Erstwhile MESL has established Employee Stock Option Scheme (ESOS) - ESOS for which 1,400,000 equity shares were earmarked. ESOS Scheme is administered through a Trust viz., MES Employees Stock Option Trust. The options under this Scheme vest over a period of 1 to 3 years from the date of the grant. Upon vesting, employees have 7 years to exercise the options. As on the effective date of amalgamation, 18,084 options were outstanding under ESOS, which were converted into equivalent 30,144 options of the Company giving effect to approved share exchange ratio, split and bonus.
xi. The employee stock compensation cost for the Employee Stock Option Plan 2010, Employee Stock Option Plan 2000, Employee Stock Option Plan- B 2013, ESOP-A, ESOP 2014 and TML-RSU schemes has been computed by reference to the fair value of share options granted and amortized over each vesting period. For the year ended March 31, 2018, the Company has accounted for employee stock compensation cost (equity settled) amounting to Rs, 713 Million (March 31, 2017: Rs, 1,066 Million). This amount is net of cost of options granted to employees of subsidiaries.
The Black and Scholes valuation model has been used for computing the weighted average fair value.
Basic earnings per share is calculated by dividing the profit attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the year including vested option exercisable for little or no consideration.
11. The previous year figures have been audited by a firm other than B S R & Co. LLP.
12. The disclosures regarding details of specified bank notes held and transacted during November 8, 2016 to December 30, 2016 has not been made since the requirement does not pertain to financial year ended March 31, 2018. Corresponding disclosure as appearing in the audited Standalone Ind AS financial statements for the period ended March 31, 2017 have been disclosed below:
"Pursuant to MCA notification dated March 30, 2017 read with Section 143 and Section 469 (1) (2) of Companies Act, 2013, the Company had not dealt in Specified Bank Notes and other notes in the form of any deposit, withdrawal, payment or receipt during the period from November 8, 2016 to December 30, 2016".
13. Previous year figures have been regrouped wherever necessary, to correspond with the current period''s classification / disclosure.
Mar 31, 2018
1 CORPORATE OVERVIEW
Mahindra & Mahindra Financial Services Limited (âthe Companyâ), incorporated and headquartered in Mumbai, India is a publicly held Non-Banking Financial Company (âNBFCâ) engaged in providing asset finance through its pan India branch network. The Company is registered as a Systemically Important Deposit Accepting NBFC as defined under Section 45-IA of the Reserve Bank of India (âRBIâ) Act, 1934 with effect from 4 September 1998. The Company is a subsidiary of Mahindra & Mahindra Limited.
a) Terms / rights attached to equity shares :
The Company has only one class of equity shares having a par value of Rs.2/- per share. Each holder of equity shares is entitled to one vote per share. The dividend proposed by the board of directors and approved by the shareholders in the annual general meeting is paid in Indian rupees. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
b) Shares issued to ESOS Trust:
The Guidance note issued by The Institute of Chartered Accountants of India on accounting for employee share-based payment requires that shares allotted to a Trust but not transferred to the employees be reduced from Share capital and Reserves. Accordingly, the Company has reduced the Share capital and Securities premium reserve in respect of outstanding equity shares pertaining to Employee Stock Option Scheme 2005 and Employee Stock Option Scheme 2010 held by the Trust, as at the year-end pending allotment of shares to eligible employees as per details provided below.
All secured loans / debentures are secured by paripassu charges on Aurangabad office and exclusive charge on receivables under loan contracts, owned assets and book debts to the extent of 100% of outstanding secured loans / debentures.
The funds raised by the Company during the year by Issue of Secured / Unsecured Non Convertible Debentures / bonds were utilised for the purpose intended, i.e. towards lending, financing, to refinance the existing indebtedness of the Company or for long-term working capital, in compliance with applicable laws.
All secured loans are secured by paripassu charges on Aurangabad office and exclusive charge on receivables under loan contracts, owned assets and book debts to the extent of 100% of outstanding secured loans / debentures.
All secured loans / debentures are secured by paripassu charges on Aurangabad office and exclusive charge on receivables under loan contracts, owned assets and book debts to the extent of 100% of outstanding secured loans / debentures.
The funds raised by the Company during the year by issue of Secured / Unsecured Non Convertible Debentures / bonds were utilised for the purpose intended, i.e. towards lending, financing, to refinance the existing indebtedness of the Company or for long-term working capital, in compliance with applicable laws.
Quoted investments of Rs. 70,251.08 lakhs [31 March 2017: Rs. 70,418.03 lakhs] are in Government Stocks as Statutory Liquid Assets as required under Section 45 IB of The Reserve Bank of India Act,1934 vide a floating charge created in favour of public deposit holders through a âTrust Deedâ with an independent trust.
iii) During the year, the Company has made following equity investments -
a) Rs.13,000.00 Lakhs (31 March 2017: Rs. 11,375.00 Lakhs) in Mahindra Rural Housing Finance Ltd., its subsidiary, by subscription to 1,30,00,000 Equity shares of Rs.10/- each for cash at Rs.100.00 per share, including premium of Rs.90.00 per equity share on a rights basis, fully paid up (31 March 2017: 1,69,77,612 Equity shares of Rs.10/- each for cash at Rs.57.00 per share, including premium of Rs.30/- per equity share, fully paid up).
b) Rs.2,900.00 Lakhs (31 March 2017: Rs. 3,045.00 Lakhs) in Mahindra Asset Management Company Private Limited, its wholly owned subsidiary, by subscription to 2,90,00,000 (31 March 2017: 3,04,50,000) Equity shares of Face Value of Rs.10/- each at par for cash fully paid up on a rights basis.
c) Rs.1,662.44 Lakhs (31 March 2017: Rs. 3,111.84 Lakhs) being additional equity infusion in Mahindra Finance USA LLC, a 49% joint venture company formed jointly with De Lage Landen Financial Services Inc. in United States.
d) During the previous year, the Company had made an additional investment of Rs.0.95 Lakh in New Democratic Electoral Trust, a Trust approved by the Central Board of Direct Taxes under Electoral Trust Scheme, 2013, by subscription to 9,500 Equity shares, including 7,000 additional Equity shares offered, of Face Value of Rs.10/- each at par for cash fully paid up on a rights basis. During the current year, there were no further investment made in New Democratic Electoral Trust.
e) Rs.700.00 lakhs in Orizonte Business Solution Limited (formerly known as âMega One Stop Farm Services Limitedâ), engaged in business of operating a Business to Business (B2B) platform âSmart shiftâ, a online logistic marketplace which connects cargo owners and transporters in India, by subscribing to preferential issue of 35,00,000 equity shares of Rs.10/- each, for cash, at a premium of Rs.10/- per share.
iv) During the year, the Company has sold 1,28,866 equity shares of face value of Rs.10/- each representing 5% of holding in subsidiary company, Mahindra Insurance Brokers Ltd., at Rs.5,044.00 per share for a consideration aggregating to Rs.6,500.00 lakhs. Consequent to the said sale transaction, the shareholding percentage of the Company stands reduced from 85% to 80%. This transaction has resulted in profit of Rs.6,497.18 lakhs on a standalone basis and the same has been shown as an Exceptional items in the Statement of profit and loss.
2 EMPLOYEE STOCK OPTION PLAN
a] The Company had allotted 134,32,750 equity shares [face value of Rs.2/- each] under Employee Stock Option Scheme 2005 at a premium of Rs.8.20 per share on December 06, 2005 and 48,45,025 Equity shares [face value of Rs.2/- each] under Employee Stock Option Scheme 2010 at par on February 03, 2011, to Mahindra and Mahindra Financial Services Limited Employeesâ Stock Option Trust set up by the Company. The Trust holds these shares for the benefit of the employees and issues them to the eligible employees as per the recommendation of the Compensation Committee. The Trust had issued 1,49,89,782 equity shares to employees up to 31 March 2018 [31 March 2017: 1,45,54,477 equity shares], of which 4,35,305 equity shares [31 March 2017: 4,40,284 equity shares] were issued during the current year. All the equity shares issued to employees during the current year are out of Employee Stock Option Scheme 2010.
f) Method used for accounting for share based payment plan
The Company has elected to use intrinsic value method to account for the compensation cost of stock options to employees of the Company. Intrinsic value is the amount by which the quoted market price of the underlying share exceeds the exercise price of the option. Employee stock compensation cost is amortized over the vesting period.
g) Fair value of options
The fair value of options have been calculated using Black Scholes Options Pricing Model and the significant assumptions made in this regards are as follows :
h] Earnings Per Share
Earnings Per Share as required by Accounting Standard 20 read with the Guidance Note on âAccounting for Employee Share-based Paymentsâ is as follows:
3 FRESH ISSUE OF EQUITY SHARE CAPITAL
The Board of Directors of the Company, at its meeting held on 1 November 2017, and special resolution passed by the members at the Extraordinary General Meeting held on 29 November 2017 had approved the infusion of share capital.
Pursuant to the passing of the above resolutions and in accordance with Chapter VIII of Securities & Exchange Board of India [Issue of Capital & Disclosure requirements] Regulations, 2009, as amended, the Company has raised funds amounting to Rs. 2,11,100.00 lakhs through allotment of fresh equity shares as per details provided below :
a] Preferential allotment of 2,50,00,000 equity shares of face value of Rs.2.00 each, at a price of Rs.422.00 each, for cash, including a premium of Rs.420.00 per equity share, aggregating to Rs.1,05,500.00 lakhs, to Mahindra & Mahindra Limited, the Holding Company;
b] Qualified Institutional Placement [QIP] of 2,40,00,000 equity shares of face value of Rs.2.00 each, at a price of Rs.440.00 each, for cash, including a premium of Rs.438.00 per equity share, aggregating to Rs. 1,05,600.00 lakhs, to Qualified Institutional Buyers [QIBâs]. The Company has utilized the entire proceeds [net of issue related expenses] from issue of equity shares through QIP for the purposes as stated in its âPlacement Documentâ.
The share issue expenses of Rs.1,310.13 lakhs has been adjusted against securities premium reserve as per the accounting policy. These equity shares were allotted on 7 December 2017.
The fresh allotment of equity shares through preferential allotment and QIP as stated above have resulted in an increase of equity share capital by Rs. 980.00 lakhs and securities premium reserve by Rs. 210120.00 lakhs.
4 PUBLIC ISSUANCE OF UNSECURED SUBORDINATED REDEEMABLE NONCONVERTIBLE DEBENTURES (NCDâS)
During the year, the Company has raised an amount of Rs. 1,15,053.13 lakhs by way of Public Issuance of Unsecured Subordinated Redeemable Non-Convertible Debentures [NCDâs] of the face value of Rs.1,000.00 each. The NCDâs were allotted on 24 July 2017 and listed on BSE Limited on 26 July 2017. The entire amount of proceeds of the issue were used for the purposes as stated in its âPlacement Documentâ and there is no unutilised amount pertaining to this issuance. The NCDâs issue expenses of Rs. 1215.07 lakhs [net of taxes] has been adjusted against securities premium reserve as per the accounting policy. The total amount of NCDs outstanding as at 31 March 2018 were Rs. 2,15,053.13 lakhs, including the amount of fresh issuance during the year.
In terms of the requirements as per Section 71 (4) of the Companies Act, 2013 read with The Companies (Share capital and Debentures) Rules 2014, Rule no.18 (7) and applicable SEBI Issue and Listing of Debt Securities) Regulations, 2008, the Company has transferred Rs. 5,053.12 Lakhs (31 March 2017: Rs.2,649.86 lakhs) to Debenture Redemption Reserve (DRR) on a prorata basis on total NCDs outstanding as at 31 March 2018, including the amount of fresh issuance during the year to create adequate DRR over the tenor of the debentures.
5 LOAN PROVISIONS
a) The Company has made adequate provision for the Non-performing assets identified, in accordance with the guidelines issued by The Reserve Bank of India. As per the practice consistently followed, the Company has also made accelerated provision on a prudential basis.
The RBI vide itâs notification no. DNBR. 011/ CGM (CDS)-2015 dated March 27, 2015 has revised the asset classification norms for NPAs and substandard assets under its prudential norms applicable to NBFCs in a phased manner commencing from financial year ended 31st March, 2016, upto the financial year ended 31st March, 2018 and these revised guidelines have been followed during the current year while making provisions for NPAs and Standard assets.
The cumulative accelerated provision made by the Company as on 31 March 2018 is Rs.69,970.22 Lakhs (31 March 2017: Rs.68,623.98 Lakhs).
The Company, during the year ended 31 March 2017, had started considering the estimated realisable value of underlying security (which conforms to the RBI norms) for loan assets to determine 100% provisioning for assets which were 24 months overdue which had resulted in lower provision of Rs.8,336.91 Lakhs for the year ended 31 March 2017 with a consequent impact on the profit before tax. However, during the current year, the Company has reviewed the basis of estimating provision for non-performing assets and made additional provision of Rs. 8,336.91 Lakhs against the above mentioned 100% provision cases.
b) (i) I n accordance with the Master direction DNBR.PD.008/03.10.119/2016-17 dated September 01, 2016 issued by The Reserve Bank of India (RBI) vide its directions to all NBFCâs, the Company has made Standard assets of provision of Rs.3208.00 Lakhs (31 March 2017: Rs. 2180.00 Lakhs) during the current year
(ii) The total amount of provision on Standard assets as at 31 March 2018 stood at Rs. 19,423.00 Lakhs (31 March 2017: Rs. 16,215.00 Lakhs, including additional provision of Rs.2,034.00 lakhs).
6 The Company is engaged primarily in the business of financing and accordingly there are no separate reportable segments as per Accounting Standard 17 dealing with Segment Reporting.
7 LEASES
In the cases where assets are given on operating lease (as lessor) -
The total future minimum lease rentals receivable for the non-cancellable lease period as at the Balance sheet date is as under:
8 DISCLOSURE ON DERIVATIVES
The Company has outstanding foreign currency non-repatriable loans of US - 1,648.41 Lakhs (31 March 2017: US - 1,535.23 Lakhs). The said loan has been hedged to INR liability using a cross currency and interest swap. There is no un-hedged foreign currency exposure as on 31 March 2018.
During the year 2016-17, the Company has changed its accounting policy for derivative transactions to align to the Guidance Note on Accounting for Derivative Transactions issued by the Institute of Chartered Accountants of India applicable with effect from 1 April 2016. Consequently, mark to market loss of Rs.514.68 Lakhs (net of deferred tax of Rs.272.38 Lakhs) is charged to opening retained earnings as transitional charge in respect of derivative transactions outstanding as at 1April 2016. Loss of Rs. 2,182.88 lakhs (31 March 2017: Rs. 2,365.54 Lakhs) is charged to Statement of profit and loss for the year ended 31 March 2018.
9 SECURITISATION / ASSIGNMENT TRANSACTIONS
a] During the year, the Company has without recourse securitised on âat parâ basis vide PTC route loan receivables of 22694 contracts [31 March 2017: 11,489 contracts] amounting to Rs.55,160.71 Lakhs [31 March 2017: Rs. 33,772.18 Lakhs] for a consideration of Rs 55,160.71 Lakhs [31 March 2017: Rs. 33,772.18 Lakhs] and de-recognised the assets from the books.
b] In terms of the accounting policy stated in 2.4 [a], securitisation income is recognized as per RBI Guidelines dated 21st August, 2012. Accordingly, interest only strip representing present value of interest spread receivable has been recognized and reflected under loans and advances.
c] Excess interest spread received during the year by the Special Purpose Vehicle Trust [SPV Trust] has been recognised as income and included in Income from assignment / securitisation transactions amounting to Rs.14,032.87 Lakhs [31 March 2017: Rs.11,500.70 Lakhs]
10 FRAUDS REPORTED DURING THE YEAR
There were 143 cases [31 March 2017: 176 cases] of frauds amounting to Rs.230.08 Lakhs [31 March 2017: Rs 397.06 Lakhs] reported during the year. The Company has recovered an amount of Rs.77.60 Lakhs [31 March 2017: Rs 125.98 Lakhs] and has initiated appropriate legal actions against the individuals involved. The claims for the un-recovered losses have been lodged with the insurance companies.
11 The gold loans outstanding as at 31 March 2018 was Rs. 1.67 lakhs [31 March 2017: Rs.2.17 lakhs] and these were fully provided for.
12 CORPORATE SOCIAL RESPONSIBILITY (CSR)
During the year, the Company has incurred an expenditure of Rs.2,557.55 Lakhs [31 March 2017 : Rs. 2,905.66 Lakhs] towards CSR activities which includes contribution / donations made to the trusts which are engaged in activities prescribed under section 135 of the Companies Act, 2013 read with Schedule VII to the said Act and expense of Rs.145.99 Lakhs [31 March 2017 : Rs. 141.87 Lakhs] towards the CSR activities undertaken by the Company [refer note no. 28].
Detail of amount spent towards CSR activities :
a] Gross amount required to be spent by the Company during the year is Rs. 2,706.75 lakhs [Previous year: Rs. 3,047.53 lakhs].
b) Amount spent by the Company during the year :
In addition to amount spent as per point (b) above, the Company has also spent Rs.12.25 lakhs as salary cost in respect of certain employees who have been exclusively engaged in CSR administrative activities which qualifies as CSR expenditure under section 135 of the Companies Act, 2013 and considering this salary cost, the total amount spent by the Company during the year stood at Rs.2,715.79 lakhs.
13 During the previous year, the Company had made a contribution of Rs.160.00 lakhs to New Democratic Electoral Trust, a Trust approved by the Central Board of Direct Taxes under Electoral Trust Scheme, 2013 to enable Electoral Trust to make contributions to political party/parties duly registered with the Election Commission, in such manner and at such times as it may decide from time to time. This contribution was as per the provisions of section 182 of the Companies Act, 2013. However, there were no such contribution made during the current year.
14 The Company has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision as required under any law / accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of accounts.
The Companyâs pending litigations comprise of claims against the Company primarily by the customers and proceedings pending with Income Tax, sales tax/VAT and other authorities. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed the contingent liabilities where applicable, in its financial statements. The amount of provisions / contingent liabilities is based on managementâs estimate, and no significant liability is expected to arise out of the same.
15 MICRO AND SMALL ENTERPRISES :
Based on and to the extent of the information received by the Company from the suppliers during the year regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) and relied upon by the auditors, there are no amounts due to MSME as at 31 March 2018.
16 Schedule to the Balance Sheet of a Non-Banking Financial Company as required under Master Direction -Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company [Reserve Bank] Directions, 2016
17 Balance Sheet Disclosures as required under Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016
Exchange Traded Interest Rate (IR) Derivative
The Company has not entered into any exchange traded derivative.
b) Exchange Traded Interest Rate (IR) Derivatives
The Company is not carrying out any activity of providing Derivative cover to third parties
c) Disclosures on Risk Exposure in Derivatives
Qualitative Disclosures -
i) The Company undertakes the derivatives transaction to prudently hedge the risk in context of a particular borrowing or to diversify sources of borrowing and to maintain fixed and floating borrowing mix. The Company does not indulge into any derivative trading transactions. The Company reviews, the proposed transaction and outline any considerations associated with the transaction, including identification of the benefits and potential risks (worst case scenarios); an independent analysis of potential savings from the proposed transaction. The Company evaluates all the risks inherent in the transaction viz., counter party risk, Market Risk, Operational Risk, basis risk etc.
ii) Credit risk is controlled by restricting the counterparties that the Company deals with, to those who either have banking relationship with the Company or are internationally renowned or can provide sufficient information. Market/Price risk arising from the fluctuations of interest rates and foreign exchange rates or from other factors shall be closely monitored and controlled. Normally transaction entered for hedging, will run till its life, irrespective of profit or loss. However in case of exceptions it has to be un-winded only with prior approval of M.D/CFO/Treasurer Liquidity risk is controlled by restricting counterparties to those who have adequate facility, sufficient information, and sizable trading capacity and capability to enter into transactions in any markets around the world.
iii) The respective functions of trading, confirmation and settlement should be performed by different personnel. The front office and back-office role is well defined and segregated. All the derivatives transactions is quarterly monitored and reviewed by CFO and Treasurer. All the derivative transactions have to be reported to the board of directors on every quarterly board meetings including their financial positions.
IV) Disclosures relating to Securitisation
a) Disclosures in the notes to the accounts in respect of securitisation transactions as required under revised guidelines on securitization transactions issued by RBI vide circular no.DNBS. PD.No.301/3.10.01/2012-13 dated August 21, 2012.
b) Details of Financial Assets sold to Securitisation / Reconstruction Company for Asset Reconstruction
During the current year and the previous year, the Company has not sold any financial assets to Securitisation /Reconstruction Company for asset reconstruction.
d) Details of non-performing financial assets purchased / sold
i) Details of non-performing financial assets purchased:
During the current year and the previous year the Company has not purchased any non -performing financial assets.
ii) Details of Non-performing Financial Assets sold:
During the current year and the previous year the Company has not sold any non -performing financial assets.
V) Exposures
a) Exposure to Real Estate Sector
During the current year and the previous the Company has no Exposure to Real estate sector.
c) Details of financing of parent company products
Of the total financing activity undertaken by the Company during the financial year 2017-18, 43% [31 March 2017: 47%] of the financing was towards parent company products.
d) Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the NBFC
During the current year and the previous year, the Company has not exceeded the prudential exposure limits.
e) Unsecured Advances
As at 31 March 2018, the amount of unsecured advances stood at Rs. 2,42,125.35 Lakhs [31 March 2017: Rs.1,72,370.24 Lakhs].
VI) Miscellaneous
a) Registration obtained from other financial sector regulators
During the current year and the previous year, the Company has not obtained any registration from other financial sector regulators.
b) Disclosure of Penalties imposed by RBI and other regulators
During the current year and the previous year, there are no penalties imposed by RBI and other regulators
c) Related Party Transactions
[refer note 45]
d) Rating assigned by credit rating agencies and migration of ratings during the year
During the current year and the previous year, the Company has not exceeded the prudential exposure limits.
Credit Rating -
During the year under review, CRISIL Limited [CRISIL], has reaffirmed the rating to the Companyâs Long-term Debt Instruments and Bank Facilities as âCRISIL AA / Stableâ and the Companyâs Fixed Deposit Programme as âFAAA/ Stableâ, respectively. The âAA /Stableâ rating indicates a high degree of safety with regard to timely payment of financial obligations. The rating on the Companyâs Short-term Bank Loans and Cash Credit facility has been reaffirmed at âCRISIL A1 â which is the highest level of rating.
During the year under review, India Ratings & Research Private Limited [IND], which is part of Fitch Group, reaffirmed the rating of Companyâs Long-term instrument and Subordinated Debt programme to âIND AAA/Stableâ. The Companyâs Short Term Commercial Paper has been rated at IND A1 .
During the year under review, Credit Analysis & Research Limited [CARE], also reaffirmed the âCARE AAA/ Stableâ rating to Companyâs Longterm debt instrument and Subordinated Debt programme.
During the year under review, Brickwork Ratings India Private Limited [BWR] has, reaffirmed the âBWR AAA/stableâ rating of the Companyâs Longterm Subordinated Debt Issue.
The âAAAâ ratings denote the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
VII) Net Profit of Loss for the period ,prior period items and change in accounting policies
There are no such material items which require disclosures in the notes to Account in terms of the relevant Accounting Standard.
VIII) Revenue Recognition
[Refer note no. 2.3 under Summary of Significant Accounting Policies]
IX) Accounting Standard 21- Consolidated Financial Statements (CFS)
All the subsidiaries of the Company have been consolidated as per Accounting Standard 21. Refer consolidated financial statements [CFS]
Additional Disclosures :
All the subsidiaries of the Company have been consolidated as per Accounting Standard 21. Refer consolidated financial statements [CFS]
Draw Down from Reserves Year ended March 31, 2018 : Nil Year ended March 31, 2017 : Nil
18 The disclosures regarding details of Specified Bank Notes (SBNs) held and transacted during 8 November 2016 to 30 December 2016 has not been made since the requirement does not pertain to financial year ended 31 March 2018. Corresponding disclosure as required under notification No. G.S.R. 308 (E) dated March 30, 2017 issued by the Ministry of Corporate Affairs as appearing in the audited Standalone financial statements for the year ended 31 March 2017 have been reproduced here below:
19 Previous year figures have been regrouped / reclassified, wherever found necessary, to conform to current year classification.
Mar 31, 2018
1 CORPORATE OVERVIEW
Mahindra & Mahindra Financial Services Limited (âthe Companyâ), incorporated and headquartered in Mumbai, India is a publicly held Non-Banking Financial Company (âNBFCâ) engaged in providing asset finance through its pan India branch network. The Company is registered as a Systemically Important Deposit Accepting NBFC as defined under Section 45-IA of the Reserve Bank of India (âRBIâ) Act, 1934 with effect from 4 September 1998. The Company is a subsidiary of Mahindra & Mahindra Limited.
a) Terms / rights attached to equity shares :
The Company has only one class of equity shares having a par value of Rs.2/- per share. Each holder of equity shares is entitled to one vote per share. The dividend proposed by the board of directors and approved by the shareholders in the annual general meeting is paid in Indian rupees. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
b) Shares issued to ESOS Trust:
The Guidance note issued by The Institute of Chartered Accountants of India on accounting for employee share-based payment requires that shares allotted to a Trust but not transferred to the employees be reduced from Share capital and Reserves. Accordingly, the Company has reduced the Share capital and Securities premium reserve in respect of outstanding equity shares pertaining to Employee Stock Option Scheme 2005 and Employee Stock Option Scheme 2010 held by the Trust, as at the year-end pending allotment of shares to eligible employees as per details provided below.
All secured loans / debentures are secured by paripassu charges on Aurangabad office and exclusive charge on receivables under loan contracts, owned assets and book debts to the extent of 100% of outstanding secured loans / debentures.
The funds raised by the Company during the year by Issue of Secured / Unsecured Non Convertible Debentures / bonds were utilised for the purpose intended, i.e. towards lending, financing, to refinance the existing indebtedness of the Company or for long-term working capital, in compliance with applicable laws.
All secured loans are secured by paripassu charges on Aurangabad office and exclusive charge on receivables under loan contracts, owned assets and book debts to the extent of 100% of outstanding secured loans / debentures.
All secured loans / debentures are secured by paripassu charges on Aurangabad office and exclusive charge on receivables under loan contracts, owned assets and book debts to the extent of 100% of outstanding secured loans / debentures.
The funds raised by the Company during the year by issue of Secured / Unsecured Non Convertible Debentures / bonds were utilised for the purpose intended, i.e. towards lending, financing, to refinance the existing indebtedness of the Company or for long-term working capital, in compliance with applicable laws.
Quoted investments of Rs. 70,251.08 lakhs [31 March 2017: Rs. 70,418.03 lakhs] are in Government Stocks as Statutory Liquid Assets as required under Section 45 IB of The Reserve Bank of India Act,1934 vide a floating charge created in favour of public deposit holders through a âTrust Deedâ with an independent trust.
iii) During the year, the Company has made following equity investments -
a) Rs.13,000.00 Lakhs (31 March 2017: Rs. 11,375.00 Lakhs) in Mahindra Rural Housing Finance Ltd., its subsidiary, by subscription to 1,30,00,000 Equity shares of Rs.10/- each for cash at Rs.100.00 per share, including premium of Rs.90.00 per equity share on a rights basis, fully paid up (31 March 2017: 1,69,77,612 Equity shares of Rs.10/- each for cash at Rs.57.00 per share, including premium of Rs.30/- per equity share, fully paid up).
b) Rs.2,900.00 Lakhs (31 March 2017: Rs. 3,045.00 Lakhs) in Mahindra Asset Management Company Private Limited, its wholly owned subsidiary, by subscription to 2,90,00,000 (31 March 2017: 3,04,50,000) Equity shares of Face Value of Rs.10/- each at par for cash fully paid up on a rights basis.
c) Rs.1,662.44 Lakhs (31 March 2017: Rs. 3,111.84 Lakhs) being additional equity infusion in Mahindra Finance USA LLC, a 49% joint venture company formed jointly with De Lage Landen Financial Services Inc. in United States.
d) During the previous year, the Company had made an additional investment of Rs.0.95 Lakh in New Democratic Electoral Trust, a Trust approved by the Central Board of Direct Taxes under Electoral Trust Scheme, 2013, by subscription to 9,500 Equity shares, including 7,000 additional Equity shares offered, of Face Value of Rs.10/- each at par for cash fully paid up on a rights basis. During the current year, there were no further investment made in New Democratic Electoral Trust.
e) Rs.700.00 lakhs in Orizonte Business Solution Limited (formerly known as âMega One Stop Farm Services Limitedâ), engaged in business of operating a Business to Business (B2B) platform âSmart shiftâ, a online logistic marketplace which connects cargo owners and transporters in India, by subscribing to preferential issue of 35,00,000 equity shares of Rs.10/- each, for cash, at a premium of Rs.10/- per share.
iv) During the year, the Company has sold 1,28,866 equity shares of face value of Rs.10/- each representing 5% of holding in subsidiary company, Mahindra Insurance Brokers Ltd., at Rs.5,044.00 per share for a consideration aggregating to Rs.6,500.00 lakhs. Consequent to the said sale transaction, the shareholding percentage of the Company stands reduced from 85% to 80%. This transaction has resulted in profit of Rs.6,497.18 lakhs on a standalone basis and the same has been shown as an Exceptional items in the Statement of profit and loss.
2 EMPLOYEE STOCK OPTION PLAN
a] The Company had allotted 134,32,750 equity shares [face value of Rs.2/- each] under Employee Stock Option Scheme 2005 at a premium of Rs.8.20 per share on December 06, 2005 and 48,45,025 Equity shares [face value of Rs.2/- each] under Employee Stock Option Scheme 2010 at par on February 03, 2011, to Mahindra and Mahindra Financial Services Limited Employeesâ Stock Option Trust set up by the Company. The Trust holds these shares for the benefit of the employees and issues them to the eligible employees as per the recommendation of the Compensation Committee. The Trust had issued 1,49,89,782 equity shares to employees up to 31 March 2018 [31 March 2017: 1,45,54,477 equity shares], of which 4,35,305 equity shares [31 March 2017: 4,40,284 equity shares] were issued during the current year. All the equity shares issued to employees during the current year are out of Employee Stock Option Scheme 2010.
f) Method used for accounting for share based payment plan
The Company has elected to use intrinsic value method to account for the compensation cost of stock options to employees of the Company. Intrinsic value is the amount by which the quoted market price of the underlying share exceeds the exercise price of the option. Employee stock compensation cost is amortized over the vesting period.
g) Fair value of options
The fair value of options have been calculated using Black Scholes Options Pricing Model and the significant assumptions made in this regards are as follows :
h] Earnings Per Share
Earnings Per Share as required by Accounting Standard 20 read with the Guidance Note on âAccounting for Employee Share-based Paymentsâ is as follows:
3 FRESH ISSUE OF EQUITY SHARE CAPITAL
The Board of Directors of the Company, at its meeting held on 1 November 2017, and special resolution passed by the members at the Extraordinary General Meeting held on 29 November 2017 had approved the infusion of share capital.
Pursuant to the passing of the above resolutions and in accordance with Chapter VIII of Securities & Exchange Board of India [Issue of Capital & Disclosure requirements] Regulations, 2009, as amended, the Company has raised funds amounting to Rs. 2,11,100.00 lakhs through allotment of fresh equity shares as per details provided below :
a] Preferential allotment of 2,50,00,000 equity shares of face value of Rs.2.00 each, at a price of Rs.422.00 each, for cash, including a premium of Rs.420.00 per equity share, aggregating to Rs.1,05,500.00 lakhs, to Mahindra & Mahindra Limited, the Holding Company;
b] Qualified Institutional Placement [QIP] of 2,40,00,000 equity shares of face value of Rs.2.00 each, at a price of Rs.440.00 each, for cash, including a premium of Rs.438.00 per equity share, aggregating to Rs. 1,05,600.00 lakhs, to Qualified Institutional Buyers [QIBâs]. The Company has utilized the entire proceeds [net of issue related expenses] from issue of equity shares through QIP for the purposes as stated in its âPlacement Documentâ.
The share issue expenses of Rs.1,310.13 lakhs has been adjusted against securities premium reserve as per the accounting policy. These equity shares were allotted on 7 December 2017.
The fresh allotment of equity shares through preferential allotment and QIP as stated above have resulted in an increase of equity share capital by Rs. 980.00 lakhs and securities premium reserve by Rs. 210120.00 lakhs.
4 PUBLIC ISSUANCE OF UNSECURED SUBORDINATED REDEEMABLE NONCONVERTIBLE DEBENTURES (NCDâS)
During the year, the Company has raised an amount of Rs. 1,15,053.13 lakhs by way of Public Issuance of Unsecured Subordinated Redeemable Non-Convertible Debentures [NCDâs] of the face value of Rs.1,000.00 each. The NCDâs were allotted on 24 July 2017 and listed on BSE Limited on 26 July 2017. The entire amount of proceeds of the issue were used for the purposes as stated in its âPlacement Documentâ and there is no unutilised amount pertaining to this issuance. The NCDâs issue expenses of Rs. 1215.07 lakhs [net of taxes] has been adjusted against securities premium reserve as per the accounting policy. The total amount of NCDs outstanding as at 31 March 2018 were Rs. 2,15,053.13 lakhs, including the amount of fresh issuance during the year.
In terms of the requirements as per Section 71 (4) of the Companies Act, 2013 read with The Companies (Share capital and Debentures) Rules 2014, Rule no.18 (7) and applicable SEBI Issue and Listing of Debt Securities) Regulations, 2008, the Company has transferred Rs. 5,053.12 Lakhs (31 March 2017: Rs.2,649.86 lakhs) to Debenture Redemption Reserve (DRR) on a prorata basis on total NCDs outstanding as at 31 March 2018, including the amount of fresh issuance during the year to create adequate DRR over the tenor of the debentures.
5 LOAN PROVISIONS
a) The Company has made adequate provision for the Non-performing assets identified, in accordance with the guidelines issued by The Reserve Bank of India. As per the practice consistently followed, the Company has also made accelerated provision on a prudential basis.
The RBI vide itâs notification no. DNBR. 011/ CGM (CDS)-2015 dated March 27, 2015 has revised the asset classification norms for NPAs and substandard assets under its prudential norms applicable to NBFCs in a phased manner commencing from financial year ended 31st March, 2016, upto the financial year ended 31st March, 2018 and these revised guidelines have been followed during the current year while making provisions for NPAs and Standard assets.
The cumulative accelerated provision made by the Company as on 31 March 2018 is Rs.69,970.22 Lakhs (31 March 2017: Rs.68,623.98 Lakhs).
The Company, during the year ended 31 March 2017, had started considering the estimated realisable value of underlying security (which conforms to the RBI norms) for loan assets to determine 100% provisioning for assets which were 24 months overdue which had resulted in lower provision of Rs.8,336.91 Lakhs for the year ended 31 March 2017 with a consequent impact on the profit before tax. However, during the current year, the Company has reviewed the basis of estimating provision for non-performing assets and made additional provision of Rs. 8,336.91 Lakhs against the above mentioned 100% provision cases.
b) (i) I n accordance with the Master direction DNBR.PD.008/03.10.119/2016-17 dated September 01, 2016 issued by The Reserve Bank of India (RBI) vide its directions to all NBFCâs, the Company has made Standard assets of provision of Rs.3208.00 Lakhs (31 March 2017: Rs. 2180.00 Lakhs) during the current year
(ii) The total amount of provision on Standard assets as at 31 March 2018 stood at Rs. 19,423.00 Lakhs (31 March 2017: Rs. 16,215.00 Lakhs, including additional provision of Rs.2,034.00 lakhs).
6 The Company is engaged primarily in the business of financing and accordingly there are no separate reportable segments as per Accounting Standard 17 dealing with Segment Reporting.
7 LEASES
In the cases where assets are given on operating lease (as lessor) -
The total future minimum lease rentals receivable for the non-cancellable lease period as at the Balance sheet date is as under:
8 DISCLOSURE ON DERIVATIVES
The Company has outstanding foreign currency non-repatriable loans of US - 1,648.41 Lakhs (31 March 2017: US - 1,535.23 Lakhs). The said loan has been hedged to INR liability using a cross currency and interest swap. There is no un-hedged foreign currency exposure as on 31 March 2018.
During the year 2016-17, the Company has changed its accounting policy for derivative transactions to align to the Guidance Note on Accounting for Derivative Transactions issued by the Institute of Chartered Accountants of India applicable with effect from 1 April 2016. Consequently, mark to market loss of Rs.514.68 Lakhs (net of deferred tax of Rs.272.38 Lakhs) is charged to opening retained earnings as transitional charge in respect of derivative transactions outstanding as at 1April 2016. Loss of Rs. 2,182.88 lakhs (31 March 2017: Rs. 2,365.54 Lakhs) is charged to Statement of profit and loss for the year ended 31 March 2018.
9 SECURITISATION / ASSIGNMENT TRANSACTIONS
a] During the year, the Company has without recourse securitised on âat parâ basis vide PTC route loan receivables of 22694 contracts [31 March 2017: 11,489 contracts] amounting to Rs.55,160.71 Lakhs [31 March 2017: Rs. 33,772.18 Lakhs] for a consideration of Rs 55,160.71 Lakhs [31 March 2017: Rs. 33,772.18 Lakhs] and de-recognised the assets from the books.
b] In terms of the accounting policy stated in 2.4 [a], securitisation income is recognized as per RBI Guidelines dated 21st August, 2012. Accordingly, interest only strip representing present value of interest spread receivable has been recognized and reflected under loans and advances.
c] Excess interest spread received during the year by the Special Purpose Vehicle Trust [SPV Trust] has been recognised as income and included in Income from assignment / securitisation transactions amounting to Rs.14,032.87 Lakhs [31 March 2017: Rs.11,500.70 Lakhs]
10 FRAUDS REPORTED DURING THE YEAR
There were 143 cases [31 March 2017: 176 cases] of frauds amounting to Rs.230.08 Lakhs [31 March 2017: Rs 397.06 Lakhs] reported during the year. The Company has recovered an amount of Rs.77.60 Lakhs [31 March 2017: Rs 125.98 Lakhs] and has initiated appropriate legal actions against the individuals involved. The claims for the un-recovered losses have been lodged with the insurance companies.
11 The gold loans outstanding as at 31 March 2018 was Rs. 1.67 lakhs [31 March 2017: Rs.2.17 lakhs] and these were fully provided for.
12 CORPORATE SOCIAL RESPONSIBILITY (CSR)
During the year, the Company has incurred an expenditure of Rs.2,557.55 Lakhs [31 March 2017 : Rs. 2,905.66 Lakhs] towards CSR activities which includes contribution / donations made to the trusts which are engaged in activities prescribed under section 135 of the Companies Act, 2013 read with Schedule VII to the said Act and expense of Rs.145.99 Lakhs [31 March 2017 : Rs. 141.87 Lakhs] towards the CSR activities undertaken by the Company [refer note no. 28].
Detail of amount spent towards CSR activities :
a] Gross amount required to be spent by the Company during the year is Rs. 2,706.75 lakhs [Previous year: Rs. 3,047.53 lakhs].
b) Amount spent by the Company during the year :
In addition to amount spent as per point (b) above, the Company has also spent Rs.12.25 lakhs as salary cost in respect of certain employees who have been exclusively engaged in CSR administrative activities which qualifies as CSR expenditure under section 135 of the Companies Act, 2013 and considering this salary cost, the total amount spent by the Company during the year stood at Rs.2,715.79 lakhs.
13 During the previous year, the Company had made a contribution of Rs.160.00 lakhs to New Democratic Electoral Trust, a Trust approved by the Central Board of Direct Taxes under Electoral Trust Scheme, 2013 to enable Electoral Trust to make contributions to political party/parties duly registered with the Election Commission, in such manner and at such times as it may decide from time to time. This contribution was as per the provisions of section 182 of the Companies Act, 2013. However, there were no such contribution made during the current year.
14 The Company has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Company has reviewed and ensured that adequate provision as required under any law / accounting standards for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of accounts.
The Companyâs pending litigations comprise of claims against the Company primarily by the customers and proceedings pending with Income Tax, sales tax/VAT and other authorities. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed the contingent liabilities where applicable, in its financial statements. The amount of provisions / contingent liabilities is based on managementâs estimate, and no significant liability is expected to arise out of the same.
15 MICRO AND SMALL ENTERPRISES :
Based on and to the extent of the information received by the Company from the suppliers during the year regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) and relied upon by the auditors, there are no amounts due to MSME as at 31 March 2018.
16 Schedule to the Balance Sheet of a Non-Banking Financial Company as required under Master Direction -Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company [Reserve Bank] Directions, 2016
17 Balance Sheet Disclosures as required under Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016
Exchange Traded Interest Rate (IR) Derivative
The Company has not entered into any exchange traded derivative.
b) Exchange Traded Interest Rate (IR) Derivatives
The Company is not carrying out any activity of providing Derivative cover to third parties
c) Disclosures on Risk Exposure in Derivatives
Qualitative Disclosures -
i) The Company undertakes the derivatives transaction to prudently hedge the risk in context of a particular borrowing or to diversify sources of borrowing and to maintain fixed and floating borrowing mix. The Company does not indulge into any derivative trading transactions. The Company reviews, the proposed transaction and outline any considerations associated with the transaction, including identification of the benefits and potential risks (worst case scenarios); an independent analysis of potential savings from the proposed transaction. The Company evaluates all the risks inherent in the transaction viz., counter party risk, Market Risk, Operational Risk, basis risk etc.
ii) Credit risk is controlled by restricting the counterparties that the Company deals with, to those who either have banking relationship with the Company or are internationally renowned or can provide sufficient information. Market/Price risk arising from the fluctuations of interest rates and foreign exchange rates or from other factors shall be closely monitored and controlled. Normally transaction entered for hedging, will run till its life, irrespective of profit or loss. However in case of exceptions it has to be un-winded only with prior approval of M.D/CFO/Treasurer Liquidity risk is controlled by restricting counterparties to those who have adequate facility, sufficient information, and sizable trading capacity and capability to enter into transactions in any markets around the world.
iii) The respective functions of trading, confirmation and settlement should be performed by different personnel. The front office and back-office role is well defined and segregated. All the derivatives transactions is quarterly monitored and reviewed by CFO and Treasurer. All the derivative transactions have to be reported to the board of directors on every quarterly board meetings including their financial positions.
IV) Disclosures relating to Securitisation
a) Disclosures in the notes to the accounts in respect of securitisation transactions as required under revised guidelines on securitization transactions issued by RBI vide circular no.DNBS. PD.No.301/3.10.01/2012-13 dated August 21, 2012.
b) Details of Financial Assets sold to Securitisation / Reconstruction Company for Asset Reconstruction
During the current year and the previous year, the Company has not sold any financial assets to Securitisation /Reconstruction Company for asset reconstruction.
d) Details of non-performing financial assets purchased / sold
i) Details of non-performing financial assets purchased:
During the current year and the previous year the Company has not purchased any non -performing financial assets.
ii) Details of Non-performing Financial Assets sold:
During the current year and the previous year the Company has not sold any non -performing financial assets.
V) Exposures
a) Exposure to Real Estate Sector
During the current year and the previous the Company has no Exposure to Real estate sector.
c) Details of financing of parent company products
Of the total financing activity undertaken by the Company during the financial year 2017-18, 43% [31 March 2017: 47%] of the financing was towards parent company products.
d) Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the NBFC
During the current year and the previous year, the Company has not exceeded the prudential exposure limits.
e) Unsecured Advances
As at 31 March 2018, the amount of unsecured advances stood at Rs. 2,42,125.35 Lakhs [31 March 2017: Rs.1,72,370.24 Lakhs].
VI) Miscellaneous
a) Registration obtained from other financial sector regulators
During the current year and the previous year, the Company has not obtained any registration from other financial sector regulators.
b) Disclosure of Penalties imposed by RBI and other regulators
During the current year and the previous year, there are no penalties imposed by RBI and other regulators
c) Related Party Transactions
[refer note 45]
d) Rating assigned by credit rating agencies and migration of ratings during the year
During the current year and the previous year, the Company has not exceeded the prudential exposure limits.
Credit Rating -
During the year under review, CRISIL Limited [CRISIL], has reaffirmed the rating to the Companyâs Long-term Debt Instruments and Bank Facilities as âCRISIL AA / Stableâ and the Companyâs Fixed Deposit Programme as âFAAA/ Stableâ, respectively. The âAA /Stableâ rating indicates a high degree of safety with regard to timely payment of financial obligations. The rating on the Companyâs Short-term Bank Loans and Cash Credit facility has been reaffirmed at âCRISIL A1 â which is the highest level of rating.
During the year under review, India Ratings & Research Private Limited [IND], which is part of Fitch Group, reaffirmed the rating of Companyâs Long-term instrument and Subordinated Debt programme to âIND AAA/Stableâ. The Companyâs Short Term Commercial Paper has been rated at IND A1 .
During the year under review, Credit Analysis & Research Limited [CARE], also reaffirmed the âCARE AAA/ Stableâ rating to Companyâs Longterm debt instrument and Subordinated Debt programme.
During the year under review, Brickwork Ratings India Private Limited [BWR] has, reaffirmed the âBWR AAA/stableâ rating of the Companyâs Longterm Subordinated Debt Issue.
The âAAAâ ratings denote the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.
VII) Net Profit of Loss for the period ,prior period items and change in accounting policies
There are no such material items which require disclosures in the notes to Account in terms of the relevant Accounting Standard.
VIII) Revenue Recognition
[Refer note no. 2.3 under Summary of Significant Accounting Policies]
IX) Accounting Standard 21- Consolidated Financial Statements (CFS)
All the subsidiaries of the Company have been consolidated as per Accounting Standard 21. Refer consolidated financial statements [CFS]
Additional Disclosures :
All the subsidiaries of the Company have been consolidated as per Accounting Standard 21. Refer consolidated financial statements [CFS]
Draw Down from Reserves Year ended March 31, 2018 : Nil Year ended March 31, 2017 : Nil
18 The disclosures regarding details of Specified Bank Notes (SBNs) held and transacted during 8 November 2016 to 30 December 2016 has not been made since the requirement does not pertain to financial year ended 31 March 2018. Corresponding disclosure as required under notification No. G.S.R. 308 (E) dated March 30, 2017 issued by the Ministry of Corporate Affairs as appearing in the audited Standalone financial statements for the year ended 31 March 2017 have been reproduced here below:
19 Previous year figures have been regrouped / reclassified, wherever found necessary, to conform to current year classification.
Mar 31, 2017
General information
Mahindra & Mahindra Limited (âthe Companyâ) is a limited company incorporated in India. The addresses of its registered office and principal activities of the Company are disclosed in the introduction to the Annual Report.
The Ordinary (Equity) shares of the Company are listed on the National Stock Exchange (âNSEâ), the Bombay Stock Exchange (âBSEâ) in India. The Global Depository Receipts (GDRs) (underlying equity shares) of the Company are listed on the Luxembourg Stock Exchange and London Stock Exchange.
1A. Other Equity :
Description of the nature and purpose of Other Equity :
Capital Reserve : Capital Reserve represents receipt of Government Grants from a package of incentive given by Maharashtra Government for setting up/extension of Plants in specified areas.
Securities Premium Account : The Securities Premium is created on issue of shares at a premium.
General Reserve : The general reserve comprises of transfer of profits from retained earnings for appropriation purposes. The reserve can be distributed/utilised by the Company in accordance with the Companies Act, 2013.
Debenture Redemption Reserve : Debenture Redemption Reserve is a Statutory Reserve (as per Companies Act, 2013) created out of profits of the Company available for payment of dividend for the purpose of redemption of Debentures issued by the Company. On completion of redemption, the reserve is transferred to Retained Earnings.
Investment Fluctuation Reserve (IFR) : This reserve has been created pursuant to Schemes of Arrangement/Amalgamation approved by Honâble High Courts. The IFR is utilised as approved by the Honâble High Courts for the purpose of adjusting impairment on investments. Employee Stock Options Outstanding : The Employee Stock Options Outstanding represents reserve in respect of equity settled share options granted to the Companyâs employees in pursuance of the Employee Stock Option Plan.
2. Non-Current Borrowings
(a) Rs. 500 crores Debentures are Senior Redeemable Non-Convertible Debentures carrying an interest rate of 9.55% with a tenure of 50 years, repayable in July, 2063 and Rs. 473.62 crores (Net off unamortised finance charge of Rs. 1.38 crores) Debentures are Redeemable Non-Convertible Debentures carrying an interest rate of 7.57% with a tenure of 10 years, repayable in September, 2026.
(b) Term loans from banks comprise of EURO External Commercial Borrowings carrying an average margin of 95 basis points over three month EURO Libor and are repayable after five years and one day from the date of respective availment of loan.
(c) Other loans comprise deferred sales tax loans which are interest free and repayable in five equal installments after ten years from the year of availment of respective loan.
(a) Miscellaneous Expenses include :
Amounts paid/payable to Auditors (Net of service tax where applicable) :
* denotes amount less than Rs. 50,000.
The above includes amounts paid/payable for professional services rendered by firm in which some of the partners of the statutory auditorâs firm are partners Rs. 0.79 crores (2016: Rs. 0.51 crores).
(b) Other expenses includes expenditure incurred on Corporate Social Responsibility(CSR) under section 135 of the Companies Act, 2013 Rs. 83.57 crores (2016: Rs. 85.90 crores).
(c) Other expenses includes donations given to New Democratic Electoral Trust Rs. 6.03 crores (2016: Rs. Nil crores).
(d) The gain/(loss) on foreign exchange recognised in profit or loss is a gain of Rs. 13.28 crores (2016: loss of Rs. 85.38 crores).
3. Exceptional Items (net) recognised in profit or loss
Exceptional items of Rs. 548.46 crores (2016 : Rs. 68.74 crores) comprise of :
a) profit on sale of certain long term investments Rs. 679.46 crores (2016 : Rs. 68.74 crores).
b) profit on transfer of agri business Rs. 91.00 crores (2016 : Rs. Nil crores).
c) impairment of certain investments as referred to in Note 34 Rs. 222.00 crores (2016 : Rs. Nil crores).
4. Impairment
During the year ended 31st March, 2017, the Company has recognised an aggregate impairment loss of Rs. 222.00 crores, in profit or loss, on certain investments in subsidiaries and joint ventures considering the performance of these companies and their future projections.
During the year ended 31st March, 2016, the Company has recognised an aggregate impairment loss of Rs. 126.07 crores, in investment fluctuation reserve, on certain investments in subsidiaries and joint ventures considering the performance of these companies and their future projections. Aggregate amount of reversals of impairment losses on certain investment in subsidiaries was also recognised in investment fluctuation reserve amounting to Rs. 61.48 crores.
5. The Company has allotted 55,24,219 Ordinary (Equity) Shares of Rs. 10 each, 10,00,000 Ordinary (Equity) Shares of Rs. 10 each, 1,73,53,034 Ordinary (Equity) Shares of Rs. 5 each, 19,11,628 Ordinary (Equity) Shares of Rs. 5 each and 52,00,000 Ordinary (Equity) Shares of Rs. 5 each in the years ended 31st March, 2002, 31st March, 2010, 31st March, 2011, 31st March, 2014 and 31st March, 2015 respectively to the Mahindra & Mahindra Employeesâ Stock Option Trust set up by the Company. The trust holds these shares for the benefit of the employees and issues them to the eligible employees as per the recommendation of the Compensation Committee.
Options granted under Mahindra & Mahindra Limited Employees Stock Option Scheme - 2000 (â2000 Schemeâ) vest in 4 equal installments on the expiry of 12 Months, 24 Months, 36 Months and 48 Months from the date of grant. The options may be exercised on any day over a period of five years from the date of vesting. Number of vested options exercisable is subject to a minimum of 50 or number of options vested whichever is lower.
Options granted under Mahindra & Mahindra Limited Employees Stock Option Scheme - 2010 (â2010 Schemeâ) vest in:
i) 5 equal instalments on the expiry of 12 Months, 24 Months, 36 Months, 48 Months and 60 Months from the date of grant OR
ii) 4 instalments bifurcated as 20% on the expiry of 18 Months, 20% on the expiry of 30 Months, 30% on the expiry of 42 Months and 30% on the expiry of 54 Months.
The options may be exercised on any day over a period of 5 years from the date of vesting. Number of vested options exercisable is subject to a minimum of 50 or number of options vested whichever is lower.
The fair values of options granted during the year are as follows:
Grant dated 10th November, 2016 (5 years vesting) Rs. 1,265.51 per option
Grant dated 10th November, 2016 (4 years vesting) Rs. 1,263.31 per option
Grant dated 9th February, 2017 (4 years vesting) Rs. 1,207.36 per option
In respect of Options granted under the Employee Stock Option Plan the accounting is done as per requirements of Ind AS 102. Consequently, salaries, wages, bonus etc. includes Rs. 118.59 crores (2016 : Rs. 84.12 crores) being expenses on account of share based payments, after adjusting for reversals on account of options lapsed. The amount excludes Rs. 9.38 crores (2016 : Rs. 5.02 crores) charged to its subsidiaries for options issued to their employees.
6. Contingent Liability & Commitments
(A) Contingent Liability :
(a) Claims against the Company not acknowledged as debts comprise of :
(i) Excise Duty, Sales Tax and Service Tax claims disputed by the Company relating to issues of applicability and classification aggregating Rs. 3,445.08 crores before tax (2016 : Rs. 2,846.51 crores before tax, 2015 : Rs. 2,003.26 crores before tax).
(ii) Other matters (excluding claims where amounts are not ascertainable) : Rs. 27.69 crores before tax (2016 : Rs. 27.65 crores before tax, 2015 : Rs. 28.53 crores before tax).
(b) Taxation matters :
(i) Demands against the Company not acknowledged as debts and not provided for, relating to issues of deductibility and taxability in respect of which the Company is in appeal and exclusive of the effect of similar matters in respect of assessments remaining to be completed :
â Income-tax : Rs. 627.66 crores (2016 : Rs. 564.56 crores, 2015 : Rs. 526.49 crores).
(ii) Items in respect of which the Company has succeeded in appeal, but the Income-tax Department is pursuing/likely to pursue in appeal/reference and exclusive of the effect of similar matters in respect of assessments remaining to be completed :
â Income-tax matters : Rs. 110.78 crores (2016 : Rs. 112.30 crores, 2015 : Rs. 153.65 crores).
â Surtax matters : Rs. Nil crores (2016 : Rs. 0.13 crores, 2015 : Rs. 0.13 crores).
(c) The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) by its order dated 7th December, 2009 has rejected the Companyâs appeal against the order dated 30th March, 2005 passed by the Commissioner of Central Excise (Adjudication), Navi Mumbai confirming the demand made on the Company for payment of differential excise duty (including penalty) of Rs. 304.10 crores in connection with the classification of Companyâs Commander range of vehicles, during the years 1991 to 1996. Whilst the Company had classified the Commander range of vehicles as 10-seater attracting a lower rate of excise duty, the Commissioner of Central Excise (Adjudication), Navi Mumbai, has held that these vehicles could not be classified as 10-seater as they did not fulfil the requirement of 10-seater vehicles, as provided under the Motor Vehicles Act, 1988 (MVA) read with Maharashtra Motor Vehicles Rules, 1989 (MMVR) and as such attracted a higher rate of excise duty. The Company has challenged the CESTAT order in the Supreme Court.
In earlier collateral proceedings on this issue, the CESTAT had, by an order dated 19th July, 2005 settled the controversy in the Companyâs favour. The CESTAT had accepted the Companyâs submission that MVA and MMVR could not be referred to for determining the classification for the purpose of levy of excise duty and rejected the Departmentâs appeal against the order of the Collector, Central Excise classifying the Commander range of vehicles as 10-seater. The Department had challenged the CESTAT order in the Supreme Court.
Without prejudice to the grounds raised in this appeal, the Company has paid an amount of Rs. 40.00 crores in January, 2010. The Supreme Court has admitted the Companyâs appeal and has stayed the recovery of the balance amount till further orders.
Both these orders of the Tribunals were heard and disposed off by the Honorable Supreme Court, in August 2014. Since contrary views were expressed by the Tribunals in two parallel proceedings, the Honorable Supreme Court directed that a larger bench of the Tribunal be constituted to hear the appeals without expressing any opinion on the issues. The Larger Bench of the CESTAT heard the matter in February, 2015 and by an order dated 27th February, 2015, remanded the matter to the Commissioner of Central Excise for consideration of the case afresh keeping all issues open. The company strongly believes, based on legal advice it has received, that it has a good case on merits so as to ultimately succeed in the matter.
In another case relating to Armada range of vehicles manufactured during the years 1992 to 1996, by the Company at its Nashik facility, the Commissioner of Central Excise, Nashik passed an order dated 20th March, 2006 confirming a demand of Rs. 24.75 crores, on the same grounds as adopted for Commander range of vehicles. The CESTAT has given an unconditional stay against this order. The matter was heard by the Honâble Tribunal on 18th May, 2017. After hearing the matter, the Honâble Tribunal pronounced an Order setting aside the Order in original, and allowing the Companyâs appeal. The Order is awaited.
As such, the Company does not expect any liability on this account. However, in view of the CESTAT orders and subsequent proceedings, pending their final outcome, the Company has reflected the above amount aggregating Rs. 328.85 crores (2016 : Rs. 328.85 crores, 2015: Rs. 328.85 crores) and the interest of Rs. 407.73 crores (2016 : Rs. 377.64 crores, 2015 : Rs. 341.44 crores) accrued on the same upto 31st March, 2017, under Note (a)(i) above.
(d) In respect of (a) & (b) above, it is not practicable for the Company to estimate the closure of these issues and the consequential timings of cash flows, if any.
(B) Commitments :
(a) Uncalled liability on equity shares partly paid Rs. Nil crores (2016 : Rs. Nil crores, 2015 : Rs. 10.50 crores).
(b) The estimated amount of contracts remaining to be executed on capital account and not provided for as at 31st March, 2017 is Rs. 963.35 crores (2016 : Rs. 924.74 crores, 2015 : Rs. 745.08 crores) and other commitment as at 31st March, 2017 is Rs. 7.50 crores (2016: Rs. 8.50 crores, 2015 : Rs. Nil crores)
7. Research and Development expenditure
(a) In recognised Research and Development units :
(i) Debited to Profit or Loss, including certain expenditure based on allocations made by the Company, aggregate Rs. 804.56 crores (2016 : Rs. 730.93 crores) [excluding depreciation and amortisation of Rs. 474.88 crores (2016 : Rs. 287.02 crores)].
(ii) Development expenditure incurred during the year Rs. 716.42 crores (2016 : Rs. 905.41 crores).
(iii) Capitalisation of assets Rs. 120.12 crores (2016 : Rs. 104.65 crores).
(b) In other units :
(i) Debited to Profit or Loss, including certain expenditure based on allocations made by the Company, aggregate Rs. 69.48 crores (2016 : Rs. 68.27 crores) [excluding depreciation and amortisation of Rs. 14.66 crores (2016 : Rs. 9.78 crores)].
(ii) Development expenditure incurred during the year Rs. 97.91 crores (2016 : Rs. 106.22 crores).
(iii) Capitalisation of assets Rs. 28.22 crores (2016 : Rs. 22.38 crores).
8. Employee Benefits
General description of defined benefit plans :
Gratuity
The Company operates a gratuity plan covering qualifying employees. The benefit payable is the greater of the amount calculated as per the Payment of Gratuity Act or the Company scheme applicable to the employee. The benefit vests upon completion of five years of continuous service and once vested it is payable to employees on retirement or on termination of employment. In case of death while in service, the gratuity is payable irrespective of vesting. The Company makes annual contribution to the group gratuity scheme administered by the Life Insurance Corporation of India through its Gratuity Trust Fund.
Post retirement medical
The Company provides post retirement medical cover to select grade of employees to cover the retiring employee and their spouse upto a specified age through mediclaim policy on which the premiums are paid by the Company. The eligibility of the employee for the benefit as well as the amount of medical cover purchased is determined by the grade of the employee at the time of retirement.
Post retirement housing allowance
The Company operates a post retirement benefit scheme for a certain grade of employees in which a monthly allowance determined on the basis of the last drawn basic salary at the time of retirement, is paid to the retiring employee in lieu of housing.
Through its defined benefit plans the Company is exposed to a number of risks, the most significant of which are detailed below:
Investment risk
The present value of the defined benefit plan liability (denominated in Indian Rupee) is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds.
Interest risk
A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on the planâs debt investments.
Longevity risk
The present value of defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the planâs liability.
Salary risk
The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the planâs liability.
Reconciliations between Ind AS and previous GAAP for equity and profit or loss are given below
* Other adjustments mainly include those arising from
(1) recognizing financial assets and liabilities (carried at cost in Previous GAAP) at Fair Value through Profit or Loss (FVTPL) or amortised cost,
(2) measuring certain current investments (carried at lower of cost or fair value in Previous GAAP) at FVTPL and investments in subsidiaries, associates and joint venture continue to be recognized at their cost less diminution other than temporary (deemed cost) and other equity instruments at Fair Value through Other Comprehensive Income and
(3) recognizing the impact of the cost of Employee Stock Option Schemes (recognized at intrinsic value in Previous GAAP) at fair value.
The Companyâs capital management strategy is to effectively determine, raise and deploy capital so as to create value for its shareholders. The same is done through a mix of either equity and/or preference and/or convertible and/or combination of short term /long term debt as may be appropriate.
The Company determines the amount of capital required on the basis of its product, capital expenditure, operations and strategic investment plans. The same is funded through a combination of capital sources be it either equity and/or preference and/or convertible and/or combination of short term/long term debt as may be appropriate.
The capital structure is monitored on the basis of net debt to equity and maturity profile of overall debt portfolio of the Company.
9. Financial Risk Management Framework
In the course of its business, the Company is exposed to certain financial risks namely interest risk, currency risk & liquidity risk. The Companyâs primary focus is to achieve better predictability of financial markets and seek to minimize potential adverse effects on its financial performance.
The financial risks are managed in accordance with the Companyâs risk management policy which has been approved by its Board of Directors. Market Risk
Market risk is the risk that changes in market prices such as foreign exchange rates, interest rates etc. could affect the Companyâs income or the value of its holdings of financial instruments including cash flow. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while maximising the return.
Currency Risk
The Companyâs exposure to currency risk relates primarily to the Companyâs operating activities including anticipated sales & purchase and borrowings where the transactions are denominated in a currency other than the Companyâs functional currency.
The Companyâs foreign currency exposures are managed in accordance with its Foreign Exchange Risk Management Policy which has been approved by its Board of Directors. The Company hedges its foreign currency risk mainly by way of Forward Covers. Other derivative instruments may be used if deemed appropriate.
Contracts that meet the requirements for hedge accounting are accounted as per the hedge accounting requirements of Ind AS 109 -Financial Instruments, while other contracts are accounted as derivatives measured through profit or loss.
10. Interest Rate Risk
The Company uses a mix of cash and borrowings to manage the liquidity & fund requirements of its day-to-day operations. Further, certain interest bearing liabilities carry variable interest rates.
Interest Rate risk on variable rate borrowings is managed by way of interest rate swaps.
Hedge Accounting : Interest Rate Swaps
Interest Rate Swaps entered into by the Company meet the requirements for hedge accounting under Ind AS 109 - Financial Instruments, and thus are accounted as such.
11. Credit Risk Management
Credit Risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Companyâs exposure are continuously monitored.
12. Financial Guarantees
In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Companyâs maximum exposure in this respect is the maximum amount the Company could have to pay if the guarantee is called on. Accordingly the amount recognised in Balance Sheet as liabilities :
The Company applies the simplified approach to providing for expected credit losses prescribed by Ind AS 109, which permits the use of the lifetime expected loss provision for all trade receivables. The Company has computed expected credit losses based on a provision matrix which uses historical credit loss experience of the Company. Forward-looking information (including macroeconomic information) has been incorporated into the determination of expected credit losses. The Company has taken dealer deposits, bank guarantees etc. which are considered as collateral and these are considered in determination of expected credit losses, where applicable. Amounts pertaining to these collaterals are as given below:
13. The Companyâs maximum exposure to credit risk in respect of Financial Guarantee contracts are disclosed in Note 49. In respect of other financial assets, the maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets.
14. LIQUIDITY RISK
(i) Liquidity risk management
Maturity profile of financial liabilities
The following tables detail the Companyâs remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows.
The amounts included above for financial guarantee contracts are the maximum amounts the Company could be forced to settle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty to the guarantee. Based on expectations at the end of the reporting period, the Company considers that it is more likely than not that such an amount will not be payable under the arrangement.
The following table details the Companyâs liquidity analysis for its derivative financial instruments. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves at the end of the reporting period.
15. Sensitivity Analysis
Foreign Currency Sensitivity
The following tables demonstrate the sensitivity to a reasonably possible change in exchange rates, with all other variables held constant.
If the change in rates decline by a similar percentage, there will be opposite impact of similar amount on Profit Before Tax and Pre-tax Equity Effect.
The sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.
Interest Rate sensitivity
The sensitivity analyses below have been determined based on exposure to interest rate for both derivative and non-derivative instruments at the end of reporting period. For floating rate liabilities, analysis is prepared assuming the amount of liability outstanding at the end of the reporting period was outstanding for the whole year.
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected, after the impact of hedge accounting. With all other variables held constant, the Companyâs profit before tax is affected through the impact on floating rate borrowings, as follows:
16. Offsetting of balances
The Company has not offset financial assets and financial liabilities.
17. Collaterals
The Company has availed working capital facilities and other non-fund based facilities viz. bank guarantees and letters of credit, which are secured by hypothecation of book debts, receivables, outstanding monies and all other current assets.
18. Segment information Operating Segments
The reportable segments of the Company are Automotive and Farm Equipment. The segments are largely organised and managed separately according to the organisation structure that is designed based on the nature of products and services and profile of customers. Operating segments are reported in a manner consistent with the internal reporting provided to the Executive Chairman and Managing Director jointly regarded as the Chief Operating Decision Maker (âCODMâ). Description of each of the reportable segments for all periods presented, is as under.
(a) Automotive Segment comprises of sale of automobiles, spare parts and related services;
(b) Farm Equipment Segment comprises of sale of tractors, spare parts and related services;
(c) Others comprise of Agri, Construction Equipment, Powerol, and Spares Business Unit.
The CODM evaluates the Companyâs performance and allocates resources based on an analysis of various performance indicators by operating segments. The CODM reviews revenue and gross profit as the performance indicator for all of the operating segments.
The measurement of each segmentâs revenues, expenses and assets is consistent with the accounting policies that are used in preparation of the financial statements. Segment profit represents the profit before interest and tax.
Revenue from type of products and services
The operating segments are primarily based on nature of products and services and hence the Revenue from external customers of each segment is representative of revenue based on products and services.
Domestic Segment includes sales to customers located in India and service income accrued in India.
Overseas Segment includes sales and services rendered to customers located outside India.
Information about major customers
During the year ended 31st March, 2017 and 2016 respectively, revenues from transactions with a single external customer did not amount to 10 per cent or more of the Companyâs revenues from external customers.
19. Recent accounting pronouncements Standards issued but not yet effective
I n March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, âStatement of cash flowsâ and Ind AS 102, âShare-based payment.â These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, âStatement of cash flowsâ and IFRS 2, âShare-based payment,â respectively. The amendments are applicable to the Company from 1st April, 2017.
Amendment to Ind AS 7
The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement. The Company is evaluating both the requirements of the amendment and itâs effect on the financial statements.
Amendment to Ind AS 102
The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes. It clarifies that the fair value of cash-settled awards is determined on a basis consistent with that used for equity-settled awards. Market-based performance conditions and non-vesting conditions are reflected in the âfair valuesâ, but non-market performance conditions and service vesting conditions are reflected in the estimate of the number of awards expected to vest. Also, the amendment clarifies that if the terms and conditions of a cash-settled share-based payment transaction is modified with the result that it becomes an equity-settled share-based payment transaction, the transaction is accounted for as such from the date of the modification. Further, the amendment requires the award that include a net settlement feature in respect of withholding taxes to be treated as equity-settled in its entirety. The cash payment to the tax authority is treated as if it was part of an equity settlement. The company is evaluating both the requirements of the amendment and itâs impact on the financial statements.
20. The Board of Directors of the Company at its meeting held on 3rd December, 2016, has approved the Scheme of Arrangement between Mahindra Two-Wheelers Limited (MTWL), a step-down subsidiary of the Company, and the Company and their respective Shareholders and Creditors, which inter-alia, envisages demerger of the Two-Wheeler Undertaking of MTWL (which consists of manufacturing and selling of Two-Wheelers) and transfer and vesting thereof as a going concern into the Company. The Appointed Date of the Scheme would be 1st October, 2016 or such other date as may be approved. The Scheme will be given effect to on receipt of requisite approvals / consent.
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.2/- per share. Each holder of equity shares is entitled to one vote
per share. The dividend proposed by the board of directors and
approved by the shareholders in the annual general meeting is paid in
Indian rupees. In the event of liquidation of the Company, the holders
of equity shares will be entitled to receive remaining assets of the
Company, after distribution of all preferential amounts. The
distribution will be in proportion to the number of equity shares held
by the shareholders.
b) Shares issued to ESOS Trust
The Guidance note issued by The Institute of Chartered Accountants of
India on accounting for employee share-based payment requires that
shares allotted to a Trust but not transferred to the employees be
reduced from Share capital and Reserves. Accordingly, the Company has
reduced the Share capital by Rs. 92.49 Lacs (March 31, 2014 : Rs.
104.80 Lacs), Securities premium reserve by Rs.64.39 Lacs (March 31,
2014 :
Rs. 86.83 Lacs] in respect of 46,24,289 equity shares of face value of
Rs.2/- each (March 31, 2014 : 52,39,841 equity shares of face value of
Rs.2/- each) held by the Trust, as at the year end pending allotment of
shares to eligible employees.
iii) During the year, the Company has made following equity investments
-
a] Rs. 2,190.00 Lacs in Mahindra Rural Housing Finance Ltd., its
subsidiary, being the payment towards final call money @ Rs. 12.50 per
Equity share (including premium of Rs.7.50 per Equity share) on
1,75,20,003 Equity shares of Rs.10/- each issued on a rights basis in
May, 2013 for cash at a premium of Rs.15/- per Equity share, which now
stands fully paid up.
b) Rs. 100.00 lacs being the additional investment by subscription to
10,00,000 equity shares of face value of Rs.10/- each issued on a
rights basis at par for cash in Mahindra Asset Management Company
Private Limited, a wholly owned subsidiary.
c) Rs. 5.00 Lacs as initial investment in 50,000 equity shares of face
value of Rs.10/- each in Mahindra Trustee Company Private Limited, a
newly formed subsidiary, which was incorporated on July 10, 2013.
d) Rs. 2,998.96 Lacs (US $ 4.92 million) (March 2014 : Rs. 2,193.73
Lacs equivalent to US $3.84 million) being additional equity infusion
in Mahindra Finance USA LLC, a 49% joint venture company formed jointly
with De Lage Landen Financial Services Inc. in United States.
e) Rs. 0.05 Lacs as investment in 500 equity shares of face value of
Rs.10/- each in New Democratic Electoral Trust, a section 8 company
formed by Mahindra & Mahindra Limited.
# Term deposits with scheduled banks under lien include:
i) Rs. 24,505.00 Lacs (March 31, 2014 :
Rs. 18,464.00 Lacs) being the Term deposits kept with Banks as
Statutory Liquid Assets as required under Section 45 IB of The Reserve
Bank of India Act,1934 vide a floating charge created in favour of
public deposit holders through a "Trust Deed" with an independent
trust, pursuant to circular RBI/2006-07/225 DNBS (PD) C.C.No.
87/03.02.004/2006-07 dated January 04, 2007 issued by The Reserve Bank
of India.
ii) Rs. 22,085.00 Lacs (March 31, 2014 :
Rs. 20,196.00 Lacs) being collateral deposits kept with banks as
retained exposure under credit enhancements pertaining to
securitization transactions (refer note no. 51 (iv)).
iii) Rs. 20.00 Lacs (March 31, 2014 : Rs. 20.00 Lacs) as special
deposits kept with banks towards guarantee against legal suits filed by
the Company.
iv) Rs. 500.00 Lacs (March 31, 2014 : Rs. 500.00 lacs) as collateral
deposits kept with banks towards Constituent Subsidiary General Ledger
(CSGL) account for holding securities for SLR purpose.
NOTE 27. Disclosure under the Accounting Standard relating to
''Financial Reporting of Interests in Joint Ventures'' (AS-27]. The
Company has interest in the following jointly controlled entity:
ii] Interest in the assets, liabilities, income and expenses with
respect to jointly controlled entities:
NOTE 2 EMPLOYEE STOCK OPTION PLAN
a] The Company had allotted 1,34,32,750 equity shares (face value of
Rs.2/- each] on December 06, 2005 and 48,45,025 Equity shares (face
value of Rs.2/- each] on February 03, 2011, to Mahindra and Mahindra
Financial Services Limited Employees'' Stock Option Trust set up by the
Company. The Trust holds these shares for the benefit of the employees
and issues them to the eligible employees as per the recommendation of
the Compensation Committee. The Trust had issued 1,36,53,486 equity
shares to employees (March 31, 2014 : 1,30,37,934 equity shares] up to
March 31, 2015, of which 6,15,552 equity shares (March 31, 2014 :
5,04,944 equity shares] were issued during the current year.
f] Method used for accounting for share based payment plan
The Company has elected to use intrinsic value method to account for
the compensation cost of stock options to employees of the Company.
Intrinsic value is the amount by which the quoted market price of the
underlying share exceeds the exercise price of the option. Employee
stock compensation cost is amortized over the vesting period.
g) Fair value of options
The fair value of options used to compute proforma net profit and
earnings per share in note 28 (h) have been estimated on the date of
grant using the black-scholes model. The key assumptions used in
black-scholes model for calculating fair value as on the date of grant
are:
NOTE 3 LOAN PROVISIONS AND WRITE OFFS
a] The Company has made adequate provision for the Non-performing
assets identified, in accordance with the guidelines issued by The
Reserve Bank of India. As per the practice consistently followed, the
Company has also made additional provision on a prudential basis. The
cumulative additional provision made by the Company as on March 31,
2015 is Rs.53,319.01 Lacs (March 31, 2014 : Rs. 35,253.77 Lacs).
b] In accordance with the Notification No. DNBS.222/ CGM (US]-2011
dated January 17, 2011 issued by The Reserve Bank of India (RBI) vide
its directions to all NBFC''s to make a general provision of 0.25% on
the Standard assets, the Company has made a provision of Rs. 1,057.00
Lacs (March 31,2014 : Rs. 2,110.00 Lacs].
The total amount of provision on Standard assets of Rs.12,682.00 Lacs
(March 31, 2014 : Rs. 11,625.00 Lacs] is shown separately as
"Contingent provision for Standard assets" under Long-term and
Short-term provisions in the balance sheet (refer note no.5 and 9]. The
said amount includes additional / accelerated provision of 0.15% for
Rs.4,757.00 Lacs as at March 31, 2015 (March 31, 2014 : Rs. 4,370.00
Lacs].
c] Bad debts and write offs includes loss on termination which mainly
represents shortfall on settlement of certain contracts due to lower
realisation from such hire purchase/leased/loan assets on account of
poor financial position of such customers.
d] In accordance with the Prudential norms for restructured advances,
the Company has made provisions of Rs. 31.87 Lacs on account of
restructured advance which are included under this head.
NOTE 4 Commission and brokerage mainly represents amount incurred in
respect of acquisition of customers and mobilisation of public
deposits.
NOTE 5 The Company is engaged primarily in the business of financing
and accordingly there are no separate reportable segments as per
Accounting Standard 17 dealing with Segment Reporting.
NOTE 6 In the opinion of the Board, Current assets, Loans and advances
are approximately of the value stated if realised in the ordinary
course of business.
NOTE 7 Deposits/advances received against loan agreements are on
account of loan against assets, which are repayable / adjusted over the
period of the contract.
NOTE 8 DISCLOSURE ON DERIVATIVES
Outstanding derivative instruments and un-hedged foreign currency
exposures as on March 31, 2015
The Company has outstanding Foreign Currency Non- Repatriable (FCNR
(b)) loans of US $ 872.71 Lacs (March 31, 2014 : US $ 872.71 Lacs). The
said loan has been fixed to INR liability using a cross currency swap
and floating interest thereon in LIBOR plus rate has been swapped for
fixed rate in Indian rupee. There is no un-hedged foreign currency
exposure as on March 31, 2015.
NOTE 36 SECURITISATION / ASSIGNMENT TRANSACTIONS
a) During the year, the Company has without recourse securitised on "at
par" basis vide PTC route loan receivables of 27907 contracts (March
31, 2014 : 47122 contracts) amounting to Rs. 72,229.92 Lacs (March
31,2014: Rs.1,26,292.70 Lacs) for a consideration of Rs 72,229.92 Lacs
(March 31, 2014: Rs. 1,26,292.70 Lacs) and de-recognised the assets
from the books.
b) During the year, the Company has without recourse assigned loan
receivables of Nil contracts (March 31, 2014: 6490 contracts) amounting
to Rs. Nil (March 31,2014 : Rs. 19,850.83 Lacs) for a consideration of
Rs. Nil (March 31, 2014 : Rs. 15,554.19 Lacs towards 90% of receivables
assigned and de- recognised the assets from the books). Out of the
total receivables assigned, an amount of Rs. Nil (March 31, 2014: Rs.
1,985.08 Lacs equivalent to 10% of the receivables) have been
recognized as "Retained interest in assignment transactions"
representing Minimum Retention Requirement (MRR) as required under
revised guidelines on securitization transactions vide RBI Circular
dated August 21, 2012 (refer note no. 13 and 18).
The amount of profit in cash of Rs. 120.64 Lacs (March 31,2014:
Rs.314.94 Lacs) on assignment transaction has been held under an
accounting head "Cash profit on loan transfers under assignment
transactions pending recognition" and the same is amortized in line
with above referred guidelines (refer note no. 4 and 8).
c) Income from assignment / securitization transactions include write
back of provision for loss / expenses in respect of matured assignment
transactions amounting to Rs 8,807.91 Lacs (March 31,2014 : Rs.
4,189.65 Lacs) considered no longer necessary (refer Accounting policy
3 (IV) A (iii)).
d) In terms of the accounting policy stated in 3 (IV) (B) (i) (c),
securitisation income is recognized as per RBI Guidelines dated 21st
August, 2012. Accordingly, interest only strip representing present
value of interest spread receivable has been recognized and reflected
under loans and advances (refer note no. 13 and 18) and equivalent
amount of unrealised gains has been recognised as liabilities (refer
note no. 4 and 8).
e) Excess interest spread redeemed during the year by the Special
Purpose Vehicle Trust (SPV Trust) has been recognised as income and
included in Income from assignment / securitisation transactions
amounting to Rs.11,024.71 Lacs (March 31, 2014: Rs. 5,146.47 Lacs)
NOTE 9 There were 119 cases (March 31,2014: 77 cases) of frauds
amounting to Rs.353.81 Lacs (March 31, 2014 : Rs 560.32 Lacs) reported
during the year. The Company has recovered an amount of Rs. 107.39
Lacs (March 31, 2014 : Rs 46.38 Lacs) and has initiated appropriate
legal action against the individuals involved. The claims for the
un-recovered losses have been lodged with the insurance companies.
NOTE 10 The gold loans outstanding as a percentage of total assets is
at 0.02% (March 31, 2014 : 0.03%).
NOTE 11 During the year, the Company has incurred expenditure of Rs.
2,374.07 Lacs towards CSR activities which includes contribution /
donations made to the trusts which are engaged in activities prescribed
under section 135 of the Companies Act, 2013 read with Schedule VII to
the said Act and expense of Rs.113.56 Lacs towards the CSR activities
undertaken by the Company (refer note no. 26).
NOTE 12 The Company has received show cause-cum- demand notice from
Service Tax Department to show cause as to why service tax of Rs.
4,631.54 Lacs should not be levied on subvention income and on
collection charges on receivables in respect of securitisation
transactions for the period from 2007-08 to 2013-14. The Company has
given a detailed reply to the department justifying why the
transactions would fall outside the purview of service tax. The Company
has appointed an expert to consult on the matter, who have opined that
the Company has a strong case on merits to defend and the chances of
getting an unfavourable outcome are remote.
NOTE 13 SCHEME OF AMALGAMATION
i) Scheme details and balance sheet position:
I n terms of Scheme of Arrangement under section 391 and 394 of the
Companies Act, 1956 (the "Scheme") between the Company and Mahindra
Business & Consulting Services Private Ltd. ("MBCSPL"), an erstwhile
wholly owned subsidiary of the Company and their respective
shareholders, all the assets and liabilities, including reserves, of
MBCSPL were transferred and vested in the Company effective from April
01, 2014 ("the Appointed date"). The Scheme was approved by the
Honourable High Court of judicature at Bombay ("the Court") vide its
order dated March 20, 2015. The said Scheme became effective from April
18, 2015 (the "ÂEffective date") on filing of the certified Court
order with Registrar of Companies, Maharashtra.
With effect from the appointed date, the whole of assets, properties,
liabilities of MBCSPL including all debts, liabilities, contingent
liabilities, duties and obligations of every kind, nature and
description relatable to the said business is transferred to and vested
in and / or be deemed to be transferred to and vested in the Company.
ii) Consideration:
The Scheme entails the amalgamation of MBCSPL, a wholly owned
subsidiary of the Company with its parent MMFSL, with the consequent
dissolution without winding up of MBCSPL. Accordingly, the scheme does
not envisage any issue of shares or payment of the consideration.
iii) Accounting:
a) The assets and liabilities, including reserves as at April 1, 2014
were incorporated in the financial statements of the Company at their
existing carrying amount.
b) 1,00,000 Equity Shares of Rs. 10/- each fully paid up in MBCSPL,
held as investment by the Company stands cancelled and the difference,
if any, is debited to opening balance of surplus in the Statement of
Profit and Loss (refer note no.2).
c) All inter-corporate deposits, loans and advances, outstanding
balances or other obligations between MBCSPL and the Company, stand
cancelled and there shall be no obligation / outstanding in that
behalf.
d) In accordance with the Scheme, MBCSPL continued to carry on the
business and activities in relation on account of and in trust for the
Company from April 1, 2014 (the "Appointed date") till April 18, 2015
(the "Effective date"). Accounts for the year also comprise of
operations of business transacted out of MBCSPL and therefore certain
figures may not be exactly comparable with the previous year''s figures.
NOTE 14 RELATED PARTY DISCLOSURE AS PER ACCOUNTING STANDARD 18 A) List
of the related parties and nature of relationship which have
transactions with our Company during the year:
Holding Company : Mahindra and Mahindra Limited
Subsidiary Companies
Mahindra Insurance Brokers Limited
Mahindra Rural Housing Finance Limited
Mahindra Business & Consulting Services Private Limited
(amalgamated with the Company effective from April 1, 2014)
Mahindra Asset Management Company Private Limited
Mahindra Trustee Company Private Limited
Joint Ventures : Mahindra Finance USA, LLC
Fellow subsidiary Companies:
2 x 2 Logistics Private Limited
Mahindra USA, Inc.
Mahindra Holidays and Resorts India Ltd.
NBS International Ltd.
Mahindra First Choice Wheels Ltd.
Mahindra First Choice Services Ltd.
Mahindra Defence Systems Ltd.
Mahindra Retail Pvt. Ltd.
Key Management Personnel : Mr. Ramesh Iyer (Managing Director)
Relatives of Key Management Personnel
Ms. Janaki Iyer
Ms. Ramlaxmi Iyer
Mr. Risheek Iyer
As at March 31
March 20151 March 2014
NOTE 15 CONTINGENT LIABILITIES AND
COMMITMENTS (TO THE EXTENT NOT
PROVIDED FOR)
i) Contingent liabilities
a) Demand against the Company not
acknowledged as debts
- Income tax 4,379.05 7,476.70
- Value Added Tax (VAT) 191.98 60.92
b) Corporate guarantees towards assignment
transactions 31,338.63 55,631.29
c) Credit enhancement in terms of corporate
guarantee for securitization transactions
(refer note no. 51 (iv)) 8,307.81 4,782.00
d) Legal suits filed by customers in consumer
forums and civil courts claiming compensation
from the Company 3,110.83 2,726.48
47,328.30 70,677.39
NOTE 16 The Company has sent letters to suppliers covered under the
Micro, Small and Medium Enterprises Development Act, 2006 seeking
information for which replies are awaited. In view of this, information
required under Schedule III of the Companies Act, 2013 is not given.
NOTE 17 Schedule to the Balance Sheet of a Non-Banking Financial
Company as required in terms of Paragraph 13 of Non-Banking Financial
(Deposit Accepting or Holding) Companies Prudential Norms (Reserve
Bank) Directions, 2007.
III) Derivatives
a) Forward Rate Agreement / Interest Rate Swap
The Company is not carrying out any activity of providing
Forward/Interest rate swap cover to third parties
b) Exchange Traded Interest Rate (IR) Derivatives
The Company is not carrying out any activity of providing Derivative
cover to third parties
c) Disclosures on Risk Exposure in Derivatives
Qualitative Disclosures
i) The Company undertakes the derivatives transaction to prudently
hedge the risk in context of a particular borrowing or to diversify
sources of borrowing and to maintain fixed and floating borrowing mix.
The Company does not indulge into any derivative trading transactions.
The Company reviews, the proposed transaction and outline any
considerations associated with the transaction, including
identification of the benefits and potential risks (worst case
scenarios); an independent analysis of potential savings from the
proposed transaction. The Company evaluates all the risks inherent in
the transaction viz., counter party risk, Market Risk, Operational
Risk, basis risk etc.
ii] Credit risk is controlled by restricting the counterparties that
the Company deals with, to those who either have banking relationship
with the Company or are internationally renowned or can provide
sufficient information. Market/Price risk arising from the fluctuations
of interest rates and foreign exchange rates or from other factors
shall be closely monitored and controlled. Normally transaction entered
for hedging, will run till its life, irrespective of profit or loss.
However in case of exceptions it has to be un-winded only with prior
approval of M.D/CFO/Treasurer. Liquidity risk is controlled by
restricting counterparties to those who have adequate facility,
sufficient information, and sizeable trading capacity and capability to
enter into transactions in any markets around the world.
iii) The respective functions of trading, confirmation and settlement
should be performed by different personnel. The front office and
back-office role is well defined and segregated. All the derivatives
transactions are quarterly monitored and reviewed by CFO and Treasurer.
All the derivative transactions have to be reported to the board of
directors at every quarterly board meetings including their financial
positions.
IV) Disclosures relating to Securitisation
a] Disclosures in the notes to the accounts in respect of
securitisation transactions as required under revised guidelines on
securitization transactions issued by RBI vide circular no. DNBS. PD.
No. 301/3.10.01/2012-13 dated August 21, 2012.
Applicable for transactions effected after the date of circular:
b) Details of Financial Assets sold to Securitisation / Reconstruction
Company for Asset Reconstruction
During the current year and the previous year the Company has not sold
any financial assets to Securitisation /Reconstruction Company for
asset reconstruction.
d) Details of non-performing financial assets purchased / sold
i] Details of non-performing financial assets purchased:
During the current year and the previous year the Company has not
purchased any non -performing financial assets.
ii] Details of Non-performing Financial Assets sold:
During the current year and the previous year the Company has not sold
any non -performing financial assets.
V) Exposures
a) Exposure to Real Estate Sector
During the current year and the previous the Company has no Exposure to
Real estate sector.
b) Exposure to Capital Market
During the current year and the previous year the Company has no
Exposure to Capital Market.
c) Details of financing of parent company products of the total
financing activity undertaken by the Company during the financial year
2014-15, 48% (March 31, 2014 : 48%) of the financing was towards parent
company products.
d) Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL)
exceeded by the NBFC during the current year and the previous year, the
Company has not exceeded the prudential exposure limits.
e) Unsecured Advances
During the current year, the Company has granted unsecured advances of
Rs. 1,42,013.49 Lacs (March 31, 2014: Rs.1,44,294.39 Lacs).
VI) Miscellaneous
a) Registration obtained from other financial sector regulators
During the current year and the previous year, the Company has not
obtained any registration from other financial sector regulators.
b) Disclosure of Penalties imposed by RBI and other regulators
During the current year and the previous year, there are no penalties
imposed by RBI and other regulators
c) Related Party Transactions (refer note no.42)
d) Rating assigned by credit rating agencies and migration of ratings
during the year Credit Rating
During the year under review, CRISIL Limited [CRISIL], has reaffirmed
the rating to the Company''s Long-term Debt Instruments and Bank
Facilities as ''CRISIL AA / Stable'' and the Company''s Fixed Deposit
Programme as ''FAAA/ Stable'', respectively. The ''AA /Stable'' rating
indicates a high degree of safety with regard to timely payment of
financial obligations. The rating on the Company''s Short-term Debt and
Bank Loans has been reaffirmed at ''CRISIL A1 '' which is the highest
level of rating.
During the year under review, India Ratings & Research Private Limited,
which is part of Fitch Group, upgraded the rating of Company''s National
Long-term instrument and Lower Tier II Subordinated Debt programme to
''IND AAA/Stable'' from ''IND AA /Stable''. The ''IND AAA'' national ratings
denote the highest degree of safety regarding timely servicing of
financial obligations. Such instruments carry lowest credit risk.
During the year under review, CARE Ratings has assigned the ''CARE AAA''
rating to Company''s Long-term debt instrument and Lower Tier II
Subordinated Debt programme. The Instruments with this rating are
considered to have the highest degree of safety regarding timely
servicing of financial obligations. Such instruments carry lowest
credit risk.
Brickwork Ratings India Private Limited has, during the year, upgraded
the rating of the Company''s Long-term Subordinated
Debt Issue to ''BWR AAA/stable'' from "BWR AA /positive". ''BWR AAA''
stands for an instrument that is considered to have the highest degree
of safety regarding timely servicing of financial obligations. Such
instruments carry lowest credit risk.
VII) Net Profit or Loss for the period, prior period items and change
in accounting policies
There are no such material items which require disclosures in the notes
to Account in terms of the relevant Accounting Standard.
VIII) Revenue Recognition
(Refer note no. 3 under Summary of Significant Accounting Policies).
IX) Accounting Standard 21 - Consolidated
Financial Statements (CFS)
All the subsidiaries of the Company have been consolidated as per
Accounting Standard 21. Refer consolidated financial statements (CFS)
Additional Disclosures:
Draw Down from Reserves
Refer note no. 24 regarding transitional depreciation of Rs.317.77 Lacs
(net of deferred tax of Rs.163.62 Lacs) arising pursuant to
requirements of schedule II of the Companies Act 2013 which is charged
to opening balance of surplus in Statement of Profit and Loss.
NOTE 18 DISCLOSURE ON RESTRUCTURED STANDARD ADVANCES
During the year, the Company has restructured one of the standard
advance accounts resulting in reduction in rate of interest and
increase in tenor of the loan.
NOTE 19 Previous year figures have been regrouped / reclassified
wherever found necessary.
Mar 31, 2015
1. CORPORATE INFORMATION:
Tech Mahindra Limited (referred to as "TechM" or the "Company")
operates mainly into two sectors i.e. Telecom business and Enterprise
Solutions business. The telecom business provides consulting-led
integrated portfolio services to customers which are Telecom Equipment
Manufacturers, Telecom Service Providers and IT Infrastructure
Services, Business Process Outsourcing as well as Enterprise Services
(BFSI, Retail & Logistics, Manufacturing, E&U, and Healthcare, Life
Sciences, etc.) of Information Technology (IT) and IT-enabled services
delivered through a network of multiple locations around the globe. The
enterprise solutions business provides comprehensive range of IT
services, including IT enabled services, application development and
maintenance, consulting and enterprise business solutions, extended
engineering solutions and infrastructure management services to
diversified base of corporate customers in a wide range of industries
including insurance, banking and financial services, manufacturing,
telecommunications, transportation and engineering services. The
Company''s registered office is in Mumbai, India and has over 140
subsidiaries across the globe.
2. Scheme of Amalgamation and Arrangement:
Pursuant to the Scheme of Amalgamation and Arrangement (the "Scheme")
sanctioned by the Honourable High Court of Andhra Pradesh vide its
order dated June 11, 2013 and the Honourable High Court of Judicature
at Bombay vide its order dated September 28, 2012, Venturbay
Consultants Private Limited ("Venturbay"), CanvasM Technologies Limited
("CanvasM") and Mahindra Logisoft Business Solutions Limited
("Logisoft"), the wholly owned subsidiaries of the Company, and Satyam
Computer Services Limited ("Satyam") an associate of the Company
(through Venturbay) and C&S System Technologies Private Limited (C&S) a
wholly owned subsidiary of erstwhile Satyam, merged with the Company
with effect from April 1, 2011 (the "appointed date"). The Scheme came
into effect on June 24, 2013, the day on which both the orders were
delivered to the Registrar of the Companies, and pursuant thereto the
entire business and all the assets and liabilities, duties and
obligations of Satyam, Venturbay, CanvasM, Logisoft and C&S have been
transferred to and vested in the Company with effect from April 1,
2011.
In accordance with the Scheme, the investments held in the respective
subsidiaries and associate have been cancelled and the Company has
issued 2 equity shares of Rs. 10 each fully paid-up in respect of every
17 equity shares of Rs. 2 each in the equity share capital of Satyam,
aggregating 103 Million equity shares.
The Company transferred, out of its total holding in Satyam as on April
1, 2011, 204 Million equity shares to a Trust, to hold the shares and
any additions or accretions thereto exclusively for the benefit of the
Company. The balance shares held by the Company in Satyam have been
cancelled.
As the other amalgamating companies i.e. Venturbay, Logisoft, CanvasM
and C&S were wholly owned subsidiaries of the Company / Satyam, as
applicable, no equity shares were exchanged to effect the amalgamation
in respect thereof.
These amalgamations with the Company are non-cash transactions.
2.1 General nature of business of the amalgamating companies:
- Satyam is leading information, communications and technology (ICT)
company providing a range of business consulting, information
technology and communication services to companies across multiple
industries and geographies.
- Venturbay is engaged in providing programming and software
solutions, information technology, networking and consultancy services.
- CanvasM is engaged in the business of information technology (IT)
and software services relating to developing, improving, designing,
assembling, marketing, and allied activities including dealing in all
types of computer programming, system software, data processing and
warehousing, data base management systems and interactive multimedia
and peripheral products.
- Logisoft is engaged in the business of information technology
services relating to design and development of dealership management
systems and IT software services.
- C&S is engaged in the business of providing information technology
(IT) and software services relating to solutions and consultation in
the space of learning management, communications and collaborations
management, document and workflow management, eSecurity, identity,
access and building management, managed services, etc.
The amalgamating companies operating in specialized domains of the
information technology as indicated above, amalgamating the business in
a single entity provides for consolidating the information technology
business bringing in synergy benefits, enhanced depth and breadth of
capabilities, attain efficiencies and reduce overall cost.
2.2 Accounting treatment of the amalgamation
The amalgamation is accounted under the ''pooling of interest'' method as
per Accounting Standard 14 as notified under Section 211(3C) of the
Companies Act, 1956 and as modified under the Scheme as under:
- All assets and liabilities (including contingent liabilities),
reserves, benefits under income tax, benefits for and under special
economic zone registrations, duties and obligations of Satyam,
Venturbay, CanvasM, Logisoft and C&S have been recorded in the books of
account of the Company at their existing carrying amounts and in the
same form.
- The amount of Share Capital of Venturbay, CanvasM, Logisoft, Satyam
and C&S have been adjusted against the corresponding investment
balances held by the Company in the amalgamating companies and the
equity shares issued by the Company pursuant to the Scheme and the
excess of investments (gross) over the Share Capital, as given below,
have been adjusted to reserves ("Amalgamation Reserve").
Accordingly, the amalgamation has resulted in transfer of assets and
liabilities in accordance with the terms of the Scheme at the following
summarised values:
- Further, in accordance with the Scheme, the debit balance in the
Amalgamation Reserve as of April 1, 2011, if any, pursuant to the
amalgamation have been adjusted against the securities premium account.
The application and reduction of the securities premium account is
effected as an integral part of the sanctioned Scheme which is also
deemed to be the order under Section 102 of the Companies Act, 1956
(the "Act") confirming the reduction. Accordingly, the aforesaid
balance in Amalgamation Reserve aggregating Rs. 2,489 Million as of April
1, 2011 has been adjusted against the securities premium account.
The Board of erstwhile Satyam had for the year ended March 31, 2013
proposed a dividend of Rs. 0.60 per equity share amounting to Rs. 826
Million (including dividend tax thereon), which was provided for in its
financial statements for the year ended March 31, 2013. Since the
merger has become effective on June 24, 2013, the dividend could not be
approved by the shareholders in the AGM which was scheduled to be held
on August 2, 2013. Erstwhile Satyam shareholders, who have been issued
TechM shares in the ratio of 2 shares in TechM for 17 shares in
erstwhile Satyam, became entitled to dividend of Rs. 5 per share. As
shares of erstwhile Satyam held by Venturbay are cancelled on the
merger, there is an excess provision of dividend of Rs. 217 Million,
relating to the said shares of Venturbay that have been cancelled,
which has been reversed from the proposed dividend.
The Board of Directors in its meeting held on June 25, 2013 had fixed
July 5, 2013 as the Record Date for determining the shareholders of
erstwhile Satyam who would be entitled to receive shares of the Company
in the ratio of 2 equity Shares of Rs. 10/- each fully paid-up in respect
of 17 equity shares of Rs. 2/- each fully paid-up of erstwhile Satyam in
accordance with approved Scheme of Amalgamation and Arrangement. On
July 6, 2013, the Securities Allotment Committee of the Board of
Directors of the Company have allotted 103,485,396 equity shares of
face value of Rs. 10/- each fully paid-up of the Company to the
shareholders of erstwhile Satyam ranking pari-passu in all respects
with the existing equity shares of the Company.
2.3 Other adjustments / matters arising out of amalgamation
In terms of the Scheme, the appointed date of the amalgamation being
April 1, 2011, net profit from the amalgamating companies during the
financial years 2011-12 and 2012-13 aggregating Rs. 19,735 Million has
been transferred, to the extent not accounted already, to the Surplus
in Statement of Profit and Loss in the books of the Company upon
amalgamation.
2.4 Pursuant to the Scheme, the title deeds for the immovable
properties pertaining to the amalgamating companies are pending
conveyance in the name of the Company. Further, the Company has
initiated the name change formalities to transfer the title in respect
of the other properties, contracts etc.
2.5 Appeals against the order sanctioning the Scheme
Appeals against the order by the single judge of the Honourable High
Court of Andhra Pradesh approving the Scheme of merger have been filed
by 37 companies before the Division Bench of the Honourable High Court
of Andhra Pradesh. No interim orders have been passed and the appeals
are pending hearing.
One of the said company has also appealed against the order of the
single judge rejecting the Petition for winding up of erstwhile Satyam.
The matter has been combined with the above appeals for hearing.
3. Scheme of Amalgamation and Arrangement of Mahindra Engineering
Services Limited (MESL):
Pursuant to the Scheme of Amalgamation and Arrangement (the "Scheme")
sanctioned by the Honourable High Court of Bombay vide its order dated
October 31, 2014, Mahindra Engineering Services Limited ("MESL"),
merged with the Company with effect from April 1, 2013 (the "appointed
date"). The Scheme came into effect on December 8, 2014, the day on
which the order was delivered to the Registrar of the Companies, and
pursuant thereto the entire business and all the assets and
liabilities, duties, taxes and obligations of MESL have been
transferred to and vested in the Company with effect from April 1,
2013.
In accordance with the Scheme approved by the Honourable High Court of
Bombay, the Company has, in December, 2014, issued 5 equity shares of Rs.
10 each fully paid-up in respect of every 12 equity shares of Rs. 10 each
outstanding in the equity share capital of MESL, aggregating to
4,259,011 equity shares as purchase consideration to the existing
shareholders of MESL.
3.1 General nature of business of the amalgamating company
MESL is engaged in the business of rendering engineering services in
relation to designing and developing parts, components, systems and
aggregates relating to the automotive sector.
The amalgamating company operating in specialized domain of rendering
engineering services as indicated above, amalgamating the business in a
single entity provides for bringing in synergy benefits, single ''go-
to-market'' strategy, benefits of scale, enhanced depth and breadth of
capabilities, standardization and simplification of business processes,
attain efficiencies and reduce overall cost.
3.2 Accounting treatment of the amalgamation
The amalgamation is accounted under the ''pooling of interest'' method as
per Accounting Standard 14 as specified under the Companies Act, 1956
(which are deemed to be applicable as per Section 133 of the Companies
Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014)
and as modified under the Scheme as under:
- All assets, liabilities and reserves, including the surplus in the
statement of Profit and Loss of MESL have been recorded in the books of
account of the Company at their respective carrying amounts and in the
same form.
- In accordance with the Scheme sanctioned by the Honourable High
Court of Bombay, the Company has, on December 20, 2014, issued 5 equity
shares of Rs. 10 each fully paid-up in respect of every 12 equity shares
of Rs. 10 each outstanding in the equity share capital of MESL,
aggregating to 4,259,011 equity shares as purchase consideration to the
existing shareholders of MESL ranking pari-passu in all respects with
the existing equity shares of the Company.
- The difference between face value of equity shares issued by the
Company pursuant to the Scheme and the amount of share capital of the
amalgamating company, have been adjusted to Reserves of the transferee
company.
- Accordingly, the amalgamation has resulted in transfer of assets
and liabilities in accordance with the terms of the Scheme at the
following summarized values:
3.3 Other adjustments / matters arising out of amalgamation
In terms of the Scheme, the appointed date of the amalgamation being
April 1, 2013, net profit from the amalgamating company (aggregating to
Rs. 428 Million) and movements in other components of reserves and
surplus during the financial year 2013-14 has been transferred, to the
extent not accounted already, at their respective carrying amounts and
in the same form in the books of the Company upon amalgamation.
Accordingly, the figures for the year ended March 31, 2015 are after
giving effect to the merger, while the comparative figures are before
giving effect to the merger and, hence are not comparable.
3.4 Pursuant to the Scheme, the title deeds for the properties
pertaining to the amalgamating company are pending conveyance in the
name of the Company. Further, the Company has initiated the name change
formalities to transfer the title in respect of the contracts,
agreements, etc.
4. Certain matters relating to investigations pertaining to erstwhile
Satyam Computer Services Limited (erstwhile Satyam):
4.1 Investigation by authorities in India
In the letter of January 7, 2009 (the "letter") of Mr. B. Ramalinga
Raju, the then Chairman of erstwhile Satyam, admitted that the Balance
Sheet of erstwhile Satyam as at September 30, 2008 carried an inflated
cash and bank balances, non-existent accrued interest, an understated
liability and an overstated debtors position. Consequently, various
regulators / investigating agencies such as the Central Bureau of
Investigation (CBI), Serious Fraud Investigation Office (SFIO) /
Registrar of Companies (ROC), Directorate of Enforcement (ED), etc.,
had initiated their investigation on various matters. On April 09,
2015, the Special Session Court in its judgment has sentenced rigorous
imprisonment to B. Ramlinga Raju including others for offence
punishable under various sections of Indian Penal Code.
On May 22, 2013, the ED has issued a show-cause notice to erstwhile
Satyam for contravention of provisions of the Foreign Exchange
Management Act, 1999 (FEMA) for alleged non-repatriation of ADS
proceeds aggregating USD 39.2 Million. The Company has responded to the
show-cause notice.
Certain agencies viz., SFIO and ED, pursuant to the matters stated
above, had conducted inspections and issued notices calling for
information from certain subsidiaries which have been responded / in
the process of being responded to. In furtherance to the investigation
of erstwhile Satyam, certain Regulatory Agencies in India sought
assistance from Overseas Regulators and accordingly, sought information
from certain overseas subsidiaries.
As per the assessment of the Management, based on the forensic
investigation and the information available up to this stage, all
identified / required adjustments / disclosures arising from the
identified financial irregularities, had been made in the financial
statements of erstwhile Satyam as at March 31, 2009.
Considerable time has elapsed after the initiation of investigation by
various agencies and erstwhile Satyam had not received any further
information as a result of the various ongoing investigations against
erstwhile Satyam which required adjustments to the financial
statements.
Further, in the opinion of the Management, no new claims have been made
when the Andhra Pradesh High Court considered and approved the merger,
which need any further evaluation / adjustment / disclosure in the
books, and all existing claims have been appropriately dealt with /
recorded / disclosed in the books based on their current status.
Considering the above, notwithstanding the pendency of the various
investigations/ proceedings, the Management is of the view that the
above investigations / proceedings would not result in any additional
material provisions / write-offs / adjustments (other than those
already provided for, written-off or disclosed) in the financial
statements of the Company.
4.2 Forensic investigation and nature of financial irregularities
Consequent to the aforesaid letter, the Government nominated Board of
Directors of erstwhile Satyam appointed an independent counsel
("Counsel") to conduct an investigation of the financial
irregularities. The Counsel appointed forensic accountants to assist in
the investigation (referred to as "forensic investigation") and
preparation of the financial statements of erstwhile Satyam.
The forensic investigation conducted by the forensic accountants
investigated accounting records to identify the extent of financial
irregularities and mainly focused on the period from April 1, 2002 to
September 30, 2008, being the last date up to which erstwhile Satyam
published its financial results prior to the date of the letter. In
certain instances, the forensic accountants conducted investigation
procedures outside this period.
The forensic investigation had originally indicated possible diversion
aggregating USD 41 Million from the proceeds of the American Depositary
Shares (ADS) relating to erstwhile Satyam. The amount was revised to
USD 19 Million based on the further details of utilisation of ADS
proceeds obtained by erstwhile Satyam.
The overall impact of the fictitious entries and unrecorded
transactions arising out of the forensic investigation, to the extent
determined was accounted in the financial statements for the financial
year ended March 31, 2009 of erstwhile Satyam.
Based on the forensic investigation, an aggregate amount of Rs. 11,393
Million (net debit) was identified in the financial statements of
erstwhile Satyam as at March 31, 2009 under "Unexplained differences
suspense account (net)" comprising of fictitious assets, unrecorded
loans or where complete information is not available. On grounds of
prudence, these amounts had been provided for by erstwhile Satyam in
the financial year ended March 31, 2009 and since there is no further
information available with the Management even after the lapse of more
than four years, the said amount has been completely written off in the
books of account of the Company during the year ended March 31, 2014.
The forensic investigation was unable to identify the nature of certain
alleged transactions aggregating Rs. 12,304 Million (net receipt) against
which erstwhile Satyam had received legal notices from 37 companies
claiming repayment of this amount which was allegedly given as
temporary advances. Refer note 26.3 below.
4.3 Alleged Advances
Consequent to the letter of the erstwhile Chairman, on January 8, 2009,
the erstwhile Satyam received letters from thirty seven companies
requesting confirmation by way of acknowledgement for receipt of
certain alleged amounts referred to as "alleged advances". These
letters were followed by legal notices from these companies dated
August 4/5, 2009, claiming repayment of Rs. 12,304 Million allegedly
given as temporary advances. The legal notices also claim damages/
compensation @18% per annum from date of advance till date of
repayment. The erstwhile Satyam has not acknowledged any liability to
any of the thirty seven companies and has replied to the legal notices
stating that the claims are legally untenable.
The 37 companies had filed petitions / suits for recovery against the
erstwhile Satyam before the City Civil Court, Secunderabad ("Court"),
with a prayer that these companies be declared as indigent persons for
seeking exemption from payment of requisite court fees.
One petition where court fees have been paid and the pauper petition
converted into a suit which is pending disposal and petitions filed by
remaining 36 companies are before the Court, at various stages of
rejection of pauperism / trial of pauperism / inquiry in condone delay
applications.
The remaining petitions are at a preliminary stage before the Court,
for considering condonation of delay in re-submission of pauper
petitions. In one petition, the delay had been condoned by the Court
and the Company has obtained an interim stay order from the Honourable
High Court of Andhra Pradesh. The Hon''ble High Court after hearing the
parties has remanded the matter to the lower directing to consider the
application afresh.
The erstwhile Satyam had received legal notices from nearly all of the
above companies, calling for payment of the amounts allegedly advanced
by them (including interest and damages), failing which they would be
constrained to file a petition for winding up the affairs of Satyam. In
pursuance thereof, one of the aforesaid companies filed a winding up
petition that was dismissed by the High Court. Against the said order
of dismissal, the aforementioned company has filed an appeal before the
Division Bench of High Court of Andhra Pradesh which is pending
hearing.
Furthermore, even in connection with the merger proceedings, the
erstwhile Satyam had received letters from the aforesaid companies
claiming themselves to be "creditors". They had pleaded inter-alia
before the High Court (hearing the merger petition of the erstwhile
Satyam with the Company) that the mandatory provisions governing the
scheme under the Companies Act, 1956 have not been complied with in so
far as convening a meeting of the creditors is concerned. They
contended that without convening a meeting of the creditors and hearing
their objections, the merger scheme could not be proceeded with.
The High Court based on the report of an independent firm of Chartered
Accountants appointed by the Court and the contentions of the erstwhile
Satyam, held inter-alia, in its order approving the merger of the
erstwhile Satyam with the Company, that the contention of the 37
companies that Satyam is retaining the money of the "creditors" and not
paying them does not appear to be valid and further held that any right
of the objecting creditors can be considered only if the genuineness of
the debt is proved beyond doubt which is not so in this case.
The High Court in its order, further held that in the absence of Board
resolutions and documents evidencing acceptance of unsecured loans by
the former management of the erstwhile Satyam, the new management of
the erstwhile Satyam is justified in not crediting the amounts received
in their names and not showing them as creditors and further reflecting
such amounts as Amounts pending investigation suspense account (net).
The Directorate of Enforcement (ED) is investigating the matter under
the Prevention of Money Laundering Act, 2002 ("PMLA") and directed the
erstwhile Satyam to furnish details with regard to the alleged advances
and has also directed it not to return the alleged advances until
further instructions from the ED. In furtherance to the investigation
by the ED, the erstwhile Satyam was served with a provisional
attachment order dated October 18, 2012 issued by the Joint Director,
Directorate of Enforcement, Hyderabad under Section 5(1) of the PMLA
("the Order"), provisionally attaching certain Fixed Deposit accounts
of the Company then aggregating to Rs. 8,220 Million for a period of 150
days. As stated in the Order, the investigations of the ED revealed
that Rs. 8,220 Million constitutes "proceeds of crime" as defined in the
PMLA. The erstwhile Satyam had challenged the Order in the Honourable
High Court of Andhra Pradesh ("the Writ"). The Honourable High Court of
Andhra Pradesh ("the High Court") has, pending further orders, granted
stay of the said Order and all proceedings pursuant thereto vide its
interim order dated December 11, 2012. The ED had challenged the
interim order before the Division Bench of the Honourable High Court of
Andhra Pradesh. By an order dated December 31, 2014, the Hon''ble High
court has dismissed the Appeal filed by ED and continued the stay
granted.
The criminal case has been commenced before the "Honourable XXI
Additional Chief Metropolitan Magistrate, Hyderabad cum Special
Sessions Court" by the Enforcement Directorate under the Prevention of
Money Laundering Act, 2002 against erstwhile Satyam, since merged with
the Company, along with 212 Accused persons. In the complaint, ED has
alleged that the Company has been involved in the offence of money
laundering by possessing the proceeds of crime and projecting them as
untainted. The Company had challenged the above complaint before the
Honourable High Court of Hyderabad and the Hon''ble High court has
quashed the criminal complaint against the Company vide its order dated
December 22, 2014. On appeal, the Divisional Bench of the High Court,
however passed an interim order allowing the hearing for framing
''Charges''. On Special Leave Petition before the Supreme Court of the
India, the Hon''ble Supreme Court directed the Hon''ble High Court of
Andhra Pradesh to dispose of the writ appeal within a period of four
months and further directed the trial court to defer the trial till the
Hon''ble High Court of Andhra Pradesh disposes of the writ appeal.
In view of the aforesaid developments and also based on legal opinion,
the erstwhile Satyam''s management''s view, which is also the Company''s
Management''s view, that the claim regarding the repayment of "alleged
advances" (including interest thereon) of the 37 companies are not
legally tenable has been reinforced.
However, notwithstanding the above, pending the final outcome of the
recovery suit filed by the 37 companies in the City Civil Court and the
ED matter under the PMLA pending before the High Court, the Company, as
a matter of prudence, at this point of time, is continuing to classify
the amounts of the alleged advances as "Amounts Pending Investigation
Suspense Account (net)", and the same would be accordingly dealt with /
reclassified as and when appropriate.
4.4 Documents seized by CBI/other authorities
Pursuant to the investigations conducted by CBI / other authorities,
most of the relevant documents in possession of erstwhile Satyam
relating to period affected by the financial irregularities were seized
by the CBI. On petitions filed by erstwhile Satyam, the ACMM granted
partial access to it including for taking photo copies of the relevant
documents as may be required in the presence of the CBI officials.
Further, there were also certain documents which were seized by other
authorities such as the Income Tax Authorities, of which erstwhile
Satyam could only obtain photo copies.
4.5 Management''s assessment of the identified financial irregularities
As per the assessment of the Management, based on the forensic
investigation and the information available upto this stage, all
identified / required adjustments / disclosures arising from the
identified financial irregularities, had been made in the financial
statements of erstwhile Satyam as at March 31, 2009.
Considerable time has elapsed after the initiation of investigation by
various regulators / agencies and the erstwhile Satyam has not received
any further information as a result of the various ongoing
investigations against the erstwhile Satyam which requires adjustments
to the financial statements.
Further, in the opinion of the Management, no new claims have been made
when the Andhra Pradesh High Court considered and approved the merger,
which need any further evaluation / adjustment / disclosure in the
books, and all existing claims have been appropriately dealt with /
recorded / disclosed in the books based on their current status.
Considering the above, notwithstanding the pendency of the various
investigations / proceedings, the Management is of the view that the
above investigations / proceedings would not result in any additional
material provisions / write-offs / adjustments (other than those
already provided for, written-off or disclosed) in the financial
statements of the Company.
5. Aberdeen action (USA)
On November 13, 2009, a trustee of two trusts that are purported
assignees of the claims of twenty investors who had invested in the
erstwhile Satyam''s ADS and common stock, filed a complaint against
erstwhile Satyam, its former auditors and others (the "Action")
alleging the losses suffered by the twenty investors (Claimants) is
over USD 68 Million.
On July 27, 2012, the erstwhile Satyam entered into an Agreement of
Settlement ("the Settlement") with Aberdeen Claims Administration,
Inc., the trustee for the two trusts and twenty underlying investors.
The obligations incurred pursuant to the Settlement are in full and
final disposition of the Action and the appropriate consent order of
the Court in the Southern District of New York has been received on
July 30, 2012. In terms of the Settlement, erstwhile Satyam has
deposited in an Escrow Account an amount of USD 12 Million ("Settlement
Amount") during the financial year ended March 31, 2013. Remittance out
of the Escrow is subject to determination of appropriate withholding
tax by the Authority for Advance Ruling (AAR).
6. Aberdeen (UK) complaint
In April 2012, erstwhile Satyam was served with an Amended Claim Form
and Amended Particulars of claim dated December 22, 2011, initiating
proceedings in the Commercial Court in London ("the English Court") by
Aberdeen Asset Management PLC on behalf of 23 "Claimants" who are said
to represent 30 funds who had invested in the Company''s common stock
that traded on the exchanges in India. On December 12, 2012, the
Company entered into a confidential Settlement Agreement ("the
Settlement") settling claims brought in the English Court by Aberdeen
Global and twenty-two other funds (collectively, the "Claimants")
managed by Aberdeen Asset Management PLC ("Aberdeen") and/or its
subsidiaries (the "Claims"). The Claims included certain allegations of
fraudulent misrepresentations said to have been made by the former
management of erstwhile Satyam in London and relied upon by the
Claimants'' investment manager and/ or communicated in meetings alleged
to have taken place in London. The Claimants have claimed that they
have suffered losses of an estimated sum of USD 298 Million and
additional consequential losses. By virtue of the Settlement, the
Claims have been fully and finally disposed off on the basis of,
inter-alia, for a payment to be made by the Company of USD 68 Million
("Settlement Amount").
In terms of the Settlement, erstwhile Satyam has deposited a total
amount of USD 68.16 Million towards the Settlement Amount and interest
in an Escrow Account during financial year ended March 31, 2013.
Remittance out of the Escrow is subject to determination of appropriate
withholding tax by the Authority for Advance Ruling (AAR).
7. Commitment and Contingencies
7.1 Capital Commitments
i. The estimated amount of contracts remaining to be executed on
capital account (net of advances) and not provided for as at March 31,
2015 is Rs. 5,821 Million (March 31, 2014: Rs. 9,441 Million).
ii. In respect of land, refer note 31(c).
7.2 Purchase commitments In respect of investments
i. On July 2, 2014, the Company entered in to a joint venture agreement
with Midad Holdings in Saudi Arabia. As per agreement, the Company will
hold 51% stake in that entity i.e. Tech Mahindra Arabia. The said
entity is yet to be incorporated as at March 31, 2015.
ii. Sofgen Holdings Limited (Refer note 35 (k))
iii. Avion Networks Inc. (Refer note 35 (o))
iv. On April 25, 2015 the Company has entered into a tripartite Joint
Venture Agreement to form a limited liability company ("LLC") with
Qatar Engineering Trading & Contracting Company (QETCC) and KPC Aurion
Holding WLL (Aurion). This LLC would be incorporated in the State of
Qatar with a paid-up capital of QAR 0.36 Million out of which
equivalent to USD 0.02 Million would be contributed by the Company. The
Company would hold 20% Equity Ownership in the LLC. The said entity is
yet to be incorporated and no investment has been made by the Company.
v. Tech Mahindra Servicos De Informatica LTDA (Refer note 35 (n))
7.3 Other commitments
i. On April 2, 2013, the Company had taken over certain LAB equipments
and 7 associates from one of its customers in Sweden vide its agreement
dated March 21, 2013 for a purchase consideration of USD 6 Million (Rs.
326 Million). As per the terms of agreement, the purchase consideration
shall be discharged by the Company by providing services for next three
years. As at March 31, 2015 the Company, against the said purchase
consideration, has provided services amounting to USD 6 Million (Rs. 326
Million) (March 31, 2014: USD 2.90 Million (Rs. 157 Million)). As per the
terms of agreement, we have provided full services amounting to USD 6
Million (Rs. 326 Million).
ii. The company has outstanding commitments with respect to discharge
of services to an international sports federation amounting to Rs. 27
Million as at March 31, 2015. (March 31, 2014: Rs. 380 Million)
7.4 Contingent Liabilities
i. Bank Guarantees / comfort letters/ corporate guarantee outstanding
as at March 31, 2015: Rs. 9,592 Million (March 31, 2014: Rs. 9,761
Million).
ii. During the year ended March 31, 2015, the Company has given letter
of support of USD 91 Million (Rs. 5,687 Million) to banks for loans
availed by Lightbridge Communications Corporation (100% subsidiary of
the Company).
iii. Outstanding Bill discounting as at March 31, 2015Rs.2,696 Million
(March 31, 2014: Rs. Nil).
7.5 Income Taxes
7.5.1 Income Taxes / Fringe Benefit Tax
The Company has received demand notices from Income Tax Authorities
resulting in a contingent liability of Rs. 4,663 Million (March 31, 2014:
Rs. 4,407 Million). This is mainly on account of the following:
i. An amount of Rs. 1,137 Million (March 31, 2014: Rs. 822 Million)
relating to Transfer pricing adjustment on account of arm''s length
transactions. The Company has filed an appeal against the same. For the
Assessment Year 2011-12, the Company has received draft assessment
order, against which the Company has filed an appeal before Dispute
Resolution Panel ("DRP").
ii. An amount of Rs. 742 Million (March 31, 2014: Rs. 818 Million) on
account of adjustment of expenditure in foreign currency being excluded
only from Export turnover and not from Total turnover. The Company has
already won the appeal before the Commissioner of Income Tax (Appeals)
"CIT(A)" for Assessment Year 2004-05, 2005-06, 2006-07, 2007-08. Income
Tax Department is in appeal before the Income Tax Appellate Tribunal
("ITAT") against the Order of CIT (A) for above mentioned Assessment
Years, except for Assessment Year 2006-07, for which the company is in
Appeal before ITAT against the order of DRP.
iii. An amount of Rs. 2,769 Million (March 31, 2014: Rs. 2,751 Million)
relating to Assessment Year 2007-08 for denial of deduction under
section 10A of the Income Tax Act, 1961 on transfer pricing adjustment.
The Company has won the appeal before CIT (A) and the Income Tax
department has filed an appeal before ITAT.
iv. An amount of Rs. 16 Million (March 31, 2014: Rs. 16 Million) relating
to Fringe Benefit Tax. The Company has won the appeal before ITAT. The
Income Tax department may intend to appeal before High Court against
the ITAT order.
7.5.2 Income tax matters related to erstwhile Satyam
i. Financial years 2002-03 to 2005-06
Consequent to the letter of the erstwhile Chairman of the erstwhile
Satyam, the Assessing Officer rectified the assessments earlier
completed for the financial years 2002-03 to 2005-06, by passing
rectification orders under Section 154 of the Income-tax Act, 1961 by
withdrawing foreign tax credits and raising net tax demands aggregating
Rs. 2,358 Million (including interest) against which refunds of financial
years 2007-08 and 2009-10 aggregating Rs. 17 Million have been adjusted.
During the financial year ended March 31, 2010, erstwhile Satyam had
filed an appeal with the Commissioner of Income Tax (Appeals) (CIT
(A)). In August, 2010 the CIT (A) dismissed the appeals. Subsequently,
erstwhile Satyam had filed appeals before the Income Tax Appellate
Tribunal (ITAT) for the aforesaid years which are pending disposal as
on date. During the financial year 2010-11, the assessments (in the
normal course of assessment) for the financial years 2004-05 and
2005-06 were further modified by issuing consequential orders
re-computing the tax exemptions claimed by the erstwhile Satyam and
enhancing the tax demands. The total contingent liability resulting for
these years including consequential orders is Rs. 576 Million. Against
the consequential orders, erstwhile Satyam has filed appeals before CIT
(A) against the said enhancement of tax for the aforesaid years which
are pending disposal as on date.
ii. Financial year 2007-08
Erstwhile Satyam has received a demand notice from Additional
Commissioner of Income Tax by disallowing the foreign tax credits
claimed in the return resulting in a contingent liability of Rs. 2,765
Million (including interest). The revised return filed by erstwhile
Satyam was rejected by the Income Tax Department. Erstwhile Satyam has
filed an appeal against the said order which is pending before the
ITAT.
Erstwhile Satyam''s contention with respect to the above tax demands is
that the Income Tax Department should take a holistic view of the
assessments and exclude the fictitious sales and fictitious interest
income. If the said contention of erstwhile Satyam is accepted, there
would be no tax demand payable.
iii. Petition before Honourable High Court of Judicature at Hyderabad:
Financial years 2002-03 to 2007-08
Erstwhile Satyam had filed various petitions before Central Board of
Direct Taxes (CBDT) requesting for stay of demands for the financial
years 2002-03 to 2007-08 till the correct quantification of income and
taxes payable is done for the respective years. In March 2011, the CBDT
rejected erstwhile Satyam''s petition and erstwhile Satyam filed a
Special Leave Petition before the Honourable Supreme Court which
directed erstwhile Satyam to file a comprehensive petition /
representation before CBDT giving all requisite details / particulars
in support of its case for re-quantification / re-assessment of income
for the aforesaid years and to submit a Bank Guarantee (BG) for Rs. 6,170
Million. Pursuant to the direction by the Honourable Supreme Court,
erstwhile Satyam submitted the aforesaid BG favouring the Assistant
Commissioner of Income tax and also filed a comprehensive petition
before the CBDT in April 2011.
The CBDT, vide its order dated July 11, 2011, disposed off the
erstwhile Satyam''s petition directing it to make its submissions before
the Assessing Officer in course of the ongoing proceedings for the
aforesaid years and directed the Income Tax Department not to encash
the BG furnished by erstwhile Satyam till December 31, 2011. Aggrieved
by CBDT''s order, erstwhile Satyam filed a writ petition before the
Honourable High Court of Judicature at Hyderabad on August 16, 2011.
The Honourable High Court of Judicature at Hyderabad, vide its order
dated January 31, 2012, directed the parties to maintain status quo and
directed the Income Tax Department not to en-cash the BG until further
orders. The BG has been extended upto October 16, 2015.
In the meanwhile, the Assessing Officer served an order dated January
30, 2012, for provisional attachment of properties under Section 281B
of the Income Tax Act, 1961 attaching certain immovable assets of
erstwhile Satyam on the grounds that there is every likelihood of a
large demand to be raised against erstwhile Satyam for the financial
years 2002-03 to 2008-09 along with interest liability. Aggrieved by
such order, erstwhile Satyam filed a writ petition in the Honourable
High Court of Judicature at Hyderabad that has granted a stay on the
operation of the provisional attachment order until disposal of this
writ.
iv. Appointment of Special Auditor and re-assessment proceedings
a. Financial year 1998-99
In November 2014, the company has received a notice from Income tax
department for filing of petition in Honourable High Court of
Judicature at Hyderabad against the ITAT order for financial year
1998-99. The Income tax department has raised demand of Rs. 13 Million on
account of dispute in treatment of foreign taxes payment treated as
self-assessment tax thereby levying Interest u/s. 234B & 234C.
b. Financial years 2001-02 and 2006-07
The Assessing Officer had commissioned a special audit which has been
challenged by the erstwhile Satyam on its validity and terms vide writ
petitions filed before the Honourable High Court of Judicature at
Hyderabad. The said petitions are pending disposal.
In August, 2011, the Additional Commissioner of Income Tax issued the
Draft of Proposed Assessment Orders accompanied with the Draft Notices
of demand resulting in a contingent liability of Rs. 7,948 Million and Rs.
10,329 Million for the financial years 2001-02 and 2006-07,
respectively, proposing variations to the total income, including
variations on account of Transfer Pricing adjustments. Erstwhile
Satyam has filed its objections to the Draft of Proposed Assessment
Orders for the aforesaid years on September 16, 2011 with the Dispute
Resolution Panel, Hyderabad, which is pending disposal.
c. Financial years 2002-03 and 2007-08
In December 2011, the Additional Commissioner of Income Tax appointed a
Special Auditor under section 142(2A) of the Income Tax Act, 1961 to
audit the accounts of erstwhile Satyam for the financial years 2002-03
and 2007-08. Erstwhile Satyam had filed a writ petition before
Honourable High Court of Judicature at Hyderabad challenging the
special audit.
The proceedings set out above are also subject to the Honourable High
Court of Judicature at Hyderabad order dated January 31, 2012, referred
to in note 29.5.2.iii directing the parties to maintain status quo.
d. Financial year 2003-04
In December 2014, the Company has received a notice from Income tax
department for filing of petition in High Court of Judicature at
Hyderabad against the ITAT order for financial year 2003-04. The
Income tax department has raised demand of Rs. 173 Million on account of
dispute in treatment of foreign taxes payment treated as
self-assessment tax, not allowing setoff of losses of eligible STPI
units and levying Interest u/s. 234B & 234C. In February 27, 2015 the
Company has filed counter affidavit challenging IT department''s
petition filed with Honourable High Court, pending hearing.
e. Financial year 2008-09
In January 2013, the Additional Commissioner of Income Tax appointed a
Special Auditor under section 142(2A) of the Income Tax Act, 1961 to
audit the accounts of erstwhile Satyam for the financial year 2008-09.
Erstwhile Satyam has challenged the appointment and terms of reference
of the special audit by filing a writ petition before the Honourable
High Court of Judicature at Hyderabad and the Court vide its interim
order dated April 22, 2013, has directed parties to maintain status
quo. The writ petition is pending hearing.
f. Financial year 2009-10
In March 2014, the Deputy Commissioner of Income Tax appointed a
Special Auditor under section 142(2A) of the Income Tax Act, 1961 to
audit the accounts of erstwhile Satyam for the financial year 2009-10.
The audit was completed on September 17, 2014 with certain observations
made by the Special Auditor. The Special Audit report was submitted to
Income tax Assessing officer for assessment.
In January 2015, the Assessing officer has issued assessment order,
making addition of Rs. 1,106 Million. The Company has filed appeal before
CIT (A) against the said Order.
g. Financial year 2010-11
On March, 30 2015, the Assessing officer has issued draft assessment
order, making addition of Rs. 379 Million. The Company intends to file an
Appeal with CIT (A) against final Order.
v. Provision for taxation
Erstwhile Satyam was carrying a total amount of Rs. 4,989 Million (net of
taxes paid) as at March 31, 2013 (before giving effect to its
amalgamation with the Company) towards provision for taxation,
including for the prior years for which the assessments are under
dispute.
Subsequent to the amalgamation, duly considering the professional
advice obtained in the matter, the Management has re-evaluated the
effects of the possible outcomes of the tax matters in dispute relating
to erstwhile Satyam and the estimated excess tax provision amounting to
Rs. 2,266 Million determined based on such evaluation in respect of the
prior years have been written back during the previous year ended March
31, 2014. In the opinion of the Management the balance provision for
taxation carried in the books with respect to the prior year disputes
relating to erstwhile Satyam is adequate.
29.5.3 Income tax matters related to erstwhile Mahindra Engineering
Services Limited Income Taxes
The Company has received demand notices from Income Tax Authorities
resulting in a contingent liability of Rs. 364 Million. This is mainly
relating to denial of deduction under section 10A of the Income Tax
Act, 1961 on account of Splitting up or the Reconstruction of the
business already in existence.
7.5.4 Italian Tax claim
Italian Tax Authorities has levied tax demand of EUR 0.10 Million (Rs. 8
Million). The Provincial Tax Commission rejected the Company''s plea
against which erstwhile MESL has filed an appeal in the Regional Court
of Emilia Romagna.
7.5.5 Notice from Chad Tax Administration
The Company has received a notice from Chad Tax Administration for
payment of FCFA 40 Million (Rs. 4 Million) in relation to fiscal year
2012. This amount relates to dispute towards withholding taxes. The
company has issued Bank Guarantee in favour of Deputy General Manager
of Tax Authorities for the same.
7.6 Customs fine/penalty matters relating to erstwhile Mahindra
Engineering Services Limited
i. Erstwhile MESL received a demand from Customs for import of vehicles
for an amount of Rs. 2 Million, which the company has paid the said
amount "under protest" and filed an appeal before the Honourable
Customs, Excise & Service Tax Appellate Tribunal (CESTAT) and pending
hearing.
ii. Erstwhile Tech Mahindra (R & D Services) Limited (TMRDL) received
demand (including fine and interest) from Commissioner of Customs
amounting to Rs. 2 Million (March 31, 2014: Rs. 2 Million) related to
misplace of imported capital goods bonded in the company premises
during physical verification conducted by the customs authorities. The
Company has filed an appeal before the Honorable Customs, Excise &
Service Tax Appellate Tribunal (CESTAT).
7.7 Service Tax
The Company has received demand notices from Service Tax Authorities
amounting to Rs. 14,688 Million (net of provision), (March 31, 2014: Rs.
883 Million (net of provision)) out of which:
i. Rs. 389 Million (March 31, 2014: Rs. 389 Million) relates to
disallowance of input tax credits paid on services for the period March
2005 to March 2011 for erstwhile Satyam. An amount of Rs. 55 Million has
been paid "under protest". The Company has filed an appeal before the
Honorable Customs, Excise & Service Tax Appellate Tribunal (CESTAT) and
is pending hearing.
ii. Erstwhile CanvasM received demand in March 2014 from Service tax
department amounting to Rs. 180 Million (March 31, 2014: Rs. 180 Million)
under reverse charge on onsite services rendered by overseas
subsidiaries for the financial year 2010-11. The Company has filed an
appeal before the Honorable Customs, Excise & Service Tax Appellate
Tribunal (CESTAT) and is pending hearing.
iii. Rs. 77 Million (March 31,2014: Rs. 77 Million) relates to marketing
and onsite services rendered by overseas subsidiaries for the financial
years 2004-05 to 2007-08 for erstwhile Tech Mahindra (R & D Services)
Limited (TMRDL). An amount of Rs. 7 Million (March 31, 2014: Rs. 7 Million)
has been paid "under protest". The Company has filed an appeal before
the Honorable Customs, Excise & Service Tax Appellate Tribunal (CESTAT)
and is pending hearing.
iv. Rs. 13 Million (March 31, 2014: Rs. 13 Million) pertains towards
services provided under Management Consultancy services for the Company
for which the Company has filed a reply against the same.
v. The Company received an order from Honorable High Court dated
September 15, 2014, upholding the order passed by Honourable Customs,
Excise & Service Tax Appellate Tribunal (CESTAT) issued in March 2013,
wherein the services rendered onsite either by the Company''s
subsidiary/ branch have been held as not export from India for the
period November 2008 to February 2010 and the company paid the said
amount of Rs. 224 Million. Based on the legal opinion obtained, the
company is of the view that the said amount is cenvatable and no
provision is made in the books of account and the Company has filed an
appeal before the Honorable Supreme Court.
vi. The Company has received an order from Commissioner of service tax
confirming demand for interest and penalty amounting to Rs. 12 Million
(March 31, 2014: Nil) on the short payment of service tax discharged
under reverse charge as per the applicable rate of 10.30% and not as
per revised rate of 12.36% for the period of February 2009. The Company
has filed an appeal before the Honorable Customs, Excise & Service Tax
Appellate Tribunal (CESTAT) and is pending hearing.
vii. The Company, during the year ended March 31, 2015, received a
refund order issued by Deputy Commissioner of Service Tax after
adjusting interest amounting to Rs. 146 Million (March 31, 2014: Nil) on
the liability of Rs. 224 Million refunded by the department in earlier
years giving effect to the order issued by Honorable High Court dated
September 15, 2014. The Company has filed an appeal before the
Commissioner (Appeals) against the said order.
viii. The company received an order from Commissioner of service tax
confirming service tax demand, interest and penalty amounting to Rs.
12,753 Million (March 31, 2014: Nil) under reverse charge on onsite
services rendered by overseas branches for the period May 2008 to July
2013. The Company has filed an appeal before the Honorable Customs,
Excise & Service Tax Appellate Tribunal (CESTAT).
ix. The Company has received an order from Commissioner (Appeals) of
service tax allowing service tax refund amounting to Rs. 894 Million
(March 31, 2014: Nil) related to onsite services provided by subsidiary
treated as export of services for the period July 2012 to June 2013.
The Deputy Commissioner, Service tax has filed an appeal before the
Honorable Customs, Excise & Service Tax Appellate Tribunal (CESTAT).
7.8 Value Added Tax / Central Sales Tax
i. The Company received a demand notice under Maharashtra Value Added
Tax Act, 2002 (MVAT) for financial year 2008-09 relating to mismatch of
input Vat credit availed in VAT return amounting to Rs. 5 Million
(including penalty and interest where applicable) (March 31, 2014: Rs. 5
Million).
ii. The Company has received a demand notice under Himachal Pradesh
Value Added Tax Act, 2005 (HPVAT) for the period June 2013 to December
2014 considering the transaction as local sale and levying VAT
liability amounting to Rs. 10 Million (including penalty and interest)
(March 31, 2014: Nil) on the material delivered by the vendor to the
customer located in state of Himachal Pradesh. The Company has filed an
appeal with Additional Excise and Taxation Commissioner Cum -Appellate
Authority.
iii. The Company has received a demand notice under Maharashtra Value
Added Tax Act, 2002 (MVAT) for financial year 2008-09 to 2011-12
relating to Entry tax on purchase of Air conditioner and part thereof
and Tiles amounting to Rs. 42 Million (including penalty and interest)
(March 31, 2014: Nil) from outside the state of Maharashtra and import
from outside India. The company has filed an appeal with Deputy
Commissioner (Appeal).
iv. Erstwhile C & S had received a demand notice aggregating to Rs. 12
Million (March 31, 2014: Rs. 12 Million) (including penalty and interest)
under Gujarat Value Added Tax Act, 2003 for financial year 2006-07 to
financial year 2008-09 relating to charging the type of VAT i.e. Sales
Transaction / Local Value Added Tax against which the company has paid
an amount of Rs. 7 Million under protest.
v. Erstwhile CanvasM has received demand notice under Delhi Value Added
Tax Act, 2004 relating to levy of Central Sales Tax on handset taken
for testing purpose (which are returned back after testing),
aggregating to Rs. 1 Million (March 31, 2014: 1 Million) against which
the Company has paid Rs. 1 Million under protest.
vi. Erstwhile Satyam had received demand orders/claims relating to
issues of applicability and classification aggregating Rs. 463 Million
(March 31, 2014: Rs. 423 Million) (including penalty and interest, where
applicable) against which the Company has paid an amount of Rs. 258
Million (including penalty and interest, where applicable) under
protest.
The above excludes show cause notices relating to Tamil Nadu General
sales tax Act, 1959 amounting to Rs. 4,555 Million (March 31, 2014Rs.4,555
Million) and Andhra Pradesh Value Added Tax Act, 2005 amounting to Rs.
2,717 Million (March 31, 2014Rs.3,824 Million) (including penalty).
7.9 Foreign Exchange Management Act (FEMA), 1999
The Directorate of Enforcement has issued a show-cause notice to
erstwhile Satyam for contravention of the provisions of the Foreign
Exchange Management Act, 1999 and the Foreign Exchange Management
(Realisation, Repatriation and Surrender of Foreign Exchange)
Regulations, 2000, in respect of the realisation and repatriation of
export proceeds to the extent of foreign exchange equivalent to Rs. 506
Million for invoices raised during the period July 1997 to December 31,
2002. The erstwhile Satyam has responded to the show-cause notice and
the matter is pending.
7.10 Other Claims on the Company not acknowledged as debt
i. Alleged Advances: Refer note 26.3.
ii. Claims against erstwhile Satyam not acknowledged as dues: Rs. 1,000
Million and interest (March 31, 2014Rs.1,000 Million).
iii. Claims made on the erstwhile Satyam by vendors, its employees and
customers: Rs. 82 Million (March 31, 2014Rs.68 Million).
iv. Dispute in relation to a subsidiary, refer note 32.
v. Claims made on the Company not acknowledged as debts: Rs. 107 Million
(March 31, 2014Rs.107 Million).
vi. Other claims: Rs. 6 Million (March 31, 2014Rs.6 Million) against which
the erstwhile Satyam has paid an amount of Rs. 3 Million under protest.
vii. Claims on erstwhile MESL for disputed stamp duty of Rs. 1 Million on
sanction of credit facilities. The Appeal is pending before Honourable
High Court of Karnataka.
viii. Claims on erstwhile MESL under Motor vehicle Act, 1988Rs.1 Million.
7.11 Management''s assessment of contingencies / claims
The amounts disclosed under contingencies/claims represent the best
possible estimates arrived at on the basis of the available
information. Due to high degree of judgment required in determining the
amount of potential loss related to the various claims and litigations
mentioned above and the inherent uncertainty in predicting future
settlements and judicial decisions, the Company cannot estimate a range
of possible losses.
However, the Company is carrying a provision for contingencies as at
March 31,2015, which, in the opinion of the Management, is adequate to
cover any probable losses in respect of the above litigations and
claims. Refer note 51.
8. Other regulatory non-compliances / breaches (of the erstwhile
Satyam under erstwhile Management [prior to Government nominated
Board])
The management of erstwhile Satyam had identified certain
non-compliances / breaches of various laws and regulations by erstwhile
Satyam under the erstwhile management (prior to Government nominated
Board) including but not limited to the following - payment of
remuneration / commission to whole- time directors / non-executive
directors in excess of the limits prescribed under the Act,
unauthorised borrowings, excess contributions to Satyam Foundation,
loan to ASOP Trust (Satyam Associates Trust) without prior Board
approval under the Act, delay in deposit of dividend in the bank,
dividend paid without profits, non-transfer of profits to general
reserve relating to interim dividend declared, utilisation of the
Securities Premium account, declaration of bonus shares and violation
of SEBI ESOP Guidelines. In respect of some of these matters, erstwhile
Satyam (under the Management post Government nominated Board) has
applied to the Honourable Company Law Board for condonation Any
adjustments, if required, in the financial statements of the Company,
would be made as and when the outcomes of the above matters are
concluded.
In respect of foreign currency receivables for the period''s upto March
31, 2009, the required permission under the provisions of FEMA for
extension of time had not been obtained from the appropriate
authorities. Erstwhile Satyam under the management post Government
nominated Board has fully provided for these receivables.
9. Land
(a) In respect of certain land admeasuring 19.72 acres purchased by
erstwhile Satyam in Hyderabad, erstwhile Satyam entered into an
agreement with the Government of Andhra Pradesh (GoAP) pursuant to
which, it is eligible for incentives, concessions, privileges and
amenities under the Information and Communications Technology (ICT)
Policy of the GoAP. During the financial year ended March 31, 2009,
erstwhile Satyam accounted for an eligible grant amounting to Rs. 96
Million towards the basic cost of the land on acquisition which was
adjusted to the cost of the land. Erstwhile Satyam''s entitlement to the
aforesaid grant is subject to the fulfillment of certain conditions
(secured by bank guarantees issued in favor of Andhra Pradesh
Industrial Infrastructure Corporation), including employment of a
minimum of eligible employees in facilities constructed over the said
land, that have been substantially met and are under validation by the
GoAP. The company has earlier provided bank guarantee of Rs. 23 Million
which is expired and no new bank guarantee has been submitted by the
Company. Further, the Company has filed an application dated March 26,
2014 to A.P. Industrial Infrastructure Corporation Limited requesting
execution of sale deed. Sale deed was executed on December 04, 2014 and
original documents are in process of being obtained from the TSIICL.
(b) In respect of land admeasuring 50 acres purchased from Andhra
Pradesh Industrial Infrastructure Corporation Limited in Vishakhapatnam
for a total cost of Rs. 50 Million there are certain disputes which have
arisen and the Government of Andhra Pradesh has ordered the District
Collector to allot alternate land to erstwhile Satyam. The Government
of Andhra Pradesh has signed MOU with the Company on September 29,
2014, to allot 10 acres of land to Company on lease in lieu of land
earlier allotted. The Company is in process of registering the lease
deed and take possession of the said land. Pending the registration and
possession, the amount of Rs. 50 Million is included in Capital Advances
(under Long- term loans and advances) as at March 31, 2015 (March 31,
2014: Rs. 50 Million).
(c) The erstwhile Satyam has entered into an agreement with the
Maharashtra Airport Development Company Ltd (MADC) for the land taken
on lease in Nagpur for which it has received extension to erect
buildings and commence commercial activities by July 27, 2015.
10. Dispute with Venture Global Engineering LLC
Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and
Venture Global Engineering LLC (VGE) incorporated Satyam Venture
Engineering Services Private Limited (SVES) in India with an objective
to provide engineering services to the automotive industry.
On or around March 20, 2003, numerous corporate affiliates of VGE filed
for bankruptcy and consequently the erstwhile Satyam, exercised its
option under the Shareholders Agreement (hereinafter referred to as
"the SHA"), to purchase VGE''s shares in SVES. The erstwhile Satyam''s
action, disputed by VGE, was upheld in arbitration by the London Court
of International Arbitration vide its award in April 2006 ("the
Award").
The Courts in Michigan, USA, confirmed and directed enforcement of the
Award. They also rejected VGE''s challenge to the Award. In 2008, the
District Court of Michigan further held VGE in contempt for its failure
to honour the Award and inter-alia directed VGE to dismiss the nominees
of VGE on its Board and replace them with individuals nominated by the
erstwhile Satyam. This Order was also confirmed by the Sixth Circuit
Court of Appeals in 2009. Consequently, VGE the erstwhile Satyam''s
nominees were appointed on the Board of SVES and SVES confirmed the
appointment at its Board meeting held on June 26, 2008. The erstwhile
Satyam was legally advised that SVES became its subsidiary only with
effect from that date.
In the meantime, while proceedings were pending in the USA, VGE filed a
suit in April 2006, before the District Court of Secunderabad in India
for setting aside the Award. The City Civil Court, vide its judgment in
January 2012, has set aside the Award, against which the erstwhile
Satyam preferred an appeal ("Company Appeal") before the High Court.
VGE also filed a suit before the City Civil Court, Secunderabad inter
alia seeking a direction to the Company to pay sales commission that it
was entitled to under the Shareholders Agreement. In the said suit, two
ex- parte orders were issued directing the Company and Satyam to
maintain status quo with regard to transfer of 50% shares of VGE and
with regard to taking major decisions which are prejudicial to interest
of VGE. The said suit filed by VGE is still pending before the Civil
Court.
The Company has challenged the ex-parte orders of the City Civil Court
Secunderabad, before the High Court ("SVES Appeal").
The High Court of Andhra Pradesh consolidated all the Company appeals
and by a common order dated August 23, 2013 set aside the Order of the
City Civil Court, Hyderabad setting aside the award and also the
ex-parte orders of the City Civil Court, Secunderabad. The High Court
as an interim measure ordered status quo with regard to transfer of
shares, originally given by Supreme Court to be maintained for four
weeks which was extended for a further period of three weeks. VGE has
filed special leave petition against the said Order before Supreme
Court of India, which is currently pending. The Supreme Court by an
interim Order dated October 21, 2013 extended the High Court order on
the status-quo on transfer of shares. The Company has also filed a
Special Leave Petition before the Supreme Court of India challenging
the judgment of the High Court only on the limited issue as to whether
the Civil Court has jurisdiction to entertain VGE''s challenge to the
Award. The said Petition is pending before the Supreme Court.
In a related development, in December 2010, VGE and the sole
shareholder of VGE (the "Trust", and together with VGE, the
"Plaintiffs"), filed a complaint against the erstwhile Satyam in the
United States District Court for the Eastern District of Michigan
("District Court") inter alia asserting claims under the Racketeer
Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent
concealment and seeking monetary and exemplary damages ("the
Complaint"). The District Court vide its order in March 2012 has
dismissed the Plaintiffs Complaint. The District Court also rejected
VGE''s petition to amend the complaint. In June 2013, VGE''s appeal
against the order of the District Court has been allowed by the US
Court of Appeals for the Sixth Circuit. The matter is currently before
the District Court and the Company has filed a petition before District
Court seeking dismissal of the Plaintiff''
Mar 31, 2014
I Employee Stock Option Plan
a) The Company had allotted 1,34,32,750 equity shares (face value of
Rs.2/- each] on 6th December 2005 and 43,45,025 Equity shares (face
value of Rs.2/- each] on 3rd February, 2011, to Mahindra and Mahindra
Financial Services Limited Employees'' Stock Option Trust set up by the
Company. The Trust holds these shares for the benefit of the employees
and issues them to the eligible employees as per the recommendation of
the Compensation Committee. The Trust had issued 1,30,37,934 equity
shares to employees (March 2013 : 1,25,32,990 equity shares] up to 31
st March, 2014, of which 5,04,944 equity shares (March 2013:8,31,035
equity shares] were issued during the current year.
I Loan provisions and write offs
a. The Company has made adequate provision for the Non-performing
assets identified, in accordance with the guidelines issued by The
Reserve Bank of India. As per the practice consistently followed, the
Company has also made additional provision on a prudential basis. The
cumulative additional provision made by the Company as on 31st March,
2014 is Rs. 35,253.77 Lacs (March 2013 : Rs. 19,692.65 Lacs]
b. In accordance with the Notification No. DNBS.222/ CGM (US)-2011
dated 17.01.2011 issued by The Reserve Bank of India [RBI] vide its
directions to all NBFC''s to make a general provision of 0.25% on the
Standard assets, the Company has made a provision of Rs. 2,110.00 Lacs
(March 2013 : Rs. 5,165.00 Lacs, including additional / accelerated
provision of Rs. 3,568.00 Lacs, refer note no. 27].
The total amount of provision on Standard assets of Rs. 11,625.00 Lacs
(March 2013 : Rs. 9,515.00 Lacs] is shown separately as "Contingent
provision for Standard assets" under Long-term and Short-term
provisions in the balance sheet (refer note no.5 and 9). The said
amount includes additional / accelerated provision of 0.15% for
Rs.4,370.00 Lacs as at 31st March, 2014 (March 2013 : Rs.3,568.00
Lacs).
c. Bad debts and write offs includes loss on termination which mainly
represents shortfall on settlement of certain contracts due to lower
realisation from such hire purchase/leased/loan assets on account of
poor financial position of such customers.
Commission and brokerage mainly represents amount incurred in respect
of acquisition of customers and mobilisation of public deposits.
The Company has single reportable segment "Financial services" for the
purpose of Accounting Standard 17 on Segment reporting.
In the opinion of the Board, Current assets, Loans and advances are
approximately of the value stated if realised in the ordinary course of
business.
Deposits/advances received against loan agreements are on account of
loan against assets, which are repayable / adjusted over the period of
the contract.
Disclosure on derivatives
Outstanding derivative instruments and un-hedged foreign currency
exposures as on 31st March, 2014
The Company has outstanding Foreign Currency Non- Repatriable (FCNR
(b)) loans of US $ 872.71 Lacs (March 2013 : US $ 699.13 Lacs]. The
said loan has been fixed to INR liability using a cross currency swap
and floating interest thereon in LIBOR plus rate has been swapped for
fixed rate in Indian rupee. There is no un-hedged foreign currency
exposure as on 31st March, 2014.
Securitisation / assignment transactions
a] During the year, the Company has without recourse securitised on "at
par" basis vide PTC route loan receivables of 47122 contracts (March
2013 : 54374 contracts] amounting to Rs. 1,26,292.70 Lacs (March 2013 :
Rs. 1,43,361.38 Lacs] for a consideration of Rs. 1,26,292.70 Lacs
(March 2013 : Rs. 1,43,361.38 Lacs] and de-recognised the assets from
the books.
b] During the year, the Company has without recourse assigned loan
receivables of 6490 contracts (March 2013 : NIL contracts] amounting to
Rs. 19,850.83 Lacs (March 2013 : Rs.NIL] for a consideration of Rs.
15,554.19 Lacs (March 2013 : Rs.NIL] towards 90% of receivables
assigned and de-recognised the assets from the books. Out the total
receivables, an amount of Rs. 1,985.08 Lacs equivalent to 10% of the
receivables have been recognized as "Retained interest in assignment
transactions" representing Minimum Retention Requirement [MRR] as
required under revised guidelines on securitization transactions vide
RBI Circular dated August 21, 2012 (refer note no. 13 and 18].
The amount of profit in cash of Rs. 314.94 Lacs on this assignment
transaction has been held under an accounting head "Cash profit on loan
transfers under assignment transactions pending recognition" and the
same is amortized in line with above referred guidelines (refer note
no. 4 and S).
c] Income from assignment / securitization transactions include write
back of provision for loss / expenses in respect of matured assignment
transactions amounting to Rs.4,189.65 Lacs (March 2013 : Rs. 3,193.08
Lacs] considered no longer necessary (refer Accounting policy 3 [IV] A
(iii).
d] In terms of the accounting policy stated in 3 [IV] [B] [i] [c],
securitisation income is recognized as per RBI Guidelines dated 21st
August, 2012. Accordingly, interest only strip representing present
value of interest spread receivable has been recognized and reflected
under loans and advances (refer note no. 13 and 18] and equivalent
amount of unrealised gains has been recognised as liabilities (refer
note no. 4 and S).
e] Excess interest spread redeemed during the year by the Special
Purpose Vehicle Trust (SPV Trust] has been recognised as income and
included in Income from assignment / securitisation transactions
amounting to Rs.5,146.47 Lacs (March 2013 : Rs. 106.98 Lacs]
f] Disclosures in the notes to the accounts in respect of
securitisation transactions as required under revised guidelines on
securitization transactions issued by RBI vide circular
no.DNBS.PD.No.301 /3.10.01 /2013-13 dated August 21, 2012.
There were 77 cases (March 2013 : 28 cases] of frauds amounting to Rs.
560.32 Lacs (March 2013 : Rs 450.31 Lacs] reported during the year. The
Company has recovered an amount of Rs.46.3S Lacs (March 2013 : Rs 31.53
Lacs] and has initiated appropriate legal action against the
individuals involved. The claims for the un-recovered losses have been
lodged with the insurance companies.
The gold loans outstanding as a percentage of total assets is at 0.03%
(March 2013 : 0.05%].
The Company has sent letters to suppliers covered under the Micro,
Small and Medium Enterprises Development Act, 2006 seeking information
for which replies are awaited. In view of this, information required
under Schedule VI of the Companies Act, 1956 is not given.
During the current financial year, the Company has incorporated
Mahindra Trustee Company Private Limited [MTCPL] and has proposed to
subscribe 49,998 equity shares of Rs. 10/- each amounting to Rs. 4.99
Lacs being 99.99% of the shareholding as a promoter shareholder.
However, the Company has not made any investment during the year in
MTCPL.
Schedule to the Balance Sheet of a Non-Banking Financial Company as
required in terms of Paragraph 13 of Non-Banking Financial (Deposit
Accepting or Holding] Companies Prudential Norms (Reserve Bank]
Directions, 2007
Previous year figures have been regrouped / reclassified wherever found
necessary.
Mar 31, 2013
1. In compliance with the Accounting Standard relating to ''Financial
Reporting of Interests in Joint Ventures'' (AS-27), the Company has
interest in the following jointly controlled entity
2. The Board of Directors of the Company at its meeting held on 9th
October, 2012, and special resolution passed by the members at the
Extraordinary General Meeting held on 6th November, 2012, had approved
the infusion of share capital.
Pursuant to the passing of the above resolutions and in accordance with
Chapter VIII of Securities & Exchange Board of India (Issue of Capital
& Disclosure requirements) Regulations, 2009, as amended, the Company
allotted 97,50,257 equity shares of face value of Rs.10/- each at a
price of Rs. 889/- per equity share including a premium of Rs.879/- per
equity share aggregating to Rs. 86,679.78 Lacs to Qualified
Institutional Buyers (QIBs) through Qualified Institutional Placement
(QIP). This has resulted in an increase of equity share capital by Rs.
975.02 Lacs and securities premium reserve by Rs. 85,704.76 Lacs.
The share issue expenses amounting to Rs.1,280.06 Lacs is adjusted
against the securities premium reserve in accordance with the
provisions of the Companies Act, 1956.
EMPLOYEE STOCK OPTION PLAN
a) The Company had allotted 1,34,32,750 equity shares (face value of
Rs. 2/- each) on 6th December, 2005 and 48,45,025 Equity shares (face
value of Rs. 2/- each) on 3rd February, 2011, to Mahindra & Mahindra
Financial Services Limited Employees'' Stock Option Trust set up by
the Company. The Trust holds these shares for the benefit of the
employees and issues them to the eligible employees as per the
recommendation of the Compensation Committee. The trust had issued
1,25,32,990 equity shares (March 2012: 1,17,01,955 equity shares) up to
31st March, 2013 and 8,31,035 equity shares (March 2012: 11,73,035
equity shares) for the current year to the employees.
e) Method used for accounting for share based payment plan:
The Company has elected to use intrinsic value method to account for
the compensation cost of stock options to employees of the Company.
Intrinsic value is the amount by which the quoted market price of the
underlying share exceeds the exercise price of the option.
f) Fair value of options:
The fair value of options used to compute proforma net profit and
earnings per share in note 30(g) have been estimated on the date of
grant using The Black-Scholes Model. The key assumptions used in
Black-Scholes Model for calculating fair value as on the date of grant
are:
# Dilution in Earnings per share is on account of 57,44,785 equity
shares of face value of Rs. 2/- each (March 2012: 65,75,820 equity
shares of face value of Rs. 2/- each held by the Employees Stock Option
Trust issued under the Employees Stock Option Scheme.
* Earnings Per Share under Fair value method is computed on proforma
net profit after tax after adjusting for employee compensation costs
under fair value method. Employee compensation cost under fair value
method is Rs. 476.72 Lacs (March 2012: Rs. 698.62 Lacs).
3. LOAN PROVISIONS AND WRITE OFFS
a. The Company has made adequate provision for the Non- performing
assets identified, in accordance with the guidelines issued by The
Reserve Bank of India. The Company also makes additional provision on a
prudential basis. The cumulative additional provision made by the
Company as on 31st March, 2013 is Rs. 19,692.65 Lacs (March 2012: Rs.
13,178.47 Lacs)
b. In accordance with the Notification No. DNBS.222/ CGM (US)- 2011
dated 17th January, 2011 issued by The Reserve Bank of India (RBI) vide
its directions to all NBFC''s to make a general provision of 0.25% on
the Standard assets, the Company has made a provision of Rs. 5,165.00
Lacs on the Standard assets as on 31st March, 2013 (March 2012: Rs.
4,350.00 Lacs). With effect from the current year, the Company has on a
prudent basis, decided to make additional / accelerated general
provision on its Standard assets and has provided Rs. 3,568.00 Lacs on
this account, which is reflected as "Exceptional Items" in the
Statement of profit and loss. The total amount of provision on Standard
assets of Rs. 9,515.00 Lacs is shown separately as "Contingent
provision against Standard assets" under "Provisions" in the
balance sheet.
c. Bad debts and write offs includes loss on termination which mainly
represents shortfall on settlement of certain contracts due to lower
realisation from such hire purchase/ leased/loan assets on account of
poor financial position of such customers.
Commission and brokerage mainly represents amount incurred in respect
of acquisition of customers and mobilisation of public deposits.
4. The Company has single reportable segment "Financial services"
for the purpose of Accounting Standard 17 on Segment reporting.
5. In the opinion of the Board, Current assets, Loans and advances are
approximately of the value stated if realised in the ordinary course of
business.
Deposits/advances received against loan agreements are on account of
loan against assets, which are repayable / adjusted over the period of
the contract.
6. DISCLOSURE ON DERIVATIVES
Outstanding derivative instrument and un-hedged foreign currency
exposures as on 31st March, 2013
The Company has outstanding Foreign Currency Non- Repatriable (FCNR
(b)) loans of USD 699.13 Lacs (March 2012: USD 199.13 Lacs and JPY
18,451.97 Lacs). The loan of USD 699.13 Lacs (March 2012: USD 199.13
Lacs and JPY 18,451.97 Lacs) and interest thereon has been fixed to INR
liability using a cross currency swap. There is no un-hedged foreign
currency exposure as on 31st March, 2013.
7. SECURITISATION / ASSIGNMENT TRANSACTIONS
a) During the year, the Company has without recourse securitised on
"at par" basis vide PTC route loan receivables of 54,374 contracts
(March 2012: Nil contracts) amounting to Rs. 1,43,361.38 Lacs (March
2012: Rs. Nil) for a consideration of Rs. 1,43,361.38 Lacs (March 2012:
Rs. Nil) and de-recognised the assets from the books.
b) During the year, the Company has without recourse assigned loan
receivables of Nil contracts (March 2012: 56,559 contracts) amounting
to Rs. Nil (March 2012: Rs. 1,48,741.39 Lacs) for a consideration of
Rs. Nil (March 2012: Rs.1,48,741.39 Lacs) and de-recognised the assets
from the books. The income booked in respect of assignment of
receivables includes certain amount towards cost of future servicing of
the assigned pool and an appropriate amount has been provided towards
expenditure for future services.
c) Income from assignment / securitisation includes write back of
provision in respect of assignment transactions amounting to Rs.
3,193.08 Lacs (March 2012: Rs. 2,479.18 Lacs) considered no longer
necessary.
d) In terms of the accounting policy stated in 3 (iv), securitisation
income is recognised as per RBI Guidelines dated 21st August, 2012.
Accordingly, interest only strip representing present value of interest
spread receivable has been recognised and reflected under loans and
advances (refer note no. 13 and 18) and equivalent amount of unrealised
gains has been recognised as liabilities (refer note no. 4 and 8).
e) Excess interest spread redeemed during the year by the Special
Purpose Vehicle Trust (SPV Trust) has been recognised as income and
included in Income from assignment / securitisation amounting to
Rs.106.98 Lacs (March 2012: Rs. Nil).
f) Disclosures in the notes to the accounts in respect of
securitisation transactions as required under revised guidelines on
securitisation transactions issued by RBI vide circular
no.DNBS.PD.No.301/3.10.01/2012-13 dated 21st August, 2012.
8. There were 28 cases (March 2012: 22 cases) of frauds amounting to
Rs. 450.31 Lacs (March 2012: Rs. 33.46 Lacs) reported during the year.
The Company has recovered an amount of Rs. 31.53 Lacs (March 2012: Rs.
14.92 Lacs) and has initiated appropriate legal actions against the
individuals involved. The claims for the un-recovered losses have been
lodged with the insurance companies.
9. The gold loans outstanding as a percentage of total assets is at
0.05% (March 2012: 0.05%).
10. The Company has sent letters to suppliers covered under the Micro,
Small and Medium Enterprises Development Act, 2006 seeking information
for which replies are awaited. In view of this, information required
under Schedule VI of the Companies Act, 1956 is not given.
11. Managerial Remuneration paid to Directors included in the Statement
of profit and loss is Rs. 289.26 Lacs (March 2012: Rs. 247.40 Lacs)
includes Directors'' Fees of Rs.10.24 Lacs (March 2012: Rs. 7.59 Lacs)
and Perquisites Rs. 4.95 Lacs (March 2012: Rs. 2.21 Lacs) and excluding
charge for gratuity, provision for leave encashment and sick leave as
separate actuarial valuation figures are not available. The above
perquisites do not include amortisation of Employees Stock Options.
12. Previous year figures have been regrouped / reclassified wherever
found necessary.
Mar 31, 2012
1. The Company has made adequate provision for the Non-performing
Assets identified, in accordance with the guidelines issued by the
Reserve Bank of India. The Company also makes additional provision on a
prudential basis. The cumulative additional provision made by the
Company as on 31st March, 2012 is Rs. 13,178.47 Lacs (Previous year :
Rs. 14,477.68 Lacs)
2. In accordance with the Notification No. DNBS.222/ CGM (US)-2011
dated 17.01.2011 issued by the Reserve Bank of India (RBI) vide its
directions to all NBFC's to make a general provision of 0.25% on the
standard assets, the Company has made a provision of Rs.4,350.00 Lacs
on the standard assets as on 31st March, 2012 (Previous year :
Rs.3,143.00 Lacs). The amount of provision on standard assets is shown
separately as "Contingent Provision against Standard Assets" under
"Provisions" in the Balance Sheet.
3. Bad debts & Write offs includes loss on termination which mainly
represents shortfall on settlement of certain contracts due to lower
realisation from such Hire Purchase/Leased/Loan assets on account of
poor financial position of such customers.
4. Commission & Brokerage mainly represents amount incurred in respect
of acquisition of customers & mobilisation of public deposits.
5. The Company has single reportable segment "Financial Services" for
the purpose of Accounting Standard 17 on Segment Reporting.
6. In the opinion of the Board, Current assets, Loans & Advances are
approximately of the value stated if realised in the ordinary course of
business.
7. Deposits/Advances received are on account of loan against assets,
which are repayable / adjusted over the period of the contract.
8. Disclosure on Derivatives :
There were no Derivative instruments (Previous year : 2) for hedging
interest rate risk outstanding as on 31st March, 2012.
9. a) During the year, the Company has without recourse assigned loan
receivables of 56559 contracts (Previous year : 36618 contracts)
amounting to Rs.1,48,741.39 Lacs (Previous year : Rs. 1,22,764.34 Lacs,
including future interest receivable) for a consideration of
Rs.1,48,741.39 Lacs (Previous year : Rs. 1,08,930.92 Lacs) and
de-recognised the assets from the books. The income booked in respect
of assignment of receivables includes certain amount towards cost of
future servicing of the assigned pool and an appropriate amount has
been provided towards expenditure for future services. On assignment
of receivables income recognised upfront for the current period is Rs.
Nil (Previous year : Rs. 15,152.22 Lacs) against which a provision for
estimated loss/expenses of Rs.Nil (Previous year : Rs. 9,830.08 Lacs)
is made.
During the year, all the assignment transactions are on "at par" basis
as against "premium structure" transactions during the previous year.
b) During the year, the provision in respect of assignment transactions
amounting to Rs. 2,479.18 Lacs (Previous year : Rs. 3,648.00 Lacs)
considered no longer necessary has been written back.
10. During the year, Company has acquired without recourse portfolio of
Rs. Nil (Previous year : Rs. 2,076.46 Lacs) for a consideration of Rs.
Nil (Previous year : Rs. 2,010.05 Lacs) through assignment agreements.
Accounting for the same is in line with the other loans against assets
given by the Company. The Company has received cash collateral
amounting to Rs.Nil (Previous year : Rs. 221.11 Lacs) and over
collateral of Rs. Nil (Previous year : Rs. 417.26 Lacs) against these
assignments.
11. There were 22 cases (Previous year : 15 cases) of frauds amounting
to Rs. 33.46 Lacs (Previous year : Rs 9.54 Lacs) reported during the
year. The Company has recovered an amount of Rs.14.92 Lacs (Previous
year : Rs 1.28 Lacs) and has initiated appropriate legal actions
against the individuals involved. The claims for the un-recovered
losses have been lodged with the insurance companies.
12. The gold loans outstanding as a percentage of total assets is at
0.05% (Previous year : 0.01%)
Rs. in Lacs
13. Particulars March 2012 March 2011
a) Contingent liabilities :
(a) Demand against the Company not
acknowledged as debts on 4,629.06 5,569.24
taxation matters (income tax)
(b) Corporate Guarantees towards
assignment transactions 86,274.38 73,253.29
(c) Legal suits filed by customers
in Consumer Forums and Civil 2,067.45 1,721.99
courts claiming compensation
from the Company 0.00 0.00
92,970.89 80,544.52
II) Commitments :
(a) Estimated amount of contracts
remaining to be executed on 447.13 599.16
capital account ;
(b) Uncalled liability on shares and
other investments partly paid 0.00 1,400.00
(On 3,50,00,000 partly paid equity
shares of Mahindra Rural
447.13 1,999.16
Total 93,418.02 82,543.68
15. The Company has sent letters to suppliers covered under the Micro,
Small and Medium Enterprises Development Act, 2006 seeking information
for which replies are awaited. In view of this, information required
under Schedule VI of the Companies Act, 1956 is not given.
16. Managerial Remuneration paid to Directors included in the Profit and
Loss Account is Rs. 247.40 Lacs (Previous year : Rs. 207.34 Lacs)
includes Directors' Fees of Rs. 7.59 Lacs (Previous year : Rs.5.30
Lacs) and Perquisites Rs.2.21 Lacs (Previous year : Rs.3.67 Lacs) and
excluding charge for gratuity, provision for leave encashment and sick
leave as separate actuarial valuation figures are not available. The
above perquisites do not include amortisation of Employees Stock
Options.
17. Schedule to the Balance Sheet of a Non-Banking Financial Company as
required in terms of Paragraph 13 of Non-Banking Financial (Deposit
Accepting or Holding) Companies Prudential Norms (Reserve Bank)
Directions, 2007.
18. Previous year figures have been regrouped wherever found necessary.
Mar 31, 2011
1. The estimated amount of contracts remaining to be executed on
capital account (net of capital advances), and not provided for as at
March 31, 2011 Rs. 1,382 Million (previous year: Rs. 2,677 Million).
2. Contingent liabilities :
i) The Company has received demand notices from Income Tax Authorities
resulting in a contingent liability of Rs. 920 Million (previous year :
Rs. 510 Million). This is mainly on account of the following: (a) An
amount of Rs. 123 Million (previous year : Rs. Nil) relating to
Transfer pricing adjustment on account of arm's length transactions (b)
Deduction under Section 10A amounting to Rs. 781 Million (previous year
: Rs. 494 Million) in relation to adjustment of expenditure in foreign
currency being excluded only from Export turnover and not from Total
turnover. The Company has already won the appeal before the Mumbai ITAT
for the Assessment year 2002-03 & 2003-04. The Income Tax Department
has filed the appeal before the High Court. The Company has already won
the appeal before the CIT (A) for Assessment Year 2004-05 & 2005-06.
The Income Tax Department intends to pursue the matter before Mumbai
ITAT and (c) an amount of Rs. 16 Million (previous year : Rs. 16
Million) relating to Fringe Benefit Tax. The Company has appealed
before Appellate Authorities and is hopeful of succeeding in the same.
ii) The Company has received demand notices from Sales Tax Authorities
for Rs. 18 Million (previous year: Rs. 148 Million) towards Software
services classified under Works Contract Act for the financial year
2005-06 to 2008-09. The Company has filed an appeal before the
Appellate Authority.
iii) The Company has received demand/ show cause notice from Service
Tax Authorities for Rs. 90 Million (Net of provision), (previous year:
Rs. 13 Million) out of which Rs. 77 Million (previous year : Rs. Nil)
relates to marketing and onsite services rendered by the subsidiaries
abroad for the financial years 2004-05 to 2007-08 for erstwhile Tech
Mahindra (R & D Services) Limited (TMRDL) & has paid an amount of Rs. 7
Million (previous year: Rs. 7 Million) "Under Protest" and Rs. 13
Million (previous year: Rs. 13 Million) towards services provided under
Management consultancy services for Tech Mahindra Ltd. for which the
Company has filed appeal against the same.
iv) The Company has bank guarantees outstanding Rs. 1,131 Million
(previous year: Rs. 575 Million)
v) Claim on the Company from Provident fund authorities is Rs. Nil
(previous year Rs. 2 Million).
3. The Company holds investment (unquoted) in subsidiary, Tech
Mahindra GmbH (TMGMBH) aggregating to Rs. 389 Million (previous year:
Rs. 389 Million), (Refer note 1 of Schedule V), which is held as
strategic long- term investment.
The Company had made provision in the year ended March 31, 2005, to the
extent of accumulated losses in TMGMBH aggregating to Rs. 354 Million
(previous year: Rs. 354 Million) towards diminution in the value of its
investment. TMGMBH has started earning profits from financial year
2006-07 onwards, however TMGMBH still has accumulated losses as of
March 31, 2011 and in view of this no change in provision is required.
4. In September 2008 the Company had made investment of Rs. 85 Million
for 17.28% of the share capital of Servista Limited a leading European
system integrator. With this investment the Company became Servista's
exclusive delivery arm for three years and will assist Servista in
securing more large scale European IT off shoring business. The
business plan of Servista was adversely affected by the economic
downturn and it continued to incur losses and therefore, Servista in
June 2009 decided to close down its operations. The Company had made
provision of Rs 85 Million in the year ended March 31, 2010, for
diminution in the value of its investments in Servista.
5. The Company has on July 21, 2010 incorporated a Company in Brazil
under the name of Tech Mahindra Brasil Servicecos De Informatica Ltd.
(TMBSL). There are no transactions till March 31, 2011 and Company is
yet to infuse share capital into TMBSL.
6. During the current year ended March 31, 2011, the Company has
invested an amount of USD 0.10 million (Rs. 5 Million) in subsidiary
company Tech Mahindra (Nigeria) Ltd. towards equity share capital
consisting of 15,250,026 equity shares of Naira one each. The Company
has also infused an additional amount of USD 0.10 million (Rs. 5
Million) as equity share capital in Tech Mahindra (Beijing) IT Services
Ltd.
7. During the previous year, a customer had restructured long term
contracts with the Company from April 01, 2009 which involves changes
in commercial, including rate reduction, and other agreed contract
terms. As per the amended contracts the customer had paid the Company
restructuring fees of Rs. 9,682 Million. The services under the
restructured contracts would continue to be rendered over the life of
the contract. The restructuring fees received would be amortized and
recognized as revenue over the term of the contract on a straight line
basis.
An amount of Rs. 2,005 Million (previous year: Rs. 2,005 Million) has
been recognized as revenue for the year and the balance amount of Rs.
5,672 Million (previous year: Rs. 7,677 Million) has been carried
forward and disclosed as deferred revenue in the Balance Sheet. In
addition, it also includes a part of contract termination fees received
from a customer, to the extent there is a continuing customer
involvement.
8. Details of employee benefits as required by the Accounting Standard
15 (Revised) Ã Employee Benefits are as under :
a) Defined Contribution Plan
Amount recognized as an expense in the Profit and Loss Account in
respect of defined contribution plan is Rs. 688 Million (previous year
: Rs. 530 Million).
b) Defined Benefit Plan
The defined benefit plan comprises of gratuity. The gratuity plan is
not funded.
9. During the year the Company has provided end to end solution which
includes sale of software and hardware to a customer in India which
qualifies as Finance Lease and has accordingly accounted as such. These
receivables are due in quarterly installments over the contractual
period of 4 years.
10. As per the requirements of Accounting Standard 17 on 'Segment
Reporting' (AS 17), the primary segment of the Company is business
segment by category of customers in the Telecom Service Providers
(TSP), Telecom Equipment Manufacturer (TEM), Business Process
Outsourcing (BPO) and Others, which includes non telecom vertical
customers and the secondary segment is the geographical segment by
location of its customers.
The accounting principles consistently used in the preparation of the
financial statements are also applied to record income and expenditure
in the individual segments. There are no inter-segment transactions
during the year.
11. A) The Company has instituted "Employee Stock Option Plan 2000"
(ESOP) for its employees and Directors. For this purpose it had created
a trust viz. MBT ESOP Trust. In terms of the said Plan, the trust has
granted options to the employees and Directors in form of option which
vest at the rate of 33.33% on each successive anniversary of the grant
date. The options can be exercised over a period of 5 years from the
date of grant. Each option carries with it the right to purchase one
equity share of the Company at the exercise price determined by the
Trust on the basis of fair value of the equity shares at the time of
grant.
B) The Company has instituted "Employee Stock Option Plan 2004" (ESOP
2004) for its employees. In terms of the said Plan, the Compensation
Committee has granted options to employees of the Company. The options
are divided into upfront options and Performance options. The Upfront
Options are divided into three sets which will entitle holders to
subscribe to shares at the end of First year, Second year and Third
year. The vesting of the Performance Options will be decided by the
Compensation Committee based on the performance of employees.
C) The Company has instituted "Employee Stock Option Plan 2006 "(ESOP
2006) for the employees and Directors of TML and its subsidiary
companies. In terms of the said plan, the Compensation Committee has
granted options to the employees of the Company. The vesting of the
options is 10%, 15%, 20%, 25% and 30% of total options granted after
12, 24, 36, 48 and 60 months respectively from the date of grant. The
maximum exercise period is 7 years from the date of grant.
D) The Company has instituted "Employee Stock Option Plan 2010 "(ESOP
2010) for the employees and Directors of TML and its subsidiary
companies. In terms of the said Plan, options to the employees and
Directors shall vest at the rate of 33.33% on each successive
anniversary of the grant date. The options can be exercised over a
period of 5 years from the date of grant. Each option carries with it
the right to purchase one equity share of the Company at the exercise
price determined by Compensation Committee.
F) The stock compensation cost for the Employee Stock Option Plan 2010
issued at par has been computed under the intrinsic value method and
amortized on a straight line basis over the total vesting period of
three years. For the year ended March 31, 2011 the Company has recorded
stock compensation expense of Rs. 70 Million (previous year: Rs. Nil).
12. As required under Accounting Standard 18 "Related Party
Disclosures" (AS 18), following are details of transactions during the
year with the related parties of the Company as defined in AS 18 :
(a) List of Related Parties and Relationships :
Name of Related Party Relation
Mahindra & Mahindra Limited Promoter holding more than 20% stake *
British Telecommunications, Plc. Promoter holding more than 20% stake
Mahindra BT Investment Company (Mauritius) Limited Promoter group
Company
Tech Mahindra ( Americas ) Inc, USA 100% Subsidiary Company
Tech Mahindra GmbH 100% Subsidiary Company
Tech Mahindra (Singapore) Pte Limited 100% Subsidiary Company
Tech Mahindra (Thailand) Limited 100% Subsidiary Company
PT Tech Mahindra Indonesia 100% Subsidiary Company
CanvasM Technologies Limited 80.10% Subsidiary Company
CanvasM (Americas) Inc. 80.10% Subsidiary Company
Tech Mahindra (Malaysia) SDN. BHD. 100% Subsidiary Company
Tech Mahindra (Beijing) IT Services Limited 100% Subsidiary Company
Venturbay Consultants Private Limited 100% Subsidiary Company
Tech Mahindra Foundation # 100% Subsidiary Company
Mahindra Logisoft Business Solutions Limited 100% Subsidiary Company
Tech Mahindra (Nigeria) Limited 100% Subsidiary Company
Tech Mahindra (Bahrain) Limited. S.P.C. 100% Subsidiary Company
Tech Mahindra Brasil Servicecos De Informatica Ltd. 100% Subsidiary
Company
Mahindra Engineering & Chemical Products Limited Fellow Subsidiary
Company**
Mahindra Engineering Services Limited Fellow Subsidiary Company**
Bristlecone India Limited Fellow Subsidiary Company**
Mahindra World City (Jaipur) Limited Fellow Subsidiary Company**
Mahindra Renault Private Limited Fellow Subsidiary Company**
Mahindra Navistar Automotives Limited Fellow Subsidiary Company**
Mahindra Logistics Limited Fellow Subsidiary Company**
Mahindra Navistar Engines Private Limited Fellow Subsidiary Company**
Mahindra Automotive Limited Fellow Subsidiary Company**
Mahindra Hinoday Industries Limited Fellow Subsidiary Company**
Mahindra Holdings Limited Fellow Subsidiary Company**
Mahindra Lifespace Developers Fellow Subsidiary Company**
Mahindra Punjab Tractors Private Limited Fellow Subsidiary Company**
Satyam Computer Services Limited Associate Company
Satyam BPO Limited Associate Company
Mr. Vineet Nayyar Key Management Personnel
Vice Chairman and Managing Director
Mr. Sanjay Kalra @ Chief Executive Officer
* Holding Company up to March 22, 2010
** Fellow Subsidiary Company up to March 22, 2010
# Section 25 Company not considered for consolidation @ Up to September
15, 2010
13. Exchange gain/(loss)(net) accounted during the year :
a) The Company enters into foreign Exchange Forward Contracts and
Currency Option Contracts to offset the foreign currency risk arising
from the amounts denominated in currencies other than the Indian Rupee.
The counter party to the Company's foreign currency Forward Contracts
and Currency Option Contracts is generally a bank. These contracts are
entered into to hedge the foreign currency risks of certain forecasted
transactions. Forward Exchange Contracts and Currency Option Contracts
in UK Pound exposure are split into two legs, which are GBP to USD and
USD to INR. These contracts are for a period between 1 day and 4
years.
In addition to the above cash flow hedges, the Company has outstanding
Foreign Exchange Currency Options Contracts aggregating to Rs. 6,993
Million (previous year : Rs. 12,365 Million) whose fair value showed a
gain of Rs. 654 Million (previous year : Rs. 1,656 Million). Although
these contracts are effective as hedges from an economic perspective,
they do not qualify for hedge accounting and accordingly these are
accounted as derivative instruments at fair value with changes in fair
value recorded in the Profit and Loss Account and the cumulative gain
of Rs. 94 Million as at March 31, 2009 would be recycled to Profit and
Loss Account as and when the cash flows materialise.
Exchange Gain of Rs. 869 Million (previous year: Rs. 799 Million) on
foreign exchange forward contracts and currency options contracts have
been recognised in the year ended March 31, 2011.
c) As at March 31, 2011, the Company has net foreign exchange exposures
that are not hedged by a derivative instruments or otherwise amounting
to Rs. 6,183 Million (previous year : Rs. 4,069 Million)
14. The Company has exercised the option given vide notification
number G.S.R. 225 (E) dated March 31, 2009 issued by the Ministry of
Corporate Affairs, Government of India on provisions of Accounting
Standard 11, however this does not have any impact on the financial
statements, as the Company does not have any long term foreign currency
monetary items.
15. Particulars of loans/advances and investment in its own shares by
listed companies, their subsidiaries, Associates, etc, required to be
disclosed in the annual accounts of the Company pursuant to Clause 32
of the Listing Agreement
16. Based on the information available with the Company, no creditors
have been identified as "supplier" within the meaning of "Micro, Small
and Medium Enterprises Development (MSMED) Act, 2006".
17. Current tax includes taxes for foreign branches amounting to Rs.
276 Million (previous year : Rs. 361 Million).
18. The Company has outstanding secured Non Convertible Debentures,
amounting to Rs. 6,000 Million.
(a) Secured by pari passu charge over the immovable property located in
Gujarat.
Company has also deposited the title deeds of certain other immovable
properties of the Company with the debenture trustees.
19. Details of Investments purchased and sold during the year :
During the year, Company invested an amount of Rs. 1 Million in
Philippines Treasury bills as required by Branch regulations and sold
Philippines Treasury bills costing Rs. 0.5 Million. The Company has
also invested an amount of Rs. 11 Million in Government bonds of Canada
which were sold during the year.
20. In respect of equity shares issued pursuant to Employee Stock
Option Scheme, the Company paid dividend of Rs. 6 Million for the year
2009-10 and tax on dividend of Rs. 1 Million as approved by the
shareholders at the Annual General Meeting held on July 26, 2010.
21. The Company has made the provision for claims and warranties of
Rs. 90 Million in the current year as per contractual terms, the
outcome of the same would get crystallized by next year.
22. Previous year figures have been regrouped wherever necessary, to
conform to the current year's classification.
Mar 31, 2010
1. Share Capital :
Issued and Subscribed Capital include :
(a) 3,33,618 Ordinary (Equity) Shares of Rs. 5 each (2009 : 1,66,809
Ordinary (Equity) Shares of Rs. 10 each) allotted as fully paid-up
pursuant to a contract without payment having been received in cash.
(b) 34,12,15,008 Ordinary (Equity) Shares of Rs. 5 each (2009 :
17,06,07,504 Ordinary (Equity) Shares of Rs. 10 each) allotted as fully
paid-up by way of Bonus Shares by capitalisation of Securities Premium
Account and Reserves.
(c) 25,13,124 Ordinary (Equity) Shares of Rs. 5 each (2009 : 12,56,562
Ordinary (Equity) Shares of Rs. 10 each) issued consequent to the
Scheme of Amalgamation with the Union Bank of India Limited. Of these,
27,474 Ordinary (Equity) Shares of Rs. 5 each (2009 : 13,737 Ordinary
(Equity) Shares of Rs. 10 each) were issued on conversion of 41,211 8%
Bonds.
(d) 25,96,404 Ordinary (Equity) Shares of Rs. 5 each (2009 : 12,98,202
Ordinary (Equity) Shares of Rs. 10 each) issued consequent to the
Scheme of Amalgamation with International Tractor Company of India
Limited without payment having been received in cash.
(e) 3,76,332 Ordinary (Equity) Shares of Rs. 5 each (2009 : 1,88,166
Ordinary (Equity) Shares of Rs. 10 each) issued consequent to the
Scheme of Amalgamation with Mahindra Spicer Limited without payment
having been received in cash.
(f) 19,46,400 Ordinary (Equity) Shares of Rs. 5 each (2009 : 9,73,200
Ordinary (Equity) Shares of Rs. 10 each) issued consequent to the
Scheme of Amalgamation with Mahindra Nissan Allwyn Limited without
payment having been received in cash.
(g) 2,56,55,104 Ordinary (Equity) Shares of Rs. 5 each (2009 :
1,28,27,552 Ordinary (Equity) Shares of Rs. 10 each) issued consequent
to the Scheme of Amalgamation with Mahindra Holdings and Finance
Limited without payment having been received in cash.
(h) 4,05,03,800 Ordinary (Equity) Shares of Rs. 5 each (2009 :
2,02,51,900 Ordinary (Equity) Shares of Rs. 10 each) issued consequent
to the Scheme of Amalgamation with Punjab Tractors Limited without
payment having been received in cash.
2. Reserves and Surplus :
(b) The Guidance Note on Accounting for Employee Share-based Payments
issued by The Institute of Chartered Accountants of India requires that
shares allotted to a trust but not transferred to employees be reduced
from Share Capital and Reserves. Accordingly, the Company has reduced
the Share Capital by Rs. 3.63 crores (2009 : Rs. 3.10 crores).
Securities Premium Account by Rs. 84.29 crores (2009 : Rs. 15.20
crores) for the 72,63,296 shares of Rs. 5 each (2009 : 31,02,653 shares
of Rs. 10 each) held by the trust pending transfer to the eligible
employees.
The Share Capital of the Company has also been reduced and the General
Reserve increased by Rs. 2.63 crores (2009 : Rs. 3.10 crores) for the
52,63,296 bonus shares of Rs. 5 each (2009 : 31,02,653 bonus shares of
Rs. 10 each) issued by the Company in September, 2005 to the trust but
not yet transferred by the trust to the employees. The above monies
which are treated as advance received from it, is included under
current liabilities.
(c) Consequent to the announcement issued by The Institute of Chartered
Accountants of India dated 29th March, 2008 in respect of forward
exchange contracts and currency and interest rate swaps, the Company
has applied the Hedge Accounting principles set out in the Accounting
Standard (AS) 30 Financial Instruments : Recognition and Measurement.
Accordingly, such contracts are marked to market and the loss
aggregating Rs. 0.91 crores (Net of Tax of Rs. 0.45 crores) [2009 : Rs.
434.19 crores (Net of Tax of Rs. 223.57 crores)] arising consequently
on contracts that were designated and effective as hedges of future
cash flows has been recognized directly in the Hedging Reserve Account.
3. Loans :
(a) Debentures are redeemable as follows :
(i) Rs. 200.00 crores on 9th January, 2011.
(ii) Rs. 400.00 crores in three equal instalments from 12th December,
2013.
(iii) Rs. 0.01 crores of 12.50% Debentures and Zero Interest Bonds on
receipt of balance amount due on allotment.
(b) (i) Debentures of Rs. 600.01 crores are secured by a pari-passu
charge on immovable properties of the Company both present and future,
subject to certain exclusions and are also secured by pari-passu charge
on the movable properties of the Company including movable machinery,
machinery spares, tools and accessories, both present and future.
(ii) Loans and Advances on cash credit accounts from the Companys
bankers are secured by a first charge on a pari-passu basis on the
whole of the current assets of the Company namely inventories, book
debts, outstanding monies, receivables, claims, etc. both present and
future.
4. (a) Buildings include Rs. * crores (2009 : Rs. * crores) being the
value of shares in co-operative housing societies.
(b) Additions to fixed assets and capital work-in-progress include :
(i) Interest capitalised during the year Rs. 26.56 crores (2009 : Rs.
15.63 crores).
(ii) Foreign exchange fluctuation capitalised during the year Rs.
117.79 crores credit (Net) [2009 : Rs. 172.97 crores debit (Net)].
(c) (i) The depreciation charge for the year excludes :
(a) An amount of Rs. 0.41 crores (2009 : Rs. 0.38 crores), representing
depreciation on the increase due to revaluation of Land and Buildings
transferred from the Revaluation Reserve.
(b) An amount of Rs. 0.01 crores (2009 : Rs. Nil), representing
depreciation on revalued buildings demolished during the year.
(ii) The net credit to the Profit and Loss Account consequent to the
above adjustments to the Revaluation Reserve is Rs. 0.42 crores (2009 :
Rs. 0.38 crores).
5. (a) Provision - Others Rs. 219.66 crores (2009 : Rs. 167.45 crores)
includes provision for contingencies Rs. 3.58 crores (2009 : Rs. 8.25
crores), provision for warranty Rs. 179.61 crores (2009 : Rs. 137.45
crores), provision for post retirement medical benefits Rs. 9.65 crores
(2009 : Rs. 4.84 crores), provision for post retirement housing
allowance Rs. 10.99 crores (2009 : Rs. Nil) and provision for
diminution in value of certain assets substantially retired from active
use Rs. 15.83 crores (2009 : Rs. 16.89 crores). Provision for
contingencies is in respect of labour demands under negotiations at
certain locations of the Company. Provision for warranties relates to
warranty provision made in respect of sale of certain products, the
estimated cost of which is accrued at the time of sale. The products
are generally covered under a free warranty period ranging from 6
months to 3 years.
6. (a) Dividends on other investments include Rs. 45.56 crores (2009
: Rs. 44.89 crores) in respect of current investments and Rs. 3.91
crores (2009 : Rs. 1.32 crores) in respect of long term investments.
(b) Profit on sale of investments (Net) includes profit on disposal of
current investments (Net) Rs. 1.53 crores (2009 : Rs. 14.73 crores),
and profit on disposal of long term investments (Net) Rs. 8.87 crores
(2009 : Rs. 38.49 crores).
(c) Interest on Government Securities, Debentures and Bonds includes
tax deducted at source Rs. 0.05 crores (2009 : Rs. 0.11 crores) and
comprise Rs. 0.50 crores (2009 : Rs. 0.50 crores) and Rs. 4.18 crores
(2009 : Rs. 4.26 crores) in respect of long term and current
investments respectively.
(d) Interest received - others includes tax deducted at source Rs.
12.21 crores (2009 : Rs. 15.11 crores).
7. Repairs and Maintenance includes machinery spares consumed Rs.
33.85 crores (2009 : Rs. 26.25 crores) but does not include items
included under Consumption of Raw Materials and Bought-out Components
and amounts charged to salaries and wages (amounts not ascertained).
8. Managerial remuneration for Directors included in the Profit and
Loss Account is Rs. 8.19 crores (2009 : Rs. 6.29 crores) including
Directors fees of Rs. 0.14 crores (2009 : Rs. 0.09 crores),
perquisites Rs. 1.68 crores (2009 : Rs. 1.27 crores) and commission Rs.
4.53 crores (2009 : Rs. 3.16 crores) (See Schedule XV) and excluding
charge for gratuity, provision for leave encashment and post retirement
medical benefit as separate actuarial valuation figures are not
available. The above perquisites include amortisation of Employees
Stock Options amounting to Rs. 0.06 crores (2009 : Rs. 0.09 crores).
9. Employee Benefits :
General description of defined benefit plans :
Gratuity
The Company operates a gratuity plan covering qualifying employees. The
benefit payable is the greater of the amount calculated as per the
Payment of Gratuity Act or the Company scheme applicable to the
employee. The benefit vests.upon completion of five years of continuous
service and once vested it is payable to employees on retirement or on
termination of employment. In case of death while in service, the
gratuity is payable irrespective of vesting. The Company makes annual
contribution to the group gratuity scheme administered by the Life
Insurance Corporation of India through its Gratuity Trust Fund.
Post retirement medical
The Company provides post retirement medical cover to select grade of
employees to cover the retiring employee and their spouse upto a
specified age through mediclaim policy on which the premiums are paid
by the Company. The eligibility of the employee for the benefit as well
as the amount of medical cover purchased is determined by the grade of
the employee at the time of retirement.
10. The Company has allotted 55,24,219 and 10,00,000 Ordinary (Equity)
Shares of Rs. 10 each in the years ended 31st March, 2002 and 31st
March, 2010 respectively to the Mahindra & Mahindra Employees Stock
Option Trust set up by the Company. The trust holds these shares for
the benefit of the employees and issues them to the eligible employees
as per the recommendation of the Compensation Committee.
In respect of options granted prior to 29th September, 2006, the equity
settled options vest one year from the date of the grant and are
exercisable on specified dates in 3 tranches within a period of 5 years
from the date of vesting. The number of options exercisable in each
tranche is between the minimum of 100 and a maximum of 1/3"* of the
options vested, except in case of the last date of exercise, where the
employee can exercise all the options vested but not exercised till
that date.
Options granted on or after 29th September, 2006 vest in 4 equal
instalments on the expiry of 12 Months, 24 Months, 36 Months and 48
Months from the date of grant. The options may be exercised on the date
of vesting and on specified dates within 5 years from the date of
vesting. Number of vested options exercisable on each specified date is
subject to a minimum of 50 or number of options vested whichever is
lower, except in case of the last date of exercise, where the employee
can exercise all the options vested but not exercised till that date.
The compensation costs of stock options granted to employees are
accounted by the Company using the intrinsic value method.
11. The estimated amount of contracts remaining to be executed on
capital account and not provided for as at 31" March, 2010 is Rs.
781.83 crores (2009 : Rs. 756.32 crores).
12. The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT)
by its order dated 7th December, 2009 has rejected the Companys appeal
against the order dated 30* March, 2005 passed by the Commissioner of
Central Excise (Adjudication), Navi Mumbai confirming the demand made
on the Company for payment of differential excise duty (including
penalty) of Rs. 304.11 crores in connection with the classification of
Companys Commander range of vehicles, during the years 1991-1996.
Whilst the Company had classified the Commander range of vehicles as
10-seater attracting a lower rate of excise duty, the Commissioner of
Central Excise (Adjudication), Navi Mumbai, has held that these
vehicles could not be classified as 10-seater as they did not fulfil
the requirement of 10-seater vehicles, as provided under the Motor
Vehicles Act, 1988 (MVA) and Maharashtra Motor Vehicles Rules, 1989
(MMVR) and as such attracted a higher rate of excise duty.
In earlier collateral proceedings on this issue, the CESTAT had by an
Order dated 19th July, 2005 settled the controversy in the Companys
favour. The CESTAT had accepted the Companys submission that MVA and
MMVR could not be referred to for determining the classification for
the purpose of levy of excise duty and rejected the Departments appeal
against the Order of the Collector, Central Excise classifying the
Commander range of vehicles as 10-seater. The Departments appeal
against the CESTAT Order dated 19th July, 2005 is pending before the
Supreme Court of India but the operation of the Order has not been
stayed.
The Company has filed an appeal against the aforesaid order dated 7th
December, 2009 inter alia, on the grounds that the MVA and MMVR cannot
be referred to for the purpose of determining the excise
classification, as has been repeatedly held by various judicial fora,
including the Supreme Court and particularly by CESTAT vide its order
dated 19th July, 2005 in the Companys own case referred to above.
Without prejudice to the grounds raised in the appeal, the Company has
paid an amount of Rs. 40.00 crores in January, 2010. Pending admission
of the Companys appeal, the Supreme Court has passed an interim order
staying the recovery of the balance amount till further orders.
In another case relating to Armada range of vehicles manufactured
during the years 1992 to 1996, by the Company at its Nashik facility,
the Commissioner of Central Excise, Nashik passed an order dated 20th
March, 2006 confirming a demand of Rs. 24.75 crores, on the same
grounds as adopted for Commander range of vehicles. The CESTAT has
given an unconditional stay against this order, which is yet to be
finally heard by the Tribunal.
The Company strongly believes, based on legal advise it has received,
that the CESTAT order dated 7!h December, 2009 which is under appeal in
the Supreme Court is not sustainable in law and hence the Company has a
very good chance of succeeding in the matter. As such, the Company does
not expect any liability on this account. However, in view of the
CESTAT order, the Company has reflected the above amount aggregating
Rs. 328.86 crores and the interest of Rs. 168.05 crores accrued on the
same upto 31" March, 2010, as a Contingent Liability in the Accounts
and the same is included in the amounts disclosed under Note 18 (b)(i).
13. Contingent Liability :
(a) Guarantees given by the Company : Rupees crores
Amount of guarantees Outstanding amounts
against the guarantees
2010 2009 2010 2009
For employees 1.05 1.05 * *
For other companies 327.61 168.46 286.91 163.67
* denotes amounts less than Rs. 50,000
(b) Claims against the Company not acknowledged as debts comprise of :
(i) Excise Duty, Sales Tax and Service Tax claims disputed by the
Company relating to issues of applicability and classification
aggregating Rs. 968.22 crores (Net of Tax : Rs. 698.04 crores) [2009 :
Rs. 386.32 crores (Net of Tax : Rs. 274.20 crores)].
(ii) Other matters (excluding claims where amounts are not
ascertainable) : Rs. 17.78 crores (Net of Tax : Rs. 12.41 crores) [2009
: Rs. 17.37 crores (Net of Tax : Rs. 12.14 crores)].
(iii) Claims on capital account : Rs. 1.18 crores (2009 : Rs. 1.18
crores).
(c) Uncalled liability on equity shares partly paid Rs. 10.50 crores
(2009 : Rs. 10.50 crores).
(d) Taxation matters :
(i) Demands against the Company not acknowledged as debts and not
provided for, relating to issues of deductibility and taxability in
respect of which the Company is in appeal and exclusive of the effect
of similar matters in respect of assessments remaining to be completed
:
- Income-tax : Rs. 181.07 crores (2009 : Rs. 168.25 crores).
(ii) Items in respect of which the Company has succeeded in appeal, but
the Income-tax Department is pursuing/likely to pursue in
appeal/reference and exclusive of the effect of similar matters in
respect of assessments remaining to be completed :
- Income-tax matters Rs. 70.58 crores (2009 : Rs. 58.63 crores).
- Surtax matters Rs. 0.13 crores (2009 : Rs. 0.13 crores).
(e) Bills discounted not matured Rs. Nil (2009 : Rs. 59.55 crores).
14. Research and Development expenditure :
(a) In recognised Research and Development units :
(i) debited to the Profit and Loss Account, including certain
expenditure based on allocations made by the Company, aggregate Rs.
248.25 crores (2009 : Rs. 220.09 crores) [excluding depreciation and
amortisation of Rs. 81.03 crores (2009 : Rs. 56.19 crores)].
(ii) Development Expenditure incurred during the year Rs. 131.28 crores
(2009 : Rs. 128.94 crores).
(iii) Capitalisation of assets Rs. 41.64 crores (2009 : Rs. 15.64
crores).
(b) In other units :
(i) debited to the Profit and Loss Account, including certain
expenditure based on allocations made by the Company, aggregate Rs.
25.89 crores (2009 : Rs. 18.69 crores) [excluding depreciation and
amortisation of Rs. 2.25 crores (2009 : Rs. 1.50 crores)].
(ii) Development Expenditure incurred during the year Rs. 38.59 crores
(2009 : Rs. 7.50 crores).
(iii) Capitalisation of assets Rs. 4.34 crores (2009 : Rs. 3.56
crores).
15. The net difference in foreign exchange loss debited to the Profit
and Loss Account is Rs. 113.48 crores (2009 : Rs. 237.20 crores).
16. Exceptional items of Rs. 90.75 crores (2009 : Rs. 10.27 crores)
comprise of :
(a) Profit on sale of certain long term investments Rs. 90.75 crores
(2009 : Rs. Nil).
(b) Surplus on transfer of Logistics business Rs. Nil (2009 : Rs. 10.27
crores).
17. Scheme of Amalgamations :
(a) In the previous year, pursuant to the Scheme of Amalgamation (the
scheme) as approved by the shareholders of the Company and subsequently
sanctioned by the Honourable High Court of Bombay on 18th July, 2008,
the entire business and all the assets and liabilities, duties and
obligations of Mahindra Holdings and Finance Limited (MHFL) (an
erstwhile wholly owned subsidiary of the Company) were transferred to
and vested in the Company, with effect from 1st February, 2008. The
excess of the value of the net assets of MHFL over the face value of
the shares allotted, the face value of the shares cancelled and the
amount of General Reserve and Profit and Loss Account of MHFL
transferred to the Company was credited to the existing Investment
Fluctuation Reserve Account.
(b) In the previous year, pursuant to the Scheme of Amalgamation (the
scheme) as approved by the shareholders of the Company and subsequently
sanctioned by the Honourable High Court of Bombay and the Honourable
High Court of Punjab & Haryana on 9* January, 2009 and 16th January,
2009 respectively, the entire business and all the assets and
liabilities, duties and obligations of Punjab Tractors Limited (PTL)
(an erstwhile subsidiary of the Company) were transferred to and vested
in the Company, with effect from 1st August, 2008. The excess of the
value of the net assets of PTL over the face value of the shares
allotted was credited to the existing Investment Fluctuation Reserve
Account.
(c) Accordingly, Jhe figures for the current year are not strictly
comparable with that of the previous year.
18. The outstanding derivative instruments as on 31st March, 2010 :
The Company has taken foreign exchange contracts amounting to US$ 54.80
crores comprising Forward Contracts US$ 32.10 crores (2009 : US$ 60.30
crores), Range Forwards US$ 7.20 crores (2009 : US$ 10.20 crores) and
US$ 15.50 crores (2009 : US$ 33.20 crores) of derivative structures in
the form of strips.
The foreign currency exposures not hedged by derivative instrument or
otherwise as on 31st March, 2010 are - Receivables of ZAR 4.67 crores,
EUR 0.58 crores, AUD 0.39 crores, GBP 0.27 crores, NZD 0.02 crores, CHF
* crores and Payables of JPY 2.20 crores, US$ 1.33 crores, SEK 0.03
crores, SAR 0.01 crores, SGD * crores (2009 : Receivables of AUD 0.38
crores, RMB 0.01 crores, SEK * crores and Payables of US$ 2.71 crores,
EUR 0.03 crores, GBP * crores, CHF * crores, JPY 2.38 crores, ZAR *
crores, SAR 0.04 crores, SGD * crores, DKK * crores, NZD * crores ).
The Company has outstanding borrowings of JPY 1,126.44 crores (2009 :
JPY 1,126.44 crores and US$ 9.45 crores) as Foreign Currency
Borrowings. The borrowing of JPY 450.24 crores (2009 : JPY 450.24
crores) has been completely hedged using cross currency swap structure
fixing the liability into a full fledged rupee liability. The borrowing
of JPY 676.20 crores (2009 : JPY 676.20 crores) has been fixed to a US$
liability using a cross currency swap structure. The borrowing of US$
Nil (2009 : US$ 2.00 crores) has been hedged using a forward cover.
The Company had made an issue of US$ 20.00 crores in the form of
Foreign Currency Convertible Bonds in April, 2006. Out of this issue,
Bonds of value US$ 18.95 crores (2009 : US$ 18.95 crores) are
outstanding and have not been hedged.
* denotes amounts less than 50,000 of respective currency.
19. Related Party Disclosure :
(a) Related parties where control exist :
(i) Subsidiaries :
Sl. No. Name of the Company
1. Mahindra Engineering and Chemical Products Limited
2. Mahindra Logisoft Business Solutions Limited (upto 22nd March,
2010)
3. Mahindra First Choice Wheels Limited
4. Mahindra USA Inc.
5. Mahindra Gujarat Tractor Limited
6. Mahindra (China) Tractor Company Limited
7. Mahindra Shubhlabh Services Limited
8. Mahindra & Mahindra South Africa (Proprietary) Limited
9. Mahindra Europe s.r.l.
10. Mahindra Engineering Services Limited
11. Mahindra Gears & Transmissions Private Limited (formerly known as
Mahindra SAR Transmission Private Limited)
12. Mahindra Overseas Investment Company (Mauritius) Limited
13. Mahindra-BT Investment Company (Mauritius) Limited
14. Mahindra Intertrade Limited
15. Mahindra Steel Service Centre Limited
16. Mahindra Middleeast Electrical Steel Service Centre (FZC)
17. Mahindra Consulting Engineers Limited
18. Mahindra Holidays & Resorts India Limited
19. Mahindra Holidays and Resorts USA Inc.
20. NBS International Limited
21. Mahindra Ugine Steel Company Limited
22. Mahindra & Mahindra Financial Services Limited
23. Mahindra Insurance Brokers Limited
24. Tech Mahindra Limited (upto 22nd March, 2010)
25. Tech Mahindra (Americas) Inc. (upto 22nd March, 2010)
26. Tech Mahindra GmbH (upto 22nd March, 2010)
27. Tech Mahindra (Singapore) Pte. Limited (upto 22nd March, 2010)
28. Tech Mahindra (Thailand) Limited (upto 22nd March, 2010)
29. Tech Mahindra Foundation (upto 22nd March, 2010)
30. Bristlecone Limited
31. Bristlecone Inc.
32. Bristlecone (UK) Limited
33. Bristlecone India Limited
34. Bristlecone (Singapore) Pte. Limited
35. Bristlecone GmbH
36. Mahindra Renault Private Limited
37. Mahindra Navistar Automotives Limited
38. Stokes Group Limited
39. Jensand Limited
40. Stokes Forgings Limited
41. Stokes Forgings Dudley Limited
42. Mahindra Engineering Services (Europe) Limited
43. Mahindra Engineering GmbH (formerly known as Plexion Technologies
GmbH)
44. Mahindra Technologies Inc. (upto 10th March, 2010)
45. Mahindra Lifespace Developers Limited
46. Mahindra World City (Jaipur) Limited
47. Mahindra World City Developers Limited
48. Mahindra Infrastructure Developers Limited
49. Mahindra Integrated Township Limited
50. Mahindra World City (Maharashtra) Limited
51. PTTech Mahindra Indonesia (upto 22nd March, 2010)
52. Mahindra Forgings International Limited
53. CanvasM Technologies Limited (upto 22nd March, 2010)
54. CanvasM (Americas) Inc. (upto 22nd March, 2010)
55. Mahindra Forgings Europe AG
56. Gesenkschmiede Schneider GmbH
57. JECO-Jellinghaus GmbH
58. Falkenroth Umformtechnik GmbH
59. Mahindra Vehicle Manufacturers Limited
60. Schoneweiss & Co. GmbH
61. MHR Hotel Management GmbH
62. Mahindra Forgings Limited
63. Mahindra Rural Housing Finance Limited
64. Mahindra Hotels and Residences India Limited
65. Mahindra Forgings Global Limited
66. Bristlecone (Malaysia) SDN.BHD
67. Tech Mahindra (Malaysia) SDN.BHD (upto 22nd March, 2010)
68. Mahindra Castings Limited (formerly known as Mahindra Castings
Private Limited)
69. Knowledge Township Limited (formerly known as Mahindra Knowledge
City Limited)
70. Mahindra Holdings Limited
71. Mahindra Logistics Limited
72. Tech Mahindra (Beijing) IT Services Limited (upto 22nd March,
2010)
73. Mahindra Navistar Engines Private Limited
74. Mahindra Residential Developers Limited
75. Mahindra Graphic Research Design s.r.l.
76. Mahindra Aerospace Private Limited
77. Heritage Bird (M) SDN.BHD
78. Mahindra First Choice Services Limited
79. Mahindra Bebanco Developers Limited
80. Mahindra Gears Global Limited
81. Mahindra Gears Cyprus Limited
82. Mahindra Gears International Limited
83. Metalcastello s.r.l. (formerly known as Mahindra Metalcastello
s.r.l.)
84. Industrial Township (Maharashtra) Limited (formerly known as
Mahindra Industrial Township Limited)
85. Metalcastello S.p.A (upto 31st December, 2009)
86. Crest Geartech Private Limited
87. Engines Engineering s.r.l.
88. EFF Engineering s.r.l.
89. ID-EE s.r.l.
90. Mahindra Business & Consulting Services Private Limited (formerly
known as Mahindra IT Consulting Private Limited)
91. Mahindra Automotive Australia Pty. Ltd.
92. Mahindra Two Wheelers Limited
93. Mahindra United Football Club Private Limited
94. Defence Land Systems India Private Limited (formerly known as
Mahindra Defence Land Systems Private Limited)
95. Mahindra Yeuda (Yancheng) Tractor Company Limited
96. Venturbay Consultants Private Limited (upto 22"d March, 2010)
97. Mahindra Metal One Steel Service Centre Limited (w.e.f. 11th June,
2009)
98. Raigad Industrial & Business Park Limited (w.e.f. 18th June, 2009)
99. Retail Initiative Holdings Limited (w.e.f. 1st July, 2009)
100. Mahindra Retail Private Limited (w.e.f. 1st July, 2009)
101. Mahindra Technologies Services Inc. (w.e.f. 4th June, 2009)
102. Tech Mahindra (Nigeria) Limited
(from 18th August, 2009 to 22nd March, 2010)
103. Mahindra Punjab Tractors Private Limited (w.e.f. 9th October,
2009)
104. Tech Mahindra Bahrain Limited S.P.C.
(w.e.f. 3,d November, 2009 & upto 22nd March, 2010)
105. Mahindra EcoNova Private Limited (w.e.f. 2nd January, 2010)
106. Mahindra Conveyor Systems Private Limited (w.e.f. 4th January,
2010)
107. BAH Hotelanlagen AG (w.e.f. 11th January, 2010)
(b) Other parties with whom transactions have taken place during the
year. (i) Associates :
Sl. No. Name of the Company
1. Mahindra Composites Limited
2. Mahindra Construction Company Limited
3. Owens Comings (India) Limited
4. Satyam Computer Services Limited (from 5th May, 2009 to 22nd March,
2010)
5. Swaraj Automotives Limited
6. Swaraj Engines Limited
7. Mahindra Water Utilities Limited
(ii) Joint Venture :
Sl. No. Name of the Company
1. Mahindra Sona Limited
2. Tech Mahindra Limited (w.e.f 23rd March, 2010)_
(iii) Key Management Personnel :
Vice Chairman and Managing Director Mr. Anand Mahindra
Executive
Directors......................... Mr. B.N. Doshi
Mr. A.K. Nanda
(iv) Welfare Funds :
Sl. No. Name of the Fund
1. Mahindra World School Education Trust
2. M&M Benefit Trust
3. M&M Employees Welfare Fund
4. M&M Employees Farm Equipment Sector Employees Welfare Fund
20. Additional information pursuant to the provisions of paragraphs
3(i)(a) and (ii), 4C and 4D of Part II of Schedule VI to the Companies
Act, 1956 - See Schedule XVI. Previous years figures are indicated
below the current years figures.
21. Additional information pursuant to the provisions of Part IV of
Schedule VI to the Companies Act, 1956 - See Schedule XVII.
22. Previous years figures have been regrouped/restated wherever
necessary.
Mar 31, 2000
1. Retirement Benefits:
The Companys liability towards gratuity to the employees is covered by
a group gratuity policy with LIC of India. The difference, if any,
between such contribution and the actuarial valuation of gratuity
liability is provided for. There is no provision for encashment of
leave as per the rules of employment of the Company.
2. The Company has made adequate provision for the Non-performing
assets identified, in accordance with the guidelines issued by the
Reserve Bank of India.
3. In the opinion of the Board, Current Assets, Loans and Advances
are approximately of the value stated if realised in the ordinary
course of business.
4. Current Liabilities include Deposits/Advances received on account
of Lease/ Hire Purchase, which is repayable over a period of three
years.
5. The Foreign Currency Loan availed by the Company in respect of
which the Company has obtained a forward cover has been translated at
the forward contract rate.
6. During the period ended March 2000, Rs. 1,268.77 lakhs has been
credited to Lease equalisation account.
7. Provision for income tax has been made on the basis of accounting
practices consistently followed by the Company including the method of
accounting for income as elaborated in the accounting policy for
revenue recognition (Refer Note 2).
8. The market value of Repossessed Vehicles in stock and the vehicles
given on hire to parties whose receivables are classified as
non-performing as per RBI guidelines, as determined by the management
have been relied upon by the auditors for the purpose of stock
valuation and provisioning respectively.
9. The Company has given counter guarantee to guarantor of bank loan
for Rs. 15 crores.
10. Contingent Liability not provided for:
(i) Taxation matters: Demands against the Company not acknowledged as
debts and not provided for, in respect of which the Company is in
appeal and exclusive of the effect of similar matters in respect of
assessments to be completed:
à Income Tax : Rs. 264.62 lakhs
à Interest-Tax : Rs. 7.53 lakhs
(ii) The Company has given a performance guarantee in respect of which
the Company stands fully indemnified for the loss, if any, which would
be incurred on failure, if any, to perform the guaranteed act.
(iii) Liability on Securitised Contracts: Rs. 956.68 lakhs,
(iv) On account of outstanding Capital Commitments Rs. 6.94 lakhs,
11. The Company incurred an expenditure of Rs. 4.53 lakhs, on Foreign
Travel of the employees.
12. During the previous year the Company has securitised Vehicle Hire
Purchase receivable for Rs. 1,841.47 lakhs. The Companys liability in
the event of a default in the repayment by hirers is Rs. 956.68 lacs.
13. In the opinion of the management there are no dues payable to
small scale industrial undertakings in view of the nature of the
business of the Company.
14. Inter Corporate Deposits given includes deposit given to Company
under the same management within the meaning of Section 370 (1B) of the
Companies Act, 1956:
15. Previous years figures have been regrouped wherever necessary.