3.10 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
The Company recognises provisions only when it has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
No provision is recognised for -
a. Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future
NOTES FORMING PART OF THE STANDALONE FINANCIAL STATEMENTS
for the year ended 31st March, 2024
events not wholly within the control of the Company; or
b. Present obligations that arise from past events but are not recognised because-
1) It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
2) A reliable estimate of the amount of obligation cannot be made.
Such obligations are disclosed as contingent liabilities. These are assessed continually and only that part of the obligation for which an outflow of resources embodying economic benefits is probable, is provided for, except in the extremely rare circumstances where no reliable estimate can be made.
Contingent assets are not recognised in the standalone financial statements since this may result in the recognition of income that may never be realised.
Provisions for onerous contracts are recognised 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. Before a provision is established the Company recognises any impairment loss on the assets associated with that contract.
Warranty
The Company has an obligation by way of warranty to maintain the software during the period of warranty, as per the contractual requirements, for certain products/licenses. Costs associated with such sale are accrued at the time when related revenues are recorded and included in cost of service delivery.
The Company accounts for the provision for warranty on the basis of the information available with the Management duly taking into account the historical experience and current estimates.
3.11 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprises cash on hand, demand deposits and short term, highly liquid investments that are readily convertible to known amounts of cash, which are subject to an insignificant risk of changes in value and have a short maturity of three months or less from the date of investment.
3.12 Revenue Recognition
The Company derives revenues primarily from providing engineering services which includes design engineering services, embedded software development with its related services and from the sale of licenses and products.
The following is the summary of significant accounting policies related to revenue recognition:
Revenue is measured based on the consideration specified in a contract with a customer. The Company recognises revenue when it transfers control over a good or service to a customer.
Arrangements with customers for such engineering and its related services are bifurcated into following key categories:
a. Revenue on time and material contracts for the reporting period is recognised as and when the related services are performed and billed to the end customers. If billing for the related services is not done during the reporting period, revenue is recognized as unbilled revenue at the end of the reporting period.
b. Revenue from fixed price contracts where the performance obligations are directly linked to costs expended and are satisfied over time and there is no uncertainty as to measurement or collectability of consideration, is recognised as per the percentage-of-completion method. Percentage of completion is determined based on project costs incurred to date as a percentage of total estimated project costs required to complete the project. Costs expended have been used to measure progress towards completion as generally there is a direct relationship between input and output in respect of work completed.
c. Maintenance revenue is recognised ratably over the term of the underlying maintenance arrangement.
d. Revenue from internally developed software product licenses where the customer obtains a “right to use” the license is recognised at the time the license is made available to the customer. Revenue from licenses where the customer obtains a “right to access” is recognised over the access period.
e. Revenue from sale of third party licenses is recognised only when the sale is completed by passing ownership.
f. Revenue from sale of hardware products is recognized upon actual delivery of goods along with transfer of control and significant risks and rewards to the customers.
The following are the details of key significant
accounting policies related to revenue recognition
for all the above mentioned categories:
a. Revenue in excess of invoicing is classified either as contract asset (unbilled revenue) or financial asset (unbilled revenue), while invoicing in excess of revenue is classified as contract liabilities (unearned revenue).
b. Unbilled revenue is classified as contract asset when there is a right to consideration in exchange for goods or services which is conditional on something other than the passage of time. Whereas, it is classified as financial asset when such right to consideration in exchange for goods or services is conditional only on passage of time.
c. Amount billed in advance, without services being rendered, is classified as unearned revenue (contract liabilities).
Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, service level credits, performance bonuses and incentives, if any, as specified in the contract with the customer. Expenses reimbursed by customers during the project execution are recorded as reduction to associated costs.
d. The Company accounts for volume and/or trade discounts to customers as a reduction of
revenue. Also, when the level of discount varies with increases in levels of revenue transactions, the Company recognises the liability based on its estimate of the customer's future purchases. The Company recognises changes in the estimated amount of obligations for discounts in the period in which the change occurs. The discounts are passed on to the customer either as direct payments or as a reduction of payments due from the customer.
e. When there is an uncertainty as to measurement or ultimate collectability, revenue recognition is postponed until such uncertainty is resolved.
f. In accordance with Ind-AS 37, provision for onerous contract/ estimated losses, if any, on uncompleted contracts are recorded in a period in which such losses become probable based on the expected contract estimates at the period end date. The Company recognises an onerous contract provision when the unavoidable costs of meeting the obligations under a contract exceed the economic benefits to be received.
g. The Company presents revenues net of indirect tax in its Statement of Profit and Loss.
h. Arrangements to deliver software products
generally have three elements: license, implementation and Annual Technical
Services(ATS). The Company has applied the principles under Ind-AS 115 to account for revenues from these performance obligations. When implementation services are provided in conjunction with the licensing arrangement and the license and implementation have been identified as two separate performance obligations, the transaction price for such contracts is allocated to each performance obligation of the contract based on its relative standalone selling prices. In the absence of standalone selling price for implementation, the performance obligation is estimated using the expected cost plus margin approach. Where the license is required to be substantially customised as part of the implementation service, the entire arrangement fee for license and implementation is considered to be a single performance obligation and the revenue is recognised using the percentage-
of-completion method as the implementation is performed. Revenue from client training, support and other services arising due to the sale of software products is recognised as the performance obligations are satisfied. ATS revenue is recognised ratably over the period in which the services are rendered.
Significant judgments in revenue recognition:
a. The Company’s contracts with customers could include promises to transfer multiple products and services to a customer. The Company assesses the products/services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligation involves judgment to determine the deliverables and the ability of the customer to benefit independently from such deliverables.
b. Judgment is also required to determine the transaction price for the contract. The transaction price could be either a fixed amount of customer consideration or variable consideration with elements such as volume discounts, service level credits, performance bonuses, price concessions and incentives. The transaction price is also adjusted for the effects of the time value of money if the contract includes a significant financing component. The estimated amount of variable consideration is adjusted in the transaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur and is reassessed at the end of each reporting period. The Company allocates the elements of variable considerations to all the performance obligations of the contract unless there is observable evidence that they pertain to one or more distinct performance obligations.
c. The Company uses judgment to determine an appropriate standalone selling price for a performance obligation. The Company allocates the transaction price to each performance obligation on the basis of the relative standalone selling price of each distinct product or service promised in the contract. Where standalone selling price is not observable, the Company uses the expected cost plus margin
approach to allocate the transaction price to each distinct performance obligation.
d. The Company exercises judgment in determining whether the performance obligation is satisfied at a point in time or over a period of time. The Company considers indicators such as how customer consumes benefits as services are rendered or who controls the asset as it is being created or existence of enforceable right to payment for performance to date and alternate use of such product or service, transfer of significant risks and rewards to the customer, acceptance of delivery by the customer, etc.
e. Revenue from fixed price contracts where the performance obligations are directly linked to costs expended and are satisfied over time and there is no uncertainty as to measurement or collectability of consideration, is recognised as per the percentage-of-completion method. The Company uses judgment to estimate the future cost-to-completion of the contracts which is used to determine the degree of the completion of the performance obligation.
3.13 OTHER INCOME
Other income primarily consist of interest income, dividend income, net gain on investment and net foreign exchange gain. Interest income is recognised using the effective interest method. Dividend income is recognised when right to receive payment is established.
3.14 FINANCE COSTS
Finance costs include interest cost on borrowings, lease liabilities and other financial instruments. Borrowing costs are recognised using effective interest rate method.
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of cost of that asset. All other borrowing costs are charged to the Statement of Profit and Loss.
The exchange differences arising from foreign currency borrowings, to the extent that they are regarded as an adjustment to interest costs, are regrouped from foreign exchange differences to finance costs.
3.15 EMPLOYEE BENEFITS
i. Defined benefit plan
The Company’s gratuity scheme is a defined benefit plan (funded). For defined benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with independent actuarial valuations being carried out at each Balance Sheet date. Remeasurement of net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effects of asset ceiling (if any, excluding interest) are recognised in other comprehensive income for the period in which they occur. Net interest expense and other expenses related to defined benefit plans are recognised in the Statement of Profit and Loss. Past service cost is recognised immediately to the extent that the benefits are already vested or amortised on a straight-line basis over the average period until the benefits become vested.
The retirement benefit obligation recognised in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, and as reduced by the fair value of scheme assets, if any. Any asset resulting from this calculation is limited to the present value of available refunds and reductions in future contributions to the scheme.
ii. Defined contribution plan
A defined contribution plan is a postemployment benefit plan under which an entity pays specified contributions to a separate entity and has no obligation to pay any further amounts. The Company makes specified monthly contributions towards employee provident fund to Government administered provident fund scheme which is a defined contribution plan. The Company’s contribution is recognised as an expense in the Statement of Profit and Loss during the period in which the employee renders the related service.
iii. Compensated absences
The employees can carry-forward a portion of the unutilized accrued compensated absences
and utilize it in future service periods or receive cash compensation on termination of employment. Since the compensated absences do not fall due wholly within twelve months after the end of the period in which the employees render the related service and are also not expected to be utilized wholly within twelve months after the end of such period, the benefit is classified as a long-term employee benefit. The Company records an obligation for such compensated absences in the period in which the employee renders the services that increase this entitlement. The obligation is measured on the basis of independent actuarial valuation using the projected unit credit method. Remeasurement gains/losses are recognised in the Statement of Profit and Loss in the period in which they arise.
iv. Other employee benefits
The undiscounted amount of short-term employee benefits and discounted amount of long term employee benefit, expected to be paid in exchange for the services rendered by employees, are recognised during the period when the employee renders the service.
3.16 RESEARCH AND DEVELOPMENT:
Costs incurred during the research phase of a project are expensed when incurred. Costs incurred in the development phase are recognised as an intangible asset in accordance with policy defined in 3.6.
3.17 EMploYEE stock option
In respect of stock options granted pursuant to the Company’s Employee Stock Option Scheme, the Company recognises employee compensation expense, using the grant date fair value in accordance with Ind-AS 102 - Share Based Payment, on straight line basis over the period over which the employees would become unconditionally entitled to apply for the shares.
When the terms of the share-based payment arrangement are modified, the minimum expense recognised is the expense had the terms not been modified. Additional expense is recognised on modification that increase the total fair value
of the share-based payment arrangement or are otherwise beneficial to the employee. Where the grant of equity instruments is cancelled by the entity, the remaining fair value is recognised immediately in the Statement of profit and Loss.
For the stock options granted to the employees of the subsidiaries, the share based compensation expenses are charged to the respective subsidiary.
3.18 DIVIDEND
The Company declares and pays dividends in Indian rupees. Final dividend and interim dividend on equity shares are recorded as a liability on approval by the shareholders and on declaration by the Company's Board of Directors respectively. Dividends declared by the Company are based on profits available for distribution.
3.19 INCOME TAXES
Income tax expense comprises current and deferred income tax. Income tax expense is recognised in the Statement of Profit and Loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in other comprehensive income. Current income tax for current and prior periods is recognised at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred income tax assets and liabilities are recognised for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the standalone financial statements.
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on deferred income tax assets and liabilities is recognised as income or expense in the period that includes the enactment or the substantive enactment date. A deferred income tax asset is recognised to the extent that it is probable that
future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized. Deferred income taxes are not provided on the undistributed earnings of branches where it is expected that the earnings of the branch will not be distributed in the foreseeable future. The Company offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognised amounts and where it intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Minimum Alternate Tax
Minimum Alternate Tax ("MAT") under the provisions of the Income-tax Act, 1961 is recognised as current tax in the Statement of Profit and Loss. The credit available under the Act in respect of MAT paid is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the period for which the MAT credit can be carried forward for set-off against the normal tax liability. MAT credit recognised as an asset is reviewed at each Balance Sheet date and written down to the extent the aforesaid convincing evidence no longer exists.
3.20 EARNINGS PER SHARE
Basic earnings per share are computed by dividing the net profit for the year after tax by the weighted average number of equity shares outstanding during the year adjusted for treasury shares held. Diluted earnings per share is computed by dividing the net profit for the year after tax by the weighted average number of equity shares outstanding during the year as adjusted for the effects of all dilutive potential equity shares except where the results are anti-dilutive.
3.21 recent pronouncements
Ministry of Corporate Affairs (“MCA”) notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. For the year ended 31st March 2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Group.
19.9 Capital Management
The Company’s Capital Management policy is aimed at maintaining a stable capital base so as to ensure overall financial stability and operational efficiency. The Company will aim to strike the right balance between:
(a) Liquidity, required not only for the operations of the Company but also the investments required for future growth;
(b) Returns, by investing excess funds as per the board approved investment policy; and
(c) Distribution of dividends to the shareholders of the Company with an overall objective of consistently maximizing shareholder value over a long period of time.
The Company is predominantly equity financed and will always aim to be a Net Cash company.
34.2 FAIR VALUE HIERARCHY
Financial assets and liabilities include cash and cash equivalents, bank balances other than cash and cash equivalents, trade receivables (billed and unbilled), other financial assets, trade payables, borrowings and other financial liabilities, whose fair values approximate their carrying amounts. Fair value of lease liabilities approximate its carrying amount, as lease liabilities are valued using discounted cash flow method. Except for quoted investments, which are Level 1, rest of the financial assets and financial liabilities are classified as Level 2 or Level 3.
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 the 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).
34.3 FINANCIAL RISK MANAGEMENT
The board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The board of directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The Company has exposure to the following risks arising from financial instruments:
a. Credit risk
Credit risk is the risk of financial losses to the Company if a customer or counterparty to financial instruments fails to discharge its contractual obligations and arises primarily from the Company’s billed trade receivables from customers amounting to ' 3,494.73 million and ' 3,554.64 million and unbilled trade receivables amounting to ' 727.78 million and ' 690.58 million and other current financial assets pertaining to receivable from related and other than related parties amounting to ' 1,054.49 million and ' 170.43 million as on 31 March 2024 and 31 March 2023 respectively. To manage this, the Company periodically assesses the key accounts receivable balances. As per Ind-AS 109 : Financial Instruments, the Company uses expected credit loss model to assess the impairment loss or gain.
I. Trade receivables
The management has established accounts receivable policy under which customer accounts are regularly monitored. The Company has a dedicated sales team at each geography which is responsible for collecting dues from the customer within stipulated period. The management reviews status of critical accounts on a regular basis.
iii. Cash and bank balances
The Companyheld cashandbankbalancesof?1,223.03millionand?949.59millionasat31 March2024and 31 March 2023 respectively. The cash and bank balances are held with banks which have high credit ratings assigned by international credit rating agencies.
iv. Guarantees
The Company’s policy is to provide financial guarantees in routine course of business and on behalf of subsidiaries/joint ventures.
b. Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
The Company has a view of maintaining liquidity and to take minimum possible risk while making investments. In order to maintain liquidity, the Company invests its excess funds in short term liquid assets like liquid mutual funds. The Company monitors its cash and bank balances periodically in view of its short term obligations associated with its financial liabilities.
c. Market risk
Market risk is a risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
I. Foreign currency risk
Significant portion of the Company’s revenues are in foreign currencies, while a significant portion of the costs are in Indian rupee i.e. functional currency of the Company. The foreign currencies to which the Company is majorly exposed to are US Dollars, Euros and Pound Sterling.
The Company evaluates net exchange rate exposure based on current revenue projections and expected volatility in the market and covers its exposure up to 90% on net basis. For this purpose the Company uses foreign currency derivative instruments such as forward contracts to mitigate the risk. The counterparty to these derivative instruments is a bank. The Company has designated certain derivative instruments as cash flow hedge to mitigate the foreign exchange exposure of highly probable forecasted cash flows.
For the period ended 31 March 2023, every 1% appreciation/depreciation of the exchange rate between respective foreign currencies and the Indian rupee would impact the operating margins by approximately 0.86%/0.86%.
ii. Derivative assets and liabilities designated as cash flow hedges
Inaccordancewithitsrisk managementpolicyandbusinessplantheCompany hashedged i tscashflows. The Company enters into derivative contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than in Indian rupees. The counter party to the Company’s foreign currency contracts is a bank. These contracts are entered into to hedge the foreign currency risks of firm commitments (sales orders) and highly probable forecast transactions. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.
III. Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company do not have any investments and borrowings which are variable interest rate bearing instruments. Therefore, the Company is not exposed to interest rate risk.
IV. Other price risk
Other price risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market traded price. Other price risk arises from financial assets such as investments in quoted equity instruments and investments in mutual funds. The Company is mainly exposed to other price risk arising from investments in mutual funds which are recognised at fair value through profit and loss.
Performance obligations and remaining performance obligations
The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as at the end of the reporting period and an explanation as to when the company expects to recognize these amounts in revenue.
Applying the practical expedient as given in Ind AS 115, the company has not disclosed the remaining performance obligation related disclosures for contracts where the revenue recognized corresponds directly with the value to the customer of the entity’s performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligations estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as of 31 March 2024, other than those meeting the exclusion criteria mentioned above, is ? 2,544.00 million. Out of this, the Company expects to recognize revenue of around 83% within the next one year. This includes contracts that can be terminated for convenience without a substantive penalty, since based on current assessment, the occurrence of the same is expected to be remote.
Ý 36 GRATUITY
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Gratuity is a benefit to an employee in India based on 15 days last drawn salary for each completed year of service with a vesting period of five years.
These defined benefit plans expose the Company to actuarial risks, such as longevity risk and interest rate risk.
The Company’s gratuity scheme is a defined benefit plan (funded). The Company manages the plan through a trust. Trustees administer contributions made to the trust.
Changes in the present value of the defined benefit obligation representing reconciliation of opening and closing balances thereof are as follows:
Ý 37 SHARE BASED PAYMENTS
37.1 EMPLOYEE STOCK OPTION SCHEME - 2019
In accordance with the terms of the approved Composite Scheme, KPIT Engineering Limited (now known as KPIT Technologies limited) (“Resulting Company”) had issued the stock options to the employees holding options of the KPIT Technologies Limited (now known as BirlaSoft Limited) (“Transferee Company” or “Demerged Company”) as at the appointed date. The options issued consisted of:
i. 1,807,450 options of the Transferee Company (“Birlasoft options”), equivalent to the number of options outstanding as at the appointed date;
ii. 1,807,450 options of the Resulting Company (“KPIT options”), in the ratio of 1:1 for every outstanding stock options held by the employees in the Transferee Company.
The Board of Directors of the Company approved the Employees Stock Option Scheme at their meeting held on 15 May 2019. Pursuant to this approval, the Company instituted ESOS 2019 in May 2019. The compensation committee of the Company administers this Plan. Each type of option carries with it the right to purchase one equity share of the Demerged Company or the Resulting Company as the case may be. In terms of clause 18.5 of the Composite Scheme, the stock options had been granted at an exercise price which was the predemerger exercise price suitably adjusted in the manner of share exchange ratio. Further, as per the Composite Scheme, the Company had taken into account the vesting period completed, under the plan in the Demerged Company, prior to the grant of options to the employee under the ESOS 2019. The maximum exercise period is 5 years from the date of vesting.
The outstanding stock options held by employees of the Demerged Company as at 31 March 2024 are 22,200 and 20,000 of Birlasoft options and KPIT options respectively. The employee compensation cost for such employees is not eligible for recognition in the books of the Company.
The number of outstanding Birlasoft options held by employees of the Company as at 31 March 2024 are Nil. The Company recorded an employee compensation cost of ? Nil (Previous year ? Nil) in this respect in the Statement of Profit and Loss.
The Board of Directors and the shareholders of the Company approved another Employee Stock Option Scheme at their meetings held on 17 June 2019 and on 23 July 2019, respectively. Pursuant to this approval, the Company instituted ESOS 2019A in July 2019. The compensation committee of the Company administers this Plan. Each option carries with it the right to purchase one equity share of the Company. The options approved under this scheme are 3,793,923.
The options had been originally granted to employees of the Company and its subsidiaries at an exercise price equivalent to the fair market price of the Company’s share as on the date of grant of options. The Nomination and Remuneration Committee of the Board of Directors of the Company, in its meeting held on 30 July 2020 approved the modification in the exercise price of the options granted. The exercise price is modified to ? 10 per option.
The options would vest not earlier than statutory minimum vesting period of 1 year and up to the maximum period of 4 years from the date of grant of options or such period as may be decided by the Committee at the time of each grant of options. The exact proportion in which and the exact period over which the options would vest would be determined by the Committee, subject to the minimum vesting period of 1 year from the date of grant of options. The maximum exercise period is 5 years from the date of vesting.
The Board of Directors and the shareholders of the Company approved Employee Share Purchase Scheme at their meeting on 17 June 2019 and on 23 July 2019, respectively. Pursuant to this approval, the Company instituted ESPS 2019 in July 2019. The compensation committee of the Company administers this Plan. The shares approved under this scheme are 40,000 equity shares. The shares have been granted to employees of the Company and its subsidiaries at a price not less than the face value per share of the Company at the time of the offer.
Ý 42 DISCLOSURE AS PER THE REQUIREMENT OF SECTION 22 OF THE MICRO, SMALL AND MEDIUM
ENTERPRISE DEVELOPMENT ACT, 2006:
a. Principal amount payable to Micro and Small Enterprises (to the extent identified by the Company from available information) as at 31 March 2024 is ' 16.25 million (Previous year - ' 3.14 million). Estimated interest due thereon is ' Nil (Previous year - ' Nil).
b. Amount of payments made to suppliers beyond the appointed date during the year is ? Nil (Previous year -' Nil). Interest paid thereon is ' Nil (Previous year - ' Nil) and the estimated interest due and payable thereon is ' Nil (Previous year - ' Nil).
c. The amount of estimated interest accrued and remaining unpaid as at 31 March 2024 is ' Nil (Previous year -' Nil).
d. The amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues as above are actually paid to the small enterprise for the purpose of disallowance as a deductible expenditure under section 23 of the MSMED Act 2006 is ? Nil.
Ý 46 SEGMENT INFORMATION
Where a financial report contains both consolidated financial statements and separate financial statements of the parent, segment information needs to be presented only in case of consolidated financial statements. Accordingly, segment information has been provided only in the consolidated financial statements.
Ý 47 iNVESTMENT iN N-DREAM AG
During the current year, the Company has entered into Shareholders’ Agreement, Share Purchase Agreement, and Investment and Subscription Agreement for a strategic investment in N-Dream AG (N-Dream). N-Dream AG is a Cloud based Game Aggregation Platform company based in Switzerland. This strategic investment in N-Dream AG is part of Company’s roadmap to enable Automotive OEMs enhance the driver & passenger experience in the Cockpit of the Future.
The Company has done an initial strategic investment of 13.01% stake in N-Dream for a total cash consideration of EUR 3.00 million.
Further, in accordance with the agreements entered into, the Company has multiple options to increase its shareholding over the period of next 4 years in a staggered manner. As at the investment date, the Company has recognised derivate asset for the same. The derivative asset is initially measured at fair value and correspondingly adjusted in the cost of investment amounting to ' 184.45 million. As at 31 March 2024, the fair value of derivative asset is ' 179.23 million. Fair valuation impact of ' 5.46 million is recognised in the Statement of Profit & Loss for the year ended 31 March 2024.
Ý 50 ADDITIONAL REGULATORY INFORMATION PURSUANT TO THE REQUIREMENT IN DIVISION II OF SCHEDULE III TO THE cOMPANIES Act 2013
(i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.
(ii) The Company does not have any transactions with companies struck off.
(iii) The Company has not revalued its property, plant and equipment (including right-of-use assets) or intangible assets or both during the current or previous year.
(iv) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
(v) The Company (other than as mentioned in note 48) has not advanced or loaned or invested funds to any other person(s) or entity(ies), 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
(vi) The Company has not received any fund from any person(s) or entity(ies), 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
vii) The Company does not have any such transaction which is not recorded in the books of accounts 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.
(viii) The Company has borrowings from banks and financial institutions on the basis of security of current assets. The quarterly returns or statements of current assets filed by the Company with banks and financial institutions are in agreement with the books of accounts.
(ix) None of the entities in the Company have been declared wilful defaulter by any bank or financial institution or government or any government authority.
(x) The Company has complied with the number of layers prescribed under the Companies Act, 2013.
(xi) The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.
Ý 51 The Company has used accounting softwares for maintaining its books of account, which have a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the respective softwares, except for the instances mentioned below:
(i) The feature of recording audit trail (edit log) facility was not enabled at the database level to log any direct data changes for the accounting softwares used for maintaining all books of accounts.
(ii) The feature of recording audit trail (edit log) facility was not enabled for certain fields and tables at the application layer of the accounting software used for maintaining books of accounts relating to Revenue and Receivables, Payroll, Financial reporting, Property, plant and equipments, Purchase and payables.
For the periods where audit trail (edit log) facility was enabled and operated throughout the year for the respective accounting software there were no instance of the audit trail feature being tampered with. Further, in all material respects, adequate internal financial controls with reference to financial statements and such internal financial controls (including IT General Controls) were operating effectively as at 31 March 2024 and have no impact on the Financial Statements of the Company.
M 52 The Company has established a system of maintenance of information and documents as required by the transfer pricing legislation under Section 92-92F of the Income Tax Act 1961. The Company is in the process of updating the documentation for the financial year 2023-2024.
The management is of the opinion that international transactions are at arm’s length and accordingly the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expenses and that of provision for taxation.
As per our report of even date attached
For B S R & Co. LLP For and on behalf of the Board of Directors of
Chartered Accountants KPIT TEcHNOLOGIES Limited
Firm Registration number: 101248w/w-100022 CIN: L74999PN2018PLC174192
Swapnil Dakshindas S. B. (Ravi) Pandit Kishor Patil
Partner Chairman of The Board CEO & Managing Director
Membership No. 113896 DIN : 00075861 DIN : 00076190
Priyamvada Hardikar Mda Deshpande
Chief Financial Officer Company Secretary
Place: Pune Place: Pune
Date: 29 April 2024 Date: 29 April 2024
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