The following discussion of our financial condition and results of operations is derived from and should be read in conjunction with our Financial Information on page 247.
This Draft Red Herring Prospectus may include forward-looking statements that involve risks and uncertainties, and our actual financial performance may materially vary from the conditions contemplated in such forward-looking statements as a result of various factors, including those described below and elsewhere in this Draft Red
Herring Prospectus. For further information, see "Forward-Looking Statements" on page 19. Also read "Risk Factors" and "- Significant Factors Affecting our Results of Operations" on pages 27 and 651, respectively, for a discussion of certain factors that may affect our business, financial condition or results of operations.
Our Companys Fiscal commences on April 1 and ends on March 31 of the immediately subsequent year, and references to a particular Fiscal are to the 12 months ended March 31 of that particular year.
Unless otherwise indicated, industry and market data used in this section has been derived from industry publications, in particular, the report titled "Customer Engagement Software Market Overview Market Analysis, Compete Benchmarking" dated December 23, 2021 (the "Zinnov Report"), exclusively prepared and issued by Zinnov who were appointed pursuant to statement of work dated August 25, 2021, and exclusively commissioned by and paid for by our Company in connection with the Offer. A copy of the Zinnov Report shall be available on the website of our Company at www.capillarytech.com/investors/ from the date of the Red Herring Prospectus until the Bid/Offer Closing Date. Unless otherwise indicated, or unless the context otherwise requires, financial, operational, industry and other related information derived from the Zinnov Report and included herein with respect to any particular year refers to such information for the relevant calendar year. For more information, see "Risk Factors Industry information included in this Draft Red Herring Prospectus has been derived from an industry report commissioned and paid for by our Company for such purpose." on page 56. Also see, "Certain Conventions, Use of Financial Information, Industry and Market Data and Currency of Presentation Industry and Market Data" on page 13.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS BASED ON OUR RESTATED SUMMARY STATEMENTS
Unless otherwise stated, or the context otherwise requires, the financial information used in this section is derived from the Restated Summary Statements of our Company included in this Draft Red Herring Prospectus.
Overview
We are a technology-first company and offer AI-based cloud-native SaaS products and solutions such as automated loyalty management and CDP that enable our large enterprise customers (i.e., customers that typically contribute more than 3.50 million a year in terms of revenues) to develop loyalty of their consumers and channel partners. Our diversified product suite and technology platform allows our customers to run end-to-end loyalty programs, get a comprehensive view of consumers and offer unified, cross-channel strategies that deliver a real-time omni-channel, personalized, and consistent experience for consumers.
The global TAM for loyalty management is estimated to be 810 billion (US$ 11 billion) in 2021 and is expected to reach 1,190 billion (US$ 16 billion) by 2024. All the regions across the globe are registering a growth rate of more than 10% from 2021 to 2024, with Asia-Pacific projecting a significant growth rate of 20% from 2021 to 2024. We are the market leader in Asia-Pacific region with a 39% market share in terms of loyalty management capabilities in 2020 based on the geographies in which we operate (includes customer loyalty only and customer segments that we serve but does not include employee loyalty). (Source: Zinnov Report) We have recently expanded our operations in the United States with our acquisition of Persuade Group in September 2021. We focus on developing intellectual property and have been granted eight patents, as of October 31, 2021 as per the Arithmetic Aggregated Adjusted Capillary (including Persuade Group) Information.
As of October 31, 2021, we served over 250 brands across more than 30 countries across India, United Arab Emirates, Saudi Arabia, Singapore, Indonesia, Malaysia, Thailand, United States, and China. Our customers and brands are diversified across verticals and jurisdictions. Our customers include businesses engaged in apparel, footwear, supermarkets, conglomerates, manufacturing and electronics, pharmacy and wellness, fine dining and QSR, luxury and jewelry, entertainment, travel and hospitality.
We have presence across the United States, India, Middle East, and Asia, in particular, South East Asia. As of October 31, 2021, we had eight offices and provided services in over 30 countries. We have expanded our operations in the United States with our recent acquisition of Persuade Group in September 2021. As of October 31, 2021, we had served more than 875 million users (based on unique mobile numbers) and in Fiscal 2021, we processed 1,975.27 million transactions.
We typically follow the following approaches of pricing our services:
Retainership and other income from external customers ("Subscription"). These are recurring revenues linked to the numbers of transactions hitting our platform or number of stores live on our platform for a customer.
Income from campaign services ("Campaigns"). Campaign revenues are fees paid by customers to us for every message including text messages, email or ad-words that they send out from our platform.
Installation income from external customers ("Setup"). Setup revenues are revenues we charge customers for the integration / configurations to our platform to take a customer live.
For further information, see "Our Business Contractual Terms and Pricing" on page 205.
Presentation of Financial Information
Our Restated Summary Statements for Fiscals 2019, 2020, 2021 and the three months period ended June 30, 2021, are derived from our audited financial statements as at and for the years ended March 31, 2019, 2020 and 2021 which were prepared in accordance with accounting principles generally accepted in India ("Indian GAAP") as prescribed under Section 133 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 (as amended), and for the three months period ended June 30 2021 prepared in accordance with Indian
Accounting Standard 34 (Ind AS 34) as prescribed under Section 133 of the Act read with Companies (Indian Accounting Standards) Rules 2015, as amended and other accounting principles generally accepted in India and restated in accordance with the SEBI ICDR Regulations from time to time and the Guidance Note on Reports in Company Prospectuses (Revised 2019) issued by the Institute of Chartered Accountants of India.
Significant Factors Affecting our Results of Operations and Financial Condition based on the Restated Summary Statements of our Company
Impact of COVID-19
The spread of COVID-19 has severely impacted the business operations of our Company around the globe including India. The nationwide lockdown has impacted our Companys business volumes subsequently on account of disruptions in transportation, travel bans, quarantines, social distancing and other emergency precautionary measures and its consequent impact on the retail business during the years ended March 31, 2021 and March 31, 2020 and in the three months period ended June 30, 2021.
In response to the COVID-19 pandemic, we undertook decisive and comprehensive actions to lessen the impact of the pandemic on our business, including implementing a fully remote, work-from-home policy across all our offices in India, enacting new policies and operating procedures, including restrictions on business travel and reduction of in-person events.
Our customers were impacted by the pandemic throughout Fiscal 2021 and during the months of April to June 2021 on account of the second wave of COVID-19 due to lockdowns and serious health crises in India and Global markets our group companies operate in. As a show of support during this trying period, we extended discounts to our customers, and we also saw lower usage based revenues (campaign revenue). The conditions caused by the pandemic adversely affected spending by new customers and renewal and retention rates of existing customers. We offered customer discounts primarily during the second and third quarters of 2020 to customers who experienced difficulty, particularly those within the retail, fine dining and QSR, luxury and jewelry, entertainment, travel and hospitality industries.
Meanwhile, we have also experienced, and may continue to experience, certain positive impacts on other aspects of our business. We believe that the pandemic has caused many of our customers and potential customers to accelerate their IT and digital investments benefiting businesses, like ours, that enable and enhance digital transformations. In addition, we have seen a temporary reduction in certain operating expenses related to reduced business travel, deferred hiring in certain areas, and the virtualization or postponement of in-person customer and employee events.
Our Company has considered the uncertainty relating to the COVID-19 pandemic in assessing the recoverability and carrying amounts of receivables and other assets and assessment of its liquidity position for next one year. For this purpose, our Company considered internal and external sources of information. Our Company has also used the principles of prudence in applying judgements, estimates and assumptions including sensitivity analysis and based on the current estimates, our Company expects to fully recover the carrying amount of these assets and do not expect any cash flow constraints on the basis of support letter received from CTIPL. We will continue to monitor these aspects and take actions as appropriate based on future economic conditions.
Given our subscription-based business model, the effects of the COVID-19 pandemic may not be fully reflected in our revenue until future periods. The extent of the impact of COVID-19 on our future operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, related public health measures, and their impact on the macro economy, our current and prospective customers, employees, and vendors. The ultimate impact of the COVID-19 pandemic on our business and operations remains highly uncertain, and it is not possible for us to predict the duration and extent to which this will affect our business, future results of operations, and financial condition at this time. For further information, see "Risk Factors - Our business and operations have been adversely impacted by the COVID-19 pandemic and the future impact on our business, operations and financial performance is uncertain and could continue for an unknown period of time.", "Risk Factors - Our Statutory Auditor has included certain matters of emphasis in their auditors report on our audited financial statements as at and for the year ended March 31, 2019, 2020 and 2021 and on our audited financial statements as at and for the three months period ended June 30, 2021 and certain modifications in the annexure to their auditors report under Companies (Auditors Report) Order 2016 on our audited financial statements as at and for the year ended March 31, 2019, 2020 and 2021. Our Statutory Auditor has also included certain emphasis of matters in the Proforma Financial Information." and "Significant Factors Affecting our Results of Operations and Financial Condition based on the Restated Summary Statements of our Company" on pages 32, 57 and 651, respectively.
Ability to improve gross margins, profitability and sales efficiency
In recent years, our focus has been to improve our gross margins and become profitable. In order to improve profitability, we deployed a strategy to pivot our business to focus on large enterprise customers and transition from lower margin, high service expectation customers, typically mid-market and small and medium-sized customers. We believe that our focus on large enterprise customers will help us improve profitability, New ARR per sales personnel, Payback Period and gross margins. Our total income based on our Restated Summary Statements was 1,749.46 million, 1,675.99 million, 1,231.57 million and 337.00 million in Fiscal 2019, 2020 and 2021 and in the three months period ended June 30, 2021, respectively. For our India Operations, in Fiscal 2019, 2020 and 2021 and in the three months period ended June 30, 2021, our New ARR was 197.16 million, 160.19 million, 123.60 million, and 1.29 million, respectively. Our New ARR as a percentage of revenue from contracts with external customers was 25.99%, 20.73%, 22.99% and 1.08%, in Fiscal 2019, 2020 and 2021 and in the three months period ended June 30, 2021, respectively.
We intend to continue to build by growing our New ARR through our go-to-market initiatives. To deliver on this strategy, in addition to our account-based marketing efforts, we are investing in partnerships with large system integrators, consulting companies. We have also refocused our sales teams to target large enterprise customers, which resulted in fewer sales team members but better sales efficiency. Our number of sales representatives as of March 31, 2019, 2020 and 2021 were 23, 15 and 7, respectively. New ARR per sales personnel was 8.57 million,
10.68 million and 17.66 million in Fiscal 2019, 2020 and 2021, respectively.
As a result of our strategies, basis our Restated Summary Statements, in Fiscals 2019, 2020 and 2021 and the three months ended June 30, 2021, total revenue from operations were 1,731.48 million, 1,661.23 million, 1,149.03 million and 331.66 million, respectively. Our Adjusted EBITDA Margin improved from 1.92% in Fiscal 2019 to 15.77% in Fiscal 2021.
Growth of our international business
A significant part of our revenue comes from services we provide to our group companies. We provide technology development and delivery and support services for our group companies in South East Asia, Middle East and
United States. Our service income from group companies for Fiscal 2019, 2020 and 2021 and the three months period ended June 30, 2021 were 966.17 million, 888.30 million, 611.35 million and 211.85 million, respectively constituted 55.80%, 53.47%, 53.21% and 63.88% of our revenue from operations for these periods, respectively. A significant part of our revenue would continue to come from services we provide to our group companies and their international customers.
Our ability to retain existing customers and acquire new customers
We have large and diversified customer base covering a wide spectrum of industry verticals. As of October 31, 2021, we served over 250 brands engaged in apparel, footwear, supermarkets, conglomerates, manufacturing and electronics, pharmacy and wellness, fine dining and QSR, luxury and jewellery, entertainment, travel and hospitality.
We typically enter into long-term engagements with our customers and generate significant revenues from repeat business based on our successful prior engagements. We have fostered strong loyalty with existing customers as a result of the quality loyalty products and solutions offered by us, as well as our ability to deliver tangible value to consumers by effectively addressing their needs. In Fiscal 2021, basis the Restated Summary Statements, 84.81% of our revenue from operations excluding service income from group companies and other operating revenues was from customers that have been associated with us for three years.
We aim to acquire and retain new customers and in particular large enterprise customers by, among others, further enhancing the quality and efficiency of our existing products and solutions, offering additional innovative products and solutions and implementing effective sales strategies.
Product, revenue and vertical mix
We generate revenue primarily from providing SaaS-based products and solutions to our customers. Our product suite provides an omni-channel experience for consumers and helps enhance the returns on investment for our customers. Our single point product offering includes loyalty management, a CDP, a data analytics and insights platform, Insights+, and a customer engagement tool Engage+. Our Anywhere Commerce+ business helps retail and consumer brands with building their own e-commerce presence as well as with connectors for marketplaces.
Our customers include businesses engaged in apparel, footwear, supermarkets, conglomerates, manufacturing and electronics, pharmacy and wellness, fine dining and QSR, luxury and jewelry, entertainment, travel and hospitality. Our revenues are accordingly impacted by developments in such verticals and our results of operations are particularly sensitive to factors affecting the geographies where we operate including but not limited to competition, regulatory actions, pricing pressures, fluctuations in the demand for our platform, products or solutions.
Ability to enhance operating efficiency through investments in technology
Our results of operations have been, and will continue to be, affected by our ability to improve our operating efficiency, especially through investment in technology. As our business continues to grow, it is essential to improve operating efficiency to maintain the competitiveness of our platform. We intend to continue to invest in further developing and applying advanced technologies in the fields of programming tools, programming languages, operating systems, data matching, data filtering, data predicting, artificial intelligence, machine learning systems and other database technologies to enhance the functionalities and customer experience of our platform. For our India Operations, in Fiscal 2019, 2020 and 2021, and in the three months period ended June 30, 2021, our technology development and maintenance cost represented 15.90%, 17.60%, 19.45% and 18.82%, respectively, of our total expenses in such periods. In the future, we will continue to invest in technology to further enhance our operations, which may increase our expenditure or operating costs but will improve our operating leverage, cost efficiency and service quality. Our continued improvement of our platform is paramount to consumer experience, driving our ability to attract and retain customers, improve subscriptions, and generate revenues. Going forward, we intend to continue to prudently invest resources in technology in a cost-effective manner to support the long-term growth of our business.
Changes in currency exchange rates
Changes in currency exchange rates may influence our results of operations. We report results in our financial statements in Indian rupees, while a significant part of revenues is from outside India and costs associated with our international operations are denominated in currencies other than Indian rupees, most significantly the U.S. dollar. Changes in the value of the Indian rupee against such other currencies, particularly the U.S. dollar, could increase or decrease the rupee cost of purchasing software, components or services and the cost of making various payments, and increase or reduce our margins. The exchange rate between the Indian rupee and these other currencies particularly the U.S. dollar has been volatile in recent periods and may continue to fluctuate significantly in the future. We closely follow our exposure to foreign currencies and may, in the future, selectively enter into hedging transactions to reduce the risks of currency fluctuations.
Non-GAAP Measures based on the Restated Summary Statements of our Company
Adjusted EBITDA, Adjusted EBITDA Margin and Debt to Equity ratio (together, "Non-GAAP Measures"), presented in this section is a supplemental measure of our performance and liquidity that is not required by, or presented in accordance with, Ind AS, Indian GAAP, IFRS or US GAAP. Further, these Non-GAAP Measures are not a measurement of our financial performance or liquidity under Ind AS, Indian GAAP, IFRS or US GAAP and should not be considered in isolation or construed as an alternative to cash flows, profit/ (loss) for the years/ period or any other measure of financial performance or as an indicator of our operating performance, liquidity, profitability or cash flows generated by operating, investing or financing activities derived in accordance with Ind AS, Indian GAAP, IFRS or US GAAP. In addition, these Non-GAAP Measures are not standardised terms, hence a direct comparison of these Non-GAAP Measures between companies may not be possible. Other companies may calculate these Non-GAAP Measures differently from us, limiting its usefulness as a comparative measure. Although such Non-GAAP Measures are not a measure of performance calculated in accordance with applicable accounting standards, our Companys management believes that they are useful to an investor in evaluating us as they are widely used measures to evaluate a companys operating performance.
Reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to Restated Profit / (Loss) for the Period/Year
The table below reconciles the profit / (loss) for the year / period as per the Restated Summary Statements to EBITDA, and Adjusted EBITDA. Adjusted EBITDA is calculated as profit / (loss) for the year / period as per the Restated Summary Statements plus tax expense, finance cost, depreciation and amortisation expenses, intangible assets under development written off, exceptional (loss), employee stock option expenses, loss on account of foreign exchange fluctuations (net) and advances / deposits written off less other income, finance income, exceptional gains, gain on account of foreign exchange fluctuations (net) while Adjusted EBITDA Margin is the percentage of Adjusted EBITDA divided by revenue from operations.
| Particulars | For the year ended March 31, 2019 (As Adjusted) | For the year ended March 31, 2020 (As Adjusted) | For the year ended March 31, 2021 | For the three month period ended June 30, 2021 |
| (in million, except percentages) | ||||
| Restated (Loss) /Profit for the year/ period (A) | (116.68) | 2.06 | 169.40 | 25.28 |
| Total Tax Expenses (B) | - | - | - | - |
| Restated Profit / (loss) before tax (C=A+B) | (116.68) | 2.06 | 169.40 | 25.28 |
| Add: | ||||
| Finance Costs (D) | 38.05 | 32.27 | 18.70 | 3.85 |
| Depreciation and Amortisation expenses( E) | 61.50 | 49.65 | 34.15 | 7.02 |
| Earnings before interest, taxes, depreciation and amortisation expenses (EBITDA) (F = C+D+E) | (17.13) | 83.98 | 222.25 | 36.15 |
| Particulars | For the year ended March 31, 2019 (As Adjusted) | For the year ended March 31, 2020 (As Adjusted) | For the year ended March 31, 2021 | For the three month period ended June 30, 2021 |
| (in million, except percentages) | ||||
| Less: Other income (G) | (12.79) | (1.77) | (70.20) | (3.40) |
| Less: Finance income (H) | (5.19) | (12.99) | (12.34) | (1.94) |
| Add: Employee stock option expenses (I) | 67.28 | 39.82 | 35.70 | 35.67 |
| Add: Loss on account of foreign exchange fluctuations (net) (J) | - | 1.54 | - | - |
| Add: Advances/ deposits written off (K) | 1.11 | 3.53 | 5.75 | 1.12 |
| Adjusted Earnings before interest, taxes, depreciation and amortisation expenses (Adjusted EBITDA) (L = F-G-H+I+J+K) | 33.28 | 114.11 | 181.16 | 67.60 |
| Revenue from operations (M) | 1,731.48 | 1,661.23 | 1,149.03 | 331.66 |
| Adjusted EBITDA Margin % (Adjusted EBITDA as a percentage of Revenue from operations) (N = L / M) | 1.92% | 6.87% | 15.77% | 20.38% |
Results of Operations based on the Restated Summary Statements of our Company
The following table sets forth certain financial information with respect to our results of operations for Fiscal 2019, 2020 and 2021 and for the three months period ended June 30, 2021, the components of which are also expressed as a percentage of total income for such periods:
| Particulars | 2019 (As Adjusted) | Fiscal 2020 (As Adjusted) | 2021 | Three months period ended June 30, 2021 | ||||
| Amount (in million) | Percentag e of Total Income | Amount (in million) | Percentage of Total Income | Amount (in million) | Percentage of Total Income | Amount (in million) | Percentage of Total Income | |
| Income | ||||||||
| Revenue from operations | 1,731.48 | 98.97% | 1,661.23 | 99.12% | 1,149.03 | 93.30% | 331.66 | 98.42% |
| Other income | 12.79 | 0.73% | 1.77 | 0.11% | 70.20 | 5.70% | 3.40 | 1.01% |
| Finance income | 5.19 | 0.30% | 12.99 | 0.77% | 12.34 | 1.00% | 1.94 | 0.57% |
| Total Income | 1,749.46 | 100.00% | 1,675.99 | 100.00% | 1,231.57 | 100.00% | 337.00 | 100.00% |
| Expenses | ||||||||
| Cost of campaign services | 265.08 | 15.15% | 225.76 | 13.47% | 88.29 | 7.17% | 12.02 | 3.57% |
| Professional and consultancy services | 190.26 | 10.88% | 143.86 | 8.58% | 123.99 | 10.07% | 40.53 | 12.03% |
| Employee benefit expenses | 988.44 | 56.50% | 982.48 | 58.62% | 718.78 | 58.36% | 228.85 | 67.91% |
| Depreciation and amortisation expenses | 61.50 | 3.52% | 49.65 | 2.96% | 34.15 | 2.77% | 7.02 | 2.08% |
| Finance costs | 38.05 | 2.17% | 32.27 | 1.93% | 18.70 | 1.52% | 3.85 | 1.14% |
| Other expenses | 322.81 | 18.45% | 239.91 | 14.31% | 78.26 | 6.36% | 19.45 | 5.77% |
| Total expenses | 1,866.14 | 106.67% | 1,673.93 | 99.88% | 1,062.17 | 86.25% | 311.72 | 92.50% |
| Restated profit/ (loss) before tax | (116.68) | (6.67)% | 2.06 | 0.12% | 169.40 | 13.75% | 25.28 | 7.50% |
| Tax Expenses | ||||||||
| Current tax | - | - | - | - | - | - | - | - |
| Deferred tax charge / (credit) | - | - | - | - | - | - | - | - |
| Total tax expenses | - | - | - | - | - | - | - | - |
| Restated profit/ (loss) for the period / year | (116.68) | (6.67)% | 2.06 | 0.12% | 169.40 | 13.75% | 25.28 | 7.50% |
| Other comprehensive income | ||||||||
| Other comprehensive income not to be reclassified to profit or loss in subsequent periods: | ||||||||
| Re-measurement gains/ (losses) on | (1.10) | (0.06)% | 11.21 | 0.67% | 0.56 | 0.05% | (5.96) | (1.77)% |
| defined benefit plans Income tax effect on above | - | - | - | - | - | - | - | - |
| Restated total other comprehensive income / (loss) for the period / year (net of tax) | (1.10) | (0.06)% | 11.21 | 0.67% | 0.56 | 0.05% | (5.96) | (1.77)% |
| Restated total comprehensive income / (loss) for the period / year (net of tax) | (117.78) | (6.73)% | 13.27 | 0.79% | 169.96 | 13.80% | 19.32 | 5.73% |
Three Months Period Ended June 30, 2021
Key Developments
? Our operations were impacted by the second wave of the COVID-19 pandemic in India. Under these circumstances, we provided discounts to certain of our customers who were materially impacted by the lockdowns and other restrictions associated with the pandemic. We also experienced lower usage based revenues as a result of such lockdown and other restrictions imposed by government agencies in India.
? With our retail and hospitality customers significantly impacted, we strategically focused our new business efforts on non-retail and non-travel verticals such as diversified conglomerates, oil & gas and consumer goods companies, especially on large enterprises with stronger financial condition to weather the impact of the COVID-19 pandemic.
? We also continued to implement cost rationalization structures, including renegotiating terms negotiations with our vendors, streamlining processes, reducing travel expenses, rationalising sales and marketing expenses, and not making any new hires or extending salary raises.
Income
Our total income comprises (i) revenue from operations; (ii) other income; and (iii) finance income. Total income for the three months period ended June 30, 2021 was 337.00 million.
Revenue from Operations. Our revenue from operations comprises revenues from sale of our services. Revenue from operations for the three months period ended June 30, 2021 was 331.66 million.
Sale of Services. Sale of services comprises of (i) service income from group companies, i.e., service income from provision of technical, analytical and other support services to other companies of Capillary Group; (ii) income from retainership and other services, i.e., subscription revenue paid by our customers based on the number of transactions, customers and stores / customer touch points live on our platform; (iii) installation income from external customers, i.e., revenue we charge our customers to do integrations between our platform and their systems, and for configuring the platforms to function as needed; and (iv) income from campaign services, i.e., usage-based revenues from campaigns our customers implement on our platform. We charge our customers a fee for every message that is sent out from our platform and our charges are dependent on the media the customer is using (e-mail, SMS, social media, push notifications, etc.). Sale of services for the three months period ended
June 30, 2021 was 331.66 million.
The following table sets forth certain information relating to our sale of services in the period indicated:
| Sale of Service | For the three months period ended June 30, 2021 |
| (Rs in million) | |
| Service income from group companies | 211.85 |
| Retainership and other income from external customers# | 91.68 |
| Installation income from external customers | 13.78 |
| Income from campaign services | 14.35 |
| Total | 331.66 |
# Retainership and other income from external customers refers to subscription revenues or recurring revenues linked to the numbers of transactions hitting our platform or number of stores live on our platform for a customer.
Other Income
Other income includes, among other items, export incentives, provisions / liabilities no longer required written back, net gain on modification of lease contracts and gain on account of foreign exchange fluctuations (net).
Other income for the three months period ended June 30, 2021 was 3.40 million, including Provisions/liabilities no longer required written back of 0.68 million and gain on account of foreign exchange fluctuations (net) of
2.72 million.
Finance Income
Finance income includes, among other items, interest income on bank deposits, interest on income tax refund and Interest income on security deposits .
Finance income for the three months period ended June 30, 2021 was 1.94 million, entirely relating to interest income on bank deposits.
Expenses
Our expenses include (i) cost of campaign services; (ii) professional and consultancy services; (iii) employee benefit expenses; (iv) depreciation and amortisation expenses; (v) finance costs, and (vi) other expenses.
Total expenses for the three months period ended June 30, 2021 was 311.72 million.
Cost of Campaign Services. Cost of campaign services are costs incurred by us on media costs for the messages sent out from our platform. Cost of campaign services for the three months period ended June 30, 2021 was 12.02 million.
Professional and Consultancy Services. Professional and consultancy services primarily include services availed from third party vendors that assist in taking our customers live or help us in providing ongoing support to our customers and support functions within the Company. Professional and consultancy services for the three months period ended June 30, 2021 was 40.53 million.
Employee Benefit Expenses. Employee benefit expenses include (i) salaries, wages and bonus; (ii) sales commission expenses; (iii) contribution to provident and other funds; (iv) employee stock option expenses; (v) gratuity expenses; (vi) staff welfare expenses, and (vii) staff training and recruitment expenses.
Employee benefit expenses was 228.85 million for the three months period ended June 30, 2021 including salaries, wages and bonus of 184.03 million, sales commission expenses of 1.32 million, contribution to provident and other funds of 1.90 million, employee stock option expenses of 35.67 million, gratuity expenses of 2.68 million, staff welfare expenses of 2.65 million and staff training and recruitment expenses of 0.60 million.
Depreciation and Amortisation Expenses. Depreciation and amortisation expenses include (i) depreciation of property, plant and equipment; (ii) depreciation of right-of-use assets, and (iii) amortisation of intangible assets. Depreciation and amortisation expenses for the three months period ended June 30, 2021 was 7.02 million, comprising depreciation of property, plant and equipment of 0.66 million, depreciation of right-of-use assets of
5.97 million, and amortisation of intangible assets of 0.39 million.
Finance Costs. Finance costs include, among other things, (i) interest on debts and borrowings; (ii) interest on lease liabilities; and (iii) bank charges.
Finance costs for the three months period ended June 30, 2021 was 3.85 million, primarily comprising interest on debts and borrowings of 1.97 million, interest on lease liabilities of 0.89 million and bank charges of 0.99 million.
Other Expenses. Other expenses include travelling and conveyance, rent, communication costs, payment to auditor, power and fuel, provision for doubtful trade receivables and advances (including bad debts written off), advances / deposits written off, selling and marketing expenses, repairs and maintenance others, loss on account of foreign exchange fluctuations (net), rates and taxes, software and server charges, and miscellaneous expenses.
Other expenses for the three months period ended June 30, 2021 was 19.45 million, primarily comprising software and server charges of 7.04 million, selling and marketing expenses of 2.58 million, payment to auditor of 5.00 million, communication costs of 1.17 million, and miscellaneous expenses of 1.37 million.
Restated Profit before Tax. For the reasons discussed above, restated profit before tax was 25.28 million for the three months period ended June 30, 2021.
Tax expenses. We did not incur any tax expenses for the three months period ended June 30, 2021.
Restated Profit for the Period. We recorded restated profit for the period of 25.28 million for the three months period ended June 30, 2021.
Adjusted Earnings before Interest, Taxes, Depreciation and Amortisation (Adjusted EBITDA). Adjusted EBITDA was 67.60 million, while Adjusted EBITDA Margin was 20.38% for the three months period ended June 30, 2021.
FISCAL 2021 COMPARED TO FISCAL 2020
Key Developments
? Our business operations were adversely impacted by the COVID-19 pandemic in Fiscal 2021 as we witnessed a decline in our revenue from operations. In particular, our customers in the retail and hospitality sectors were severely affected by lockdowns and other restrictions imposed by governments globally, leading to significantly lower revenues from operations from such customers.
? We therefore strategically focused our business development efforts on non-retail and non-travel verticals such as diversified conglomerates, oil and gas and consumer goods companies, to compensate for the significant adverse impact on our retail and hospitality clients.
? We also increasingly focused our new business efforts on large enterprises, who had the benefit of stronger financial condition to weather the impact of the COVID-19 pandemic.
? In order to realign our cost structures, we entered into negotiations with almost all of our vendors globally, including vendors that provide hosting services, rationalised processes to meet reduced demand for our services, curtailed travel expenses, rationalised sales and marketing expenses, and temporarily ceased new hires and salary raises.
Income
Total income decreased by 26.52% from 1,675.99 million in Fiscal 2020 to 1,231.57 million in Fiscal 2021.
Revenue from Operations. Our revenue from operations, comprising sale of services, decreased by 30.83% from
1,661.23 million in Fiscal 2020 to 1,149.03 million in Fiscal 2021 primarily on account of the impact of the COVID-19 pandemic.
Sale of Services. Service income from group companies also reduced on account of the impact of the COVID-19 pandemic. However, we were successful in securing contracts with certain large customers in India in the oil and gas industry which in part offset the impact of the discounts extended in India, and business in our Company experienced relatively lower decrease in revenues from operations compared to most of the international companies in Capillary Group.
Retainership and other income from external customers and installation income from external customers also decreased primarily due to discounts on our subscription services extended to our customers during the period of lockdowns as well as subsequent periods when our customers businesses were adversely impacted. In addition, income from campaign services also decreased as our customers ran fewer campaigns during such periods due to the impact of the COVID-19 pandemic.
Our sale of services decreased by 30.83% from 1,661.23 million in Fiscal 2020 to 1,149.03 million in Fiscal 2021
The following table sets forth certain information relating to our revenue from sale of services presented in accordance with the types of services we offer in the periods indicated:
| Type of Service | Fiscal 2020 (As Adjusted) | Fiscal 2021 | Percentage increase |
| (in million) | (in million) | / (decrease) (%) | |
| Service income from Group Companies | 888.30 | 611.35 | (31.18)% |
| Retainership and other income from external customers# | 492.28 | 402.24 | (18.29)% |
| Installation income from external customers | 24.86 | 43.59 | 75.34% |
| Income from campaign services | 255.79 | 91.85 | (64.09)% |
| Total | 1,661.23 | 1,149.03 | (30.83)% |
# Retainership and other income from external customers refers to subscription revenues or recurring revenues linked to the numbers of transactions hitting our platform or number of stores live on our platform for a customer.
Other Income. Other income increased from 1.77 million in Fiscal 2020 to 70.20 million in Fiscal 2021 primarily due to an increase in export incentives. While we did not benefit from any export incentives in Fiscal
2020, we enjoyed export benefits of 49.23 million in Fiscal 2021 on account of service export incentive scheme submissions and corresponding receipts against approvals of Fiscal 2017, 2018 and 2019. We also recorded a Net gain on modification of lease contracts in Fiscal 2021 to the tune of 8.43 million on account of modification and reduction of lease term which ends in December 2021 instead of December 2023. We did not record any such gain in Fiscal 2020. In addition, gain on account of foreign exchange fluctuations (net) was 7.64 million in Fiscal 2021 for a favourable foreign exchange position as compared to Fiscal 2020 wherein we incurred a loss on account of foreign exchange fluctuations (net) of 1.54 million. These increases in other income were partly offset by a decrease in provisions / liabilities no longer required written back of 1.76 million in Fiscal 2020 with no such gain in Fiscal 2021.
Finance Income. Finance income marginally reduced from 12.99 million in Fiscal 2020 to 12.34 million in Fiscal 2021 primarily due to a decrease in interest income on bank deposits by 15.51% from 4.45 million in Fiscal 2020 to 3.76 million in Fiscal 2021 and decrease in Interest income on security deposits from 3.24 million in Fiscal 2020 to nil in Fiscal 2021, which was in part offset by increase in interest income on income tax refunds by 61.89% from 5.30 million in Fiscal 2020 to 8.58 million in Fiscal 2021.
Expenses
Total expenses reduced by 36.55% from 1,673.93 million in Fiscal 2020 to 1,062.17 million in Fiscal 2021.
Cost of Campaign Services. Cost of campaign services decreased by 60.89% from 225.76 million in Fiscal 2020 to 88.29 million in Fiscal 2021 primarily on account of a decrease in the number of campaigns run by our customers due to the economic impact of the COVID-19 pandemic as well as associated lockdown and travel restrictions.
Professional and Consultancy Services. Professional and consultancy services decreased by 13.81% from 143.86 million in Fiscal 2020 to 123.99 million in Fiscal 2021.
Employee Benefit Expenses. Employee benefit expenses decreased by 26.84% from 982.48 million in Fiscal 2020 to 718.78 million in Fiscal 2021, primarily due to a decrease in salaries, wages and bonus by 27.08% from
883.59 million in Fiscal 2020 to 644.28 million in Fiscal 2021 primarily resulting from rationalisation of processes and reduction in workforce response to the impact of COVID-19 pandemic, as well as modifications made in our sales team to strategically focus on large enterprises, thereby reducing the number of sales personnel. In addition, large enterprises operate at high margins and consequently cost of implementation and cost of servicing such customers as well as team size to implement / service such customers are relatively lower / smaller.
As a result of these measures, contribution to provident and other funds decreased by 37.80% from 12.70 million in Fiscal 2020 to 7.90 million in Fiscal 2021, employee stock option expenses decreased by 10.35% from
39.82 million to 35.70 million, gratuity expenses decreased by 12.13% from 11.95 million to 10.50 million, and staff welfare expenses decreased by 56.30% from 28.88 million in Fiscal 2020 to 12.62 million.
Depreciation and Amortisation Expenses. Depreciation and amortisation expenses decreased by 31.22% from 49.65 million in Fiscal 2020 to 34.15 million in Fiscal 2021, primarily due to a decrease in depreciation of property, plant and equipment by 34.14% from 11.63 million in Fiscal 2020 to 7.66 million in Fiscal 2021, depreciation of right-of-use assets by 35.31% from 36.93 million to 23.89 million. While there were significant additions of gross block of tangible and intangible assets in Fiscal 2019 resulting in significant depreciation in Fiscal 2020, , there was no significant increase in Fiscals 2020 and 2021 due to the end of useful life of the assets acquired in Fiscal 2019. Further, the depreciation of right-of-use assets reduced considerably on account of modification and reduction of lease term. Amortisation of intangible assets increased from 1.09 million in Fiscal 2020 to 2.60 million in Fiscal 2021.
Finance Costs. Finance costs decreased by 42.05% from 32.27 million in Fiscal 2020 to 18.70 million in Fiscal
2021, primarily due to a decrease in interest on debts and borrowings by 42.73% from 19.40 million in Fiscal 2020 to 11.11 million in Fiscal 2021 due to overall reduction in short term borrowings and repayment of term loan. Interest on lease liabilities similarly decreased by 28.65% from 5.55 million in Fiscal 2020 to 3.96 million in Fiscal 2021 while bank charges reduced by 43.42% from 3.57 million to 2.02 million.
Other Expenses. Other expenses decreased by 67.38% from 239.91 million in Fiscal 2020 to 78.26 million in Fiscal 2021, primarily due to a decrease in:
? Travelling and conveyance by 95.99% from 63.11 million in Fiscal 2020 to 2.53 million in Fiscal
2021 primarily due to travel restrictions imposed because of COVID-19;
? Selling and marketing expenses by 38.67% from 18.00 million in Fiscal 2020 to 11.04 million in
Fiscal 2021 primarily due to change in strategy of targeting multiple small and medium enterprises to select large enterprises;
? Rent expenses by 44.71% from 11.92 million in Fiscal 2020 to 6.59 million in Fiscal 2021 primarily due to reduction in rented spaces across our offices given the transition to hybrid work model;
? Power and fuel expense by 99.89% from 8.91 million in Fiscal 2020 to 0.01 million in Fiscal 2021 on account of shifting of office premises to a managed workspace, wherein we were not required to incur costs for utilities;
? Software and server charges by 31.43% from 50.71 million in Fiscal 2020 to 34.77 million in Fiscal
2021 primarily due to reduced server usages given the impact of COVID-19;
? Provision for doubtful trade receivables and advances (including bad debts written off) from 43.47 million in Fiscal 2020 to nil in Fiscal 2021. This was primarily due to increased uncertainty over recoverability of customers billed towards the end of Fiscal 2020 on account of the impact of COVID 19. However, a large extent of these was recovered subsequently in Fiscal 2021 offsetting the amounts provided for in Fiscal 2020.
? Communication costs by 60.06% from 12.67 million in Fiscal 2020 to 5.06 million in Fiscal 2021 primarily due to movement of our employees to a hybrid work model leading to reduced communications costs in our offices; and
? Miscellaneous expenses by 44.36% from 11.97 million in Fiscal 2020 to 6.66 million in Fiscal 2021 primarily due to the impact of COVID-19 and reduced employee headcount.
This was marginally offset by an increase in rates and taxes from 0.33 million in Fiscal 2020 to 1.95 million in Fiscal 2021, and increase in advances / deposits written off by 62.89% from 3.53 million in Fiscal 2020 to
5.75 million in Fiscal 2021 due to write-off of non-recoverable withholding taxes.
Restated Profit before Tax. For the reasons discussed above, restated profit before tax was 169.40 million in
Fiscal 2021 as compared to 2.06 million in Fiscal 2020.
Tax expenses. We did not incur any current tax or deferred tax charge / (credit) in Fiscal 2021 and Fiscal 2020.
Restated Profit for the Year. We recorded a restated profit for the year of 169.40 million in Fiscal 2021 as compared to 2.06 million in Fiscal 2020.
Adjusted Earnings before Interest, Taxes, Depreciation and Amortisation (Adjusted EBITDA). Adjusted EBITDA was 181.16 million in Fiscal 2021 as compared to 114.11 million in Fiscal 2020, while Adjusted EBITDA Margin was 15.77% in Fiscal 2021 as compared to 6.87% in Fiscal 2020.
FISCAL 2020 COMPARED TO FISCAL 2019
Key Developments
? We focused our efforts in Fiscal 2020 to improve our margins and profitability. In order to improve profitability, we ceased working with customers that require more services from us on an ongoing basis or during the initial go-live period, typically smaller customers who require additional service attention.
? We also renegotiated with customers to reduce services provided to them, and with customers where margins were relatively low.
? We also centralized our operations and transferred a majority of our global delivery efforts to Bengaluru and focused our new business efforts on winning large enterprise customers from our earlier focus of having teams for all segments of the market.
Income.
Total income decreased by 4.20% from 1,749.46 million in Fiscal 2019 to 1,675.99 million in Fiscal 2020.
Revenue from Operations. Revenue from operations decreased by 4.06% from 1,731.48 million in Fiscal 2019 to 1,661.23 million in Fiscal 2020.
Sale of Services. Sale of services decreased by 3.68% from 1,724.76 million in Fiscal 2019 to 1,661.23 million in Fiscal 2020 primarily due to the focus on profitability. We let go off customers who were delivering lower margins and renegotiated with some of our lower-margin customers to reduce service offerings. This meant revenue from existing customers who left the platform came down, and revenues from customers who moved to self-service also marginally reduced. We also added new large enterprise customers in India that compensated for this reduction. Campaign service revenues reduced as the customers who left our platform were not running the campaigns they ran the earlier year.
The following table sets forth certain information relating to our sale of services presented in accordance with the types of services we offer in the periods indicated:
| Type of Service | Fiscal 2019 (As Adjusted) | Fiscal 2020 (As Adjusted) | Percentage increase / (decrease) (%) |
| (Rs in million) | (Rs in million) | ||
| Service income from group companies | 966.17 | 888.30 | (8.06)% |
| Retainership and other income from external customers# | 438.34 | 492.28 | 12.31% |
| Installation income from external customers | 39.95 | 24.86 | (37.77)% |
| Income from campaign services | 280.30 | 255.79 | (8.74)% |
| Total | 1,724.76 | 1,661.23 | (3.68)% |
# Retainership and other income from external customers refers to subscription revenues or recurring revenues linked to the numbers of transactions hitting our platform or number of stores live on our platform for a customer.
Other Income. Other income decreased by 86.16% from 12.79 million in Fiscal 2019 to 1.77 million in Fiscal 2020 primarily due to a decrease in gain on account of foreign exchange fluctuations (net) from 10.18 million in Fiscal 2019 to a loss on account of foreign exchange fluctuations (net) of 1.54 million in Fiscal 2020 primarily due to a favourable foreign exchange position in Fiscal 2019 as compared to Fiscal 2020. This was marginally offset by an increase in provisions / liabilities no longer required written back by 64.49% from 1.07 million in Fiscal 2019 to 1.76 million in Fiscal 2020.
Finance Income. Finance income increased by 150.29% from 5.19 million in Fiscal 2019 to 12.99 million in
Fiscal 2020 primarily due to an increase in interest income on income tax refund from nil in Fiscal 2019 to 5.30 million in Fiscal 2020 and increase in interest income on bank deposits by 215.60% from 1.41 million in Fiscal 2019 to 4.45 million in Fiscal 2020.
Expenses
Total expenses reduced by 10.30% from 1,866.14 million in Fiscal 2019 to 1,673.93 million in Fiscal 2020.
Cost of Campaign Services. Cost of campaign services decreased by 14.83% from 265.08 million in Fiscal 2019 to 225.76 million in Fiscal 2020 primarily due to, (i) reduction in number of campaigns run by a reduced number of customers using our platform, and (ii) we ran an RFP process with our C-PaaS providers and increased campaign revenue margins through the same resulting in lower campaign costs.
Professional and Consultancy Services. Professional and consultancy services decreased by 24.39% from 190.26 million in Fiscal 2019 to 143.86 million in Fiscal 2020 primarily due to letting go off customers who needed heavier implementations and on-going services which led to a reduction in our need for these services from other vendors.
Employee Benefit Expenses. Employee benefit expenses reduced by 0.60% from 988.44 million in Fiscal 2019 to 982.48 million in Fiscal 2020, primarily due to an increased focus on profitability, which was implemented through measures mentioned above leading to reduced headcounts. Employee stock option expenses reduced by 40.81% from 67.28 million in Fiscal 2019 to 39.82 million in Fiscal 2020 primarily due to the profitability drive which helped us reduce headcounts. These reductions were mostly in senior management in the servicing teams towards the end of Fiscal 2020. Gratuity expenses decreased by 12.71% from 13.69 million in Fiscal 2019 to 11.95 million in Fiscal 2020 and staff welfare expenses decreased by 17.08% from 34.83 million in Fiscal 2019 to 28.88 million in Fiscal 2020. These decreases have been marginally offset by an increase in salaries, wages and bonus by 4.09% from 848.87 million in Fiscal 2019 to 883.59 million in Fiscal 2020, and increase in sales commission expenses by 48.50% from 3.34 million in Fiscal 2019 to 4.96 million in Fiscal 2020 primarily due to new business wins in India.
Depreciation and Amortisation Expenses. Depreciation and amortisation expenses decreased by 19.27% from 61.50 million in Fiscal 2019 to 49.65 million in Fiscal 2020, primarily due to a decrease in depreciation of property, plant and equipment by 30.77% from 16.80 million in Fiscal 2019 to 11.63 million in Fiscal 2020 due to significant additions in Fiscals 2017, 2018 and 2019 nearing the end of their useful lives; depreciation of right-of-use assets by 17.35% from 44.68 million in Fiscal 2019 to 36.93 million in Fiscal 2020 due to reduced balance of right-of-use asset base as a result of modification of lease contracts. These reductions are marginally offset by increase in amortisation of intangible assets from 0.02 million in Fiscal 2019 to 1.09 million in Fiscal 2020 on account of increase in capitalisation of computer software in Fiscal 2020.
Finance Costs. Finance costs reduced by 15.19% from 38.05 million in Fiscal 2019 to 32.27 million in Fiscal 2020, primarily due to a decrease in interest on debts and borrowings by 16.67% from 23.28 million in Fiscal 2019 to 19.40 million in Fiscal 2020 due to repayment of term loans resulting in reduced loan balances; interest on lease liabilities by 40.83% from 9.38 million in Fiscal 2019 to 5.55 million in Fiscal 2020 due to accretion of interest expense in Fiscal 2020 on a lower lease liability base as a result of modification of lease contracts as compared to Fiscal 2019; and bank charges by 27.59% from 4.93 million in Fiscal 2019 to 3.57 million in Fiscal 2020.
Other Expenses. Other expenses decreased by 25.68% from 322.81 million in Fiscal 2019 to 239.91 million in Fiscal 2020, primarily due to a decrease in:
? Travelling and conveyance expense by 47.27% from 119.68 million in Fiscal 2019 to 63.11 million in Fiscal 2020 primarily due to the increased focus on profitability and rationalisation of sales teams and travel budgets;
? Power and fuel expense by 26.67% from 12.15 million in Fiscal 2019 to 8.91 million in Fiscal 2020 on account of shifting of office premises to a managed workspace wherein we are not required to separately incur costs for utilities;
? Software and server charges by 27.77% from 70.21 million in Fiscal 2019 to 50.71 million in Fiscal
2020 primarily due to reduction in our loss-making customers which reduced our server usage;
? Selling and marketing expenses by 56.58% from 41.46 million in Fiscal 2019 to 18.00 million in
Fiscal 2020 primarily due to an increased focus on large enterprises as compared to a larger number of small-scale entities in Fiscal 2019 resulting in reduced customer acquisition costs;
? Communication costs by 42.04% from 21.86 million in Fiscal 2019 to 12.67 million in Fiscal 2020 primarily due to movement to a managed workspace during the year resulting in reduced office communication costs; and
? Miscellaneous expenses by 44.86% from 21.71 million in Fiscal 2019 to 11.97 million in Fiscal 2020.
These reductions were partially offset by an increase in provision for doubtful trade receivables and advances (including bad debts written off) by 89.41% from 22.95 million in Fiscal 2019 to 43.47 million in Fiscal 2020 primarily due to the impact of COVID-19 and uncertainty over recoverability of customers billed towards the end of Fiscal 2020 on account of the impact of COVID 19.
Restated Profit/(loss) before Tax. For the reasons discussed above, restated profit before tax was 2.06 million in Fiscal 2020 as compared to a restated loss before tax of 116.68 million in Fiscal 2019.
Tax expenses. We did not incur any current tax or deferred tax charge/(credit) in Fiscal 2020 and Fiscal 2019.
Restated Profit / (Loss) for the Year. We recorded a restated profit for the year of 2.06 million in Fiscal 2020 as compared to restated loss for the year of 116.68 million in Fiscal 2019.
Adjusted Earnings before Interest, Taxes, Depreciation and Amortisation (Adjusted EBITDA). Adjusted EBITDA was 114.11 million in Fiscal 2020 as compared to 33.28 million in Fiscal 2019, while Adjusted EBITDA Margin was 6.87% in Fiscal 2020 as compared to 1.92% in Fiscal 2019.
Liquidity and Capital Resources
We finance our operations and capital requirements primarily through equity infusion of our Promoter entity funded by investors, cash flows from operations and borrowings under credit facilities from certain banks. We believe that our credit facilities, together with cash generated from our operations will be sufficient to finance our working capital needs for next 12 months. We expect that these sources will continue to be our principal sources of cash in the medium term. However, there can be no assurance that additional financing will be available, or if available, that it will be available on terms acceptable to us.
Cash Flows based on the Restated Summary Statements of our Company
The following table sets forth certain information relating to our cash flows in the periods indicated:
| Particulars | 2019 (As Adjusted) | Fiscal 2020 (As Adjusted) | 2021 | For the three months period ended June 30, 2021 |
| (in million) | ||||
| Net cash flow (used in)/ from operating activities | (60.29) | 5.57 | 153.82 | (82.57) |
| Net cash used in investing activities | (60.17) | (14.30) | (25.31) | (1.91) |
| Net cash used in financing activities | (62.96) | (13.05) | (79.63) | (0.23) |
| Net (decrease)/ increase in cash and cash equivalents | (183.42) | (21.78) | 48.88 | (84.71) |
| Cash and cash equivalents at the end of the year / period | 69.68 | 47.90 | 96.78 | 12.07 |
Operating Activities
For the three months period ended June 30, 2021
For the three months period ended June 30, 2021, net cash flow used in operating activities was 82.57 million.
Profit before tax was 25.28 million and adjustments to the profit before tax primarily consisted of employee stock option expenses of 35.67 million; finance costs of 3.85 million and depreciation and amortisation expenses of 7.02 million and marginally off set by net gain on account of foreign exchange differences of 2.97 million, finance income of 1.94 million and provisions / liabilities no longer required written back of 0.68 million.
Operating profit before working capital changes was 67.81 million for the three months period ended June 30, 2021. The working capital adjustments included increase in trade receivables of 127.17 million on account of the impact of COVID-19 in the three months period ended June 30, 2021 resulting in increased receivable days of customers; and decrease in trade payables, non-current and current other financial liabilities, other liabilities and provisions of 16.84 million primarily on account of accrued employee benefits paid out in the three months period ended June 30, 2021. This was partially offset by a decrease in non-current and current other financial and other assets of 7.04 million on account of reduction in unbilled revenue balances pertaining to customers billed towards the end of the three months period ended June 30, 2021 compared with unbilled revenue balances as at the year ended March 31, 2021. Cash used in operations for the three months period ended June 30, 2021 amounted to 69.16 million. Direct taxes paid amounted to 13.41 million.
Fiscal 2021
In Fiscal 2021, net cash flow from operating activities was 153.82 million. Profit before tax was 169.40 million and adjustments primarily consisted of employee stock option expenses of 35.70 million; depreciation and amortisation expenses of 34.15 million; advances/deposits written off of 5.75 million; and finance costs of
18.70 million. This was marginally offset by gain on foreign exchange fluctuation (net) of 8.02 million, net gain on modification of lease contracts of 8.43 million, finance income of 12.34 million and net gain on disposal of property plant and equipment of 0.55 million.
Operating profit before working capital changes was 230.71 million in Fiscal 2021. The working capital adjustments included increase in trade receivables of 114.70 million on account of increase in receivable days of customers due to the impact of COVID-19; decrease in trade payables, non-current and current other financial liabilities, other liabilities and provisions of 90.44 million primarily on account of reduced operating expenditures in Fiscal 2021 as compared to Fiscal 2020 as a result of negotiated terms with vendors leading to lower year-end payables. This was partially offset by a decrease in non-current and current other financial and other assets of 29.52 million on account of reductions in unbilled revenue balances of customers and security deposits in relation to rented premises. Cash generated from operations for Fiscal 2021 amounted to 55.09 million. Direct taxes refund amounted to 98.73 million.
Fiscal 2020
In Fiscal 2020, net cash flow from operating activities was 5.57 million. Profit before tax was 2.06 million and adjustments primarily consisted of employee stock option expenses of 39.82 million; depreciation and amortisation expenses of 49.65 million; provision for doubtful trade receivables and advances (including bad debts written off) of 43.47 million and finance costs of 32.27 million. This was marginally offset by finance income of 12.99 million and provision / liabilities no longer required written back of 1.76 million.
Operating profit before working capital changes was 162.17 million in Fiscal 2020. The working capital adjustments included increase in trade receivables of 115.83 million on account of reduced collections in last quarter of Fiscal 2020 due to impacts of COVID-19 and decrease in trade payables, non-current and current other financial, other liabilities and provisions of 44.48 million primarily on account of reduced year-end accruals against vendors and employee benefits in line with reduced operating expenditures. This was partially offset by a decrease in non-current and current other financial and other assets of 20.21 million on account of reductions in unbilled revenue balances. Cash generated from operations for Fiscal 2020 amounted to 22.07 million. Direct taxes paid amounted to 16.50 million.
Fiscal 2019
In Fiscal 2019, net cash flow used in operating activities was 60.29 million. Loss before tax was 116.68 million and adjustments primarily consisted of employee stock option expenses of 67.28 million; depreciation and amortisation expenses of 61.50 million; provision for doubtful trade receivables and advances (including bad debts written off) of 22.95 million; advances / deposits written off of 1.11 million and finance costs of 38.05 million. This was marginally offset by net foreign exchange differences of 3.80 million, provisions / liabilities no longer required written back of 1.07 million, gain on disposal of investment of 0.12 million and finance income of 5.19 million.
Operating profit before working capital changes was 62.78 million in Fiscal 2019. The working capital adjustments included increase in trade receivables of 15.71 million on account of increased quarter and year-end billing in line with increased operations; decrease in trade payables, non-current and current other financial, other liabilities and provisions of 18.93 million primarily on account of reductions in pay-out days to vendors with increased cash generation from operations; and increase in non-current and current other financial and other assets of 26.02 million on account of increase non-current fixed deposits with banks against enhanced sanctions of working capital facilities. Cash generated from operations for Fiscal 2019 amounted to 2.12 million. Direct taxes paid amounted to 62.41 million.
Investing Activities
Three months period ended June 30, 2021
Net cash used in investing activities was 1.91 million in the three months period ended June 30, 2021, primarily on account of purchase of property, plant and equipment including intangible assets of 2.33 million on account of clearance of dues of outstanding capital creditors; and investment in bank deposits (margin money deposits) of 1.42 million on account of fresh fixed deposits with banks against increased working capital facility limits. This was partially offset by interest income received of 1.84 million.
Fiscal 2021
Net cash used in investing activities was 25.31 million in Fiscal 2021, primarily on account of purchase of property, plant and equipment including intangible assets of 6.14 million and investment in bank deposits (margin money deposits)of 23.93 million on account of fresh fixed deposits with banks against increased working capital facility limits. This was partially offset by proceeds from sale of property, plant and equipment of 1.04 million; and interest income received of 3.72 million.
Fiscal 2020
Net cash used in investing activities was 14.30 million in Fiscal 2020, primarily on account of purchase of property, plant and equipment including intangible assets of 5.68 million and investment in bank deposits (margin money deposits) of 12.74 million on account of fresh fixed deposits with banks against increased working capital facility limits. This was partially offset by proceeds from sale of property, plant and equipment of 0.01 million; and interest income received of 4.11 million.
Fiscal 2019
Net cash used in investing activities was 60.17 million in Fiscal 2019, primarily on account of purchase of property, plant and equipment including intangible assets of 21.01 million and investment in bank deposits (margin money deposits) of 41.60 million on account of fixed deposits with banks against new working capital facility limits. This was partially offset by proceeds of sale of current investments (net) of 1.03 million; and interest income received of 1.41 million.
Financing Activities
Three months period ended June 30, 2021
Net cash used in financing activities was 0.23 million in the three months period ended June 30, 2021, primarily on account of payment of principal and interest portion of lease liabilities of 3.82 million; and finance costs paid of 1.41 million. This was partially offset by proceeds from short term borrowings (net ) of 5.00 million.
Fiscal 2021
Net cash used in financing activities was 79.63 million Fiscal 2021, primarily on account of repayment of long-term borrowings of 16.37 million as repayment of loan payment of principal and interest portion of lease liabilities of 23.33 million; finance costs paid amounting to 8.12 million; and repayment of short term borrowings (net) of 31.81 million
Fiscal 2020
Net cash used in financing activities was 13.05 million Fiscal 2020, primarily on account of repayment of long-term borrowings of 65.45 million on account of repayment of loan ; payment of principal and interest portion of lease liabilities of 37.77 million on account of regular lease rentals; finance costs paid amounting to 26.11 million; and repayment of short term borrowings (net) of 23.00 million. This was partially offset by proceeds from long-term borrowings of 139.28 million on account of external commercial borrowing from CTIPL.
Fiscal 2019
Net cash used in financing activities was 62.96 million Fiscal 2019, primarily on account of repayment of long-term borrowings of 66.93 million on account of repayment of instalments of previous Innoven India facility; payment of principal and interest portion of lease liabilities of 46.22 million on account of regular lease rentals; settlement of cancellation of share option to employees of 3.24 million and finance costs paid amounting to
27.76 million. This was partially offset by proceeds from long-term borrowings of 65.00 million on account of new loan taken from Innoven India facility and proceeds of short term borrowings (net) of 16.19 million.
Indebtedness of our Company
As of June 30, 2021, we had total borrowings (consisting of current and non-current borrowings) of 198.66 million. Our Debt to Equity ratio was 0.52 as of June 30, 2021.
The following table sets forth certain information relating to our outstanding indebtedness as of June 30, 2021, and our repayment obligations in the periods indicated:
| Particulars | As of June 30, 2021 | |||
| Payment due by period | ||||
| (in million) | ||||
| Total | Less than 1 year | 1-5 years | More than 5 years | |
| Non-current borrowings | ||||
| External Commercial Borrowing from Holding Company (unsecured) | 74.33 | - | 74.33 | - |
| Current borrowings | - | |||
| External Commercial Borrowing from Holding Company (unsecured) | 74.33 | 74.33 | - | - |
| Bank Overdraft (Secured) | 50.00 | 50.00 | - | - |
| Total Borrowings | 198.66 | 124.33 | 74.33 | - |
Contingent Liabilities and Off-Balance Sheet Arrangements of our Company
As of June 30, 2021, our contingent liabilities as per Ind AS 37 as disclosed in the Restated Summary Statements of our Company, were as follows:
| Amount | |
| Particulars | (Rs in million) |
| Bank guarantees outstanding | 3.91 |
Except as disclosed in this Draft Red Herring Prospectus, there are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that we believe are material to investors.
Capital Expenditures of our Company
In Fiscals 2019, Fiscal 2020, and Fiscal 2021, and the three months period ended June 30, 2021 our capital expenditure towards additions to property, plant and equipment and intangible assets were 18.66 million, 6.02 million, 5.22 million and 0.61 million, respectively. The following table sets forth the net block of our property, plant and equipment and intangible assets for the periods indicated:
| Particulars | Fiscal 2019 (As Adjusted) | Fiscal 2020 (As Adjusted) | Fiscal 2021 | As of and for the three months period ended June 30, 2021 |
| (Rs in million) | ||||
| Property, plant and equipment | 19.54 | 10.57 | 5.85 | 5.80 |
| Intangible Assets | 2.02 | 4.29 | 3.49 | 3.10 |
| Total | 21.56 | 14.86 | 9.34 | 8.90 |
We expect to meet our capital expenditure in the next three Fiscals through a mix of internal accruals and funding from financial institutions.
Related Party Transactions of our Company
We enter into various transactions with related parties in the ordinary course of business. These transactions principally include service income from group companies, finance costs, collections made on behalf of other companies in Capillary Group, expenses incurred on behalf of other companies in Capillary Group and remuneration to executive Directors and Key Managerial Personnel.
For further information on our related party transactions, see "Summary of the Offer Document Summary of Related Party Transactions" on page 644. Also, see "Risk Factors We have in the past entered into related party transactions and may continue to do so in the future, which may potentially involve conflicts of interest with the equity shareholders" on page 54.
Auditors Observations
Our Statutory Auditors have included a matter of emphasis on the managements assessments on the impact of COVID-19 on the operations, financial performance and position of the Company for the years ended March 31, 2020 and March 31, 2021 and for the three months period ended June 30, 2021, in their reports on the audited financial statements for Fiscal 2020 and 2021 and for the three months period ended June 30, 2021, respectively.
In addition, our Statutory Auditors have included the following modifications in their annexure to auditors report under the Companies (Auditors Report) Order, 2016 to our underlying audited financial statements, as amended, for the following periods:
| Year / Period | Clause | Statement |
| Fiscal 2019 | Clause (vii)(a) | Undisputed statutory dues including provident fund, employees state insurance, sales-tax, service tax, duty of customs, duty of excise, value added tax, goods and service tax, cess and other material statutory dues as applicable to the Company have generally been regularly deposited with the appropriate authorities though there have been significant delays in remittance of income tax in large number of cases. |
| Fiscal 2020 | Clause (i)(b) | Property, plant and equipment have not been physically verified by the management during the year, hence, the Statutory Auditors are unable to comment on the discrepancies, if any. |
| Clause (vii)(a) | Undisputed statutory dues including provident fund, employees state insurance, duty of customs, goods and service tax, cess and other material statutory dues as applicable to the Company have generally been regularly deposited with the appropriate authorities though there have been serious delays in remittance of income tax in a few cases. | |
| Fiscal 2021 | Clause (i)(a) | Except for tagging of property, plant and equipment, the Company has maintained proper records showing full particulars, including quantitative details and situation of property, plant and equipment. |
| Clause (vii)(a) | Undisputed statutory dues including provident fund, employees state insurance, duty of customs, goods and service tax, cess and other material statutory dues as applicable to the Company have generally been regularly deposited with the appropriate authorities though there have been serious delays in remittance of income tax in few cases. |
Except at stated above, there have been no reservations/ qualifications/ adverse remarks/ matters of emphasis highlighted by respective statutory auditors in their auditors reports on the audited financial statements as of and for the years ended March 31, 2019, 2020 and 2021, and the three months period ended June 30, 2021.
Changes in Accounting Policies in the Last Three Financial Years
Except as required as per applicable law, there have been no changes in our accounting policies during Fiscals 2019, 2020 and 2021, and the three months period ended June 30, 2021.
Unusual or Infrequent Events or Transactions
Except as described in this Draft Red Herring Prospectus, to our knowledge, there have been no unusual or infrequent events or transactions that have in the past or may in the future affect our business operations or future financial performance.
Significant Economic Changes that Materially Affect or are Likely to Affect Income from Continuing Operations
Our business has been subject, and we expect it to continue to be subject, to significant economic changes that materially affect or are likely to affect income from continuing operations identified above in "Managements Discussion and Analysis of Financial Condition and Results of Operations Significant Factors Affecting our Results of Operations" and the uncertainties described in "Risk Factors" on pages 651 and 27, respectively.
Known Trends or Uncertainties
Our business has been subject, and we expect it to continue to be subject, to significant economic changes arising from the trends identified above in "Managements Discussion and Analysis of Financial Condition and Results of Operations Significant Factors Affecting our Results of Operations" and the uncertainties described in "Risk Factors" on pages 651 and 27, respectively. To our knowledge, except as discussed in this Draft Red Herring Prospectus, there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on revenues or income of our Company from continuing operations.
Future Relationship Between Cost and Income
Other than as described in "Risk Factors", "Our Business" and "Managements Discussion and Analysis of Financial Condition and Results of Operations" on pages 27, 174 and 649 respectively, to our knowledge there are no known factors that may adversely affect our business prospects, results of operations and financial condition.
New Products or Business Segments
Except as set out in this Draft Red Herring Prospectus, we have not announced and do not expect to announce in the near future any new business segments.
Competitive Conditions
We operate in a competitive environment. See "Risk Factors", "Industry Overview", "Our Business" and on pages 27, 140 and 174, respectively, for further details on competitive conditions that we face across our various business segments.
Segment Reporting
Our business activity primarily falls within cloud based intelligent customer engagement software solutions to retail chain operators. Therefore, there is only one reportable segment called CRM services in accordance with the requirement of Ind AS 108 Operating Segments.
Significant Dependence on Single or Few Customers
Given the nature of our business operations, we believe our business is dependent on any single or a few customers. For further information, see "Risk Factors We generate a significant portion of our revenues from a limited number of customers, and any loss or reduction of business from these customers could reduce our revenues and materially adversely affect our business, results of operations, financial condition, and cash flows."
Seasonality/ Cyclicality of Business
Our business is subject to seasonality or cyclicality, we experience seasonal fluctuations in our revenues due to the inherent nature of the loyalty industry. For further information, see "Industry Overview", "Our Business" and "Risk Factors Our business is subject to seasonality, which may contribute to fluctuations in our results of operations and financial condition." on pages 140, 174 and 50, respectively.
Significant Accounting Policies for our Restated Summary Statements
The accounting policies set out below have been applied consistently to the periods presented in these Restated Summary Statements.
Current versus Non-Current Classification
The Company presents assets and liabilities in the restated summary statement of assets and liabilities based on current/ non-current classification. An asset is treated as current when it is:
? Expected to be realised or intended to be sold or consumed in normal operating cycle ? Held primarily for the purpose of trading ? Expected to be realised within twelve months after the reporting period; or
? Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current
A liability is current when:
? It is expected to be settled in normal operating cycle ? It is held primarily for the purpose of trading
? It is due to be settled within twelve months after the reporting period; or
? There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
All other liabilities are classified as non-current.
Advance tax paid is classified as non-current assets.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents.
Fair Value Measurement
The Company measures financial instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
? In the principal market for the asset or liability, or
? In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participants ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the Restated Summary Statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
? Level 1 Quoted (unadjusted) market prices in active markets for identical assets or liabilities
? Level 2 Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable ? Level 3 Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the Restated Summary Statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
? Disclosures for valuation methods, significant estimates and assumptions ? Quantitative disclosures of fair value measurement hierarchy ? Financial instruments (including those carried at amortised cost)
Revenue Recognition
Revenue from operations is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company has generally concluded that it is the principal in its revenue arrangements, except for the agency services below, because it typically controls the goods or services before transferring them to the customer. Revenue is recognised when the Company satisfies a performance obligation by transferring a promised good or service to the customer, which is when the customer obtains control of the good or service. A performance obligation may be satisfied at a point in time or over time. The amount of revenue recognised is the amount allocated to the satisfied performance obligation. The specific recognition criteria described below must be met before revenue is recognised:
Income from services
Service Income from Group Companies
The Company provides technical, analytical and other support services to the group companies and revenue is recognized on an accrual basis and at agreed mark-ups on costs incurred as per the terms of agreement.
Retainer services
The Company is engaged in the business of providing cloud based intelligent customer engagement software solutions to retail chain operators. Revenue is recognized over the period as and when services are rendered in accordance with the arrangement with the customers.
Campaign services
The Company provides SMS campaign services that are bundled together with the retainer services. The Company recognises revenue based on the usage of messaging services i.e., when the Companys services are used based on the specific terms of the contract with customers.
Installation services
The Company provides a one-time installation services that are bundled together with the retainer services. The Company recognises revenue from installation services over time because the customer simultaneously receives and consumes the benefits provided to them. The Company uses an input method in measuring progress of the installation services because there is a direct relationship between the Companys effort and the transfer of service to the customer. The Company recognises revenue on the basis of the milestone achieved which correlates with hours expended relative to the total expected hours to complete the service.
Other income
Export benefits
Export entitlements in the form of Service Exports from India (SEIS) is recognized in the statement of profit and loss when the right to receive credit as per the terms of the scheme is established in respect of exports made and when there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
Interest Income
For all financial instruments measured either at amortised cost or at fair value through other comprehensive income, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortised cost of a financial liability. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument but does not consider the expected credit losses. Interest income is included in finance income in the statement of profit and loss.
Dividend Income
Dividend income is recognized when the right to receive payment is established, which is generally when shareholders approve the dividend, provided it is probable that the economic benefits associated with the dividend will flow to the Company, and the amount of the dividend can be measured reliably.
Contract balances
Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional. Contract assets are transferred to receivables when the rights become unconditional and contract liabilities are recognized as and when the performance obligation is satisfied.
Contract assets are subject to impairment assessment.
Trade receivables
A receivable is recognised if an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).
Capitalised contract costs
The Company pays sales commission to its employees for each installation and retainer contract that they obtain. Incremental costs of obtaining a contract are capitalised if these costs are recoverable. Costs to fulfil a contract are capitalised if the costs relate directly to the contract, generate or enhance resources used in satisfying the contract and are expected to be recovered. Other contract costs are expensed as incurred.
Capitalised contract costs are subsequently amortised on a systematic basis as the Company recognises the related revenue. An impairment loss is recognised in profit or loss to the extent that the carrying amount of the capitalised contract costs exceeds the remaining amount of consideration that the Company expects to receive in exchange for the goods or services to which the contract costs relates less the costs that relate directly to providing the goods and that have not been recognised as expenses. The maximum period over which the Company expects to derive benefit from contracts entered into with customers is 3 years. The Company has elected to apply the practical expedient to recognise the incremental costs of obtaining a contract as an expense when incurred where the amortisation period of the asset that would otherwise be recognised is over year or less.
Contract liabilities
A contract liability is recognised if a payment is received or a payment is due (whichever is earlier) from a customer before the Company transfers the related goods or services. Contract liabilities are recognised as revenue when the Company performs under the contract (i.e., transfers control of the related goods or services to the customer).
Taxes on Income
Current income tax
Tax expense for the year comprises current and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of profit and loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The Companys liability for current tax is calculated using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Company shall reflect the effect of uncertainty for each uncertain tax treatment by using either most likely method or expected value method, depending on which method predicts better resolution of the treatment.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying values of assets and liabilities in the Restated Summary Statements and the corresponding tax bases used in the computation of the taxable profit and is accounted for using the liability model. Deferred tax liabilities are generally recognised for all the taxable temporary differences. In contrast, deferred tax assets are only recognised to the extent that is probable that future taxable profits will be available against which the temporary differences can be utilised.
Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Property, Plant and Equipment
As at adjusted date of transition to Ind AS i.e., April 01, 2018, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognised as at March 31, 2018 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment as on April 1, 2018.
Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the property, plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. All other repair and maintenance costs are recognised in profit or loss as incurred.
Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate assets are derecognised when replaced. All other repairs and maintenance are charged to profit and loss during the reporting period in which they are incurred.
The Company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset having useful life that is materially different from that of the remaining asset. These components are depreciated over their useful lives; the remaining asset is depreciated over the life of the principal asset.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:
| Sr. No. Block | Useful lives estimated by the management (in years) |
| 1 Office Equipment | 5 |
| 2 Computers | 3 |
| 3 Furniture and fixtures | 10 |
Leasehold improvements are depreciated over the period of lease or estimated useful life, whichever is lower, on straight line basis
The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognised.
Intangible Assets
As at adjusted date of transition to Ind AS i.e., April 01, 2018, the Company has elected to continue with the carrying value of all of its intangible assets as at March 31, 2018 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment as on April 1, 2018.
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period with the affect of any change in the estimate being accounted for on a prospective basis. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when nofuture economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss. when the asset is derecognised.
Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset until such time as the assets are substantially ready for the intended use or sale. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs
Leases
The Company has lease contracts for office spaces. The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Right-of-use assets
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and accumulated impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment.
Lease liabilities
At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
Short term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
Impairment of Non-Financial Assets
As at the end of each accounting year, the Company reviews the carrying amounts of its PPE and intangible assets determine whether there is any indication that those assets have suffered an impairment loss. If such indication exists, the said assets are tested for impairment so as to determine the impairment loss, if any. Intangible assets with indefinite life are tested for impairment each year.
Impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount. Recoverable amount is determined:
? in the case of an individual asset, at the higher of the fair value less costs of disposal and the value in use; and ? in the case of a cash generating unit (a group of assets that generates identified, independent cash flows), at the higher of the cash generating units net fair value less costs of disposal and the value in use.
The amount of value in use is determined as the present value of estimated future cash flows from the continuing use of an asset and from its disposal at the end of its useful life. For this purpose, the discount rate (pre-tax) is determined based on the weighted average cost of capital of the company suitably adjusted for risks specified to the estimated cash flows of the asset.
For this purpose, a cash generating unit is ascertained as the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
If recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, such deficit is recognised immediately in the statement of profit and loss as impairment loss and the carrying amount of the asset (or cash generating unit) is reduced to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples other available fair value indicators.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Companys CGUs to which the individual assets are allocated. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, the Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified. In any case, this growth rate does not exceed the long-term average growth rate for the products, industries, or country in which the Company operates, or for the market in which the asset is used.
Impairment losses are recognised in the statement of profit and loss.
When an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss is recognised for the asset (or cash generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the statement of profit and loss
Provisions and Contingent Liabilities
Provisions are recognised when the Company has a present obligation (legal or constructive) 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 a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
If the Company has a contract that is onerous, the present obligation under the contract is recognised and measured as a provision. However, before a separate provision for an onerous contract is established, the Company recognises any impairment loss that has occurred on assets dedicated to that contract.
An onerous contract is a contract under which the unavoidable costs (i.e., the costs that the Company cannot avoid because it has the contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it. The cost of fulfilling a contract comprises the costs that relate directly to the contract (i.e., both incremental costs and an allocation of costs directly related to contract activities).
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the Restated Summary Statements.
Provisions and contingent liability are reviewed at each balance sheet.
Retirement and Other Employee Benefits
Retirement benefit in the form of provident fund and pension fund are defined contribution scheme. The Company has no obligation, other than the contribution payable. The Company recognizes contribution payable to provident fund and pension fund as expenditure, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
Accumulated leave, which is expected to be utilized within the next twelve months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. The Company recognizes expected cost of short-term employee benefit as an expense, when an employee renders the related service.
The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the reporting date. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred. The obligations are presented as current liabilities in the restated summary statement of assets and liabilities if the entity does not have an unconditional right to defer the settlement for at least twelve months after the reporting date.
The Company presents the leave as a current liability in the Restated Statement of Assets and liabilities, to the extent it does not have an unconditional right to defer its settlement for twelve months after the reporting date.
The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method using actuarial valuation to be carried out at each balance sheet date.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the Restated Summary Statement of Assets and Liabilities with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.
Past service costs are recognised in profit or loss on the earlier of:
? The date of the plan amendment or curtailment, and
? The date that the Company recognises related restructuring costs
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
? Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and ? Net interest expense or income.
Financial Instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contract embodying the related financial instruments. All financial assets, financial liabilities contracts are initially measured at transaction cost and where such values are different from the fair value, at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit and loss) are added to or deducted from the fair value measured on initial recognition of financial asset or financial liability. Transaction costs directly attributable to the acquisition of financial assets and financial liabilities at fair value through profit and loss are immediately recognised in the statement of profit and loss.
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost and fair value through profit or loss. The classification of financial assets at initial recognition depends on the financial assets contractual cash flow characteristics and the Companys business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient, the Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient are measured at the transaction price as disclosed under Revenue recognition policy.
In order for a financial asset to be classified and measured at amortised cost, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI) on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts future cash receipts or payments through the expected life of the financial instrument, or where appropriate, a shorter period.
Financial Assets
Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business model whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets measured at fair value
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business model whose objective is to hold these assets in order to collect contractual cash flows and to sell these financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial asset not measured at amortised cost or at fair value through other comprehensive income is carried at fair value through the statement of profit and loss.
For financial assets maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
Impairment of financial assets
Loss allowance for expected credit losses is recognised for financial assets measured at amortised cost and fair value through the statement of profit and loss.
The Company recognises impairment loss on trade receivables using expected credit loss model, which involves use of provision matrix constructed on the basis of historical credit loss experience as permitted under Ind AS 109
Financial Instruments.
The provision matrix is initially based on the Companys historical observed default rates. The Company will calibrate the matrix to adjust the historical credit loss experience with forward-looking information. For instance, if forecast economic conditions are expected to deteriorate over the next year which can lead to an increased number of defaults, the historical default rates are adjusted. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.
For financial assets whose credit risk has not significantly increased since initial recognition, loss allowance equal to twelve months expected credit losses is recognised. Loss allowance equal to the lifetime expected credit losses is recognised if the credit risk on the financial instruments has significantly increased since initial recognition.
For financial assets maturing within one year from the balance sheet date, the carrying amounts approximates fair value due to the short maturity of these instruments.
De-recognition of financial assets
The Company de-recognises a financial asset only when the contractual rights to the cash flows from the financial asset expire, or it transfers the financial asset and the transfer qualifies for de-recognition under Ind AS 109.
If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the assets and an associated liability for amounts it may have to pay.
If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
On de-recognition of a financial asset in its entirety, the difference between the carrying amount measured at the date of de-recognition and the consideration received is recognised in statement of profit or loss.
Financial Liabilities and Equity Instruments
Classification as debt or equity
Financial liabilities and equity instruments issued by the Company are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.
Financial Liabilities
Financial liabilities are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost, using the effective interest rate method where the time value of money is significant. Interest bearing bank loans, overdrafts and issued debt are initially measured at fair value and are subsequently measured at amortised cost using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in the statement of profit and loss.
For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
De-recognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
Off-setting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the Restated Summary Statement of Assets and Liabilities if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Segment Reporting
Operating segments are identified as those components of the Company (a) that engage in business activities to earn revenues and incur expenses (including transactions with any of the Companys other components); (b) whose operating results are regularly reviewed by the Companys Chief Operating Decision Maker (CODM) to make decisions about resource allocation and performance assessment and (c) for which discrete financial information is available. The accounting policies consistently used in the preparation of Restated Summary Statements are also applied to record revenue and expenditure in individual segments. Assets, liabilities, revenues and direct expenses in relation to segments are categorised based on items that are individually identifiable to that segment, while other items, wherever allocable, are apportioned to the segment on an appropriate basis. Certain items are not specifically allocable to individual segments as the underlying services are used interchangeably. The Company therefore believes that it is not practical to provide segment disclosures relating to such items and accordingly such items are separately disclosed as ‘unallocated
An operating segment is classified as reportable segment if reported revenue (including inter-segment revenue) or absolute amount of result or assets exceed 10% or more of the combined total of all the operating segments.
CODM evaluates the performance of the Company based on the single operative segment as cloud based intelligent customer engagement software solutions to retail chain operators. Therefore, there is only one reportable segment called CRM services in accordance with the requirement of Ind AS 108 "Operating Segments".
Cash and Cash Equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less that are readily convertible to a known amount of cash and which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, as they are considered an integral part of the Companys cash management.
Share-based Payments
Certain employees of the Company share-based payments, whereby employees render services as consideration for equity instruments of the holding company (equity-settled transactions).
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an Black-Scholes valuation model.
That cost is recognised, together with a corresponding increase in Capital contribution from parent reserves in equity, over the period in which the performance and/or service conditions are fulfilled in employee benefits expense. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Companys best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the statement of profit and loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense.
Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Companys best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the grant date fair value of the unmodified award, provided the original vesting terms of the award are met. An additional expense, measured as at the date of modification, is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee. Where an award is cancelled by the entity or by the counterparty, any remaining element of the fair value of the award is expensed immediately through profit or loss.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
Dividend
The Company recognises a liability to pay dividend to equity holders when the distribution is authorised, and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
Foreign Currencies
The Restated Summary Statements are presented in Indian Rupees, which is also the Companys functional currency.
Transactions in foreign currencies are initially recorded at functional currency spot rates at the date the transaction first qualifies for recognition. However, for practical reasons, the Company uses average rate if the average approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or profit or loss, respectively).
Exchange differences arising on the retranslation or settlement of other monetary items are included in the statement of profit and loss for the period.
Corporate Social Responsibility (‘CSR) Expenditure
The Company charges its CSR expenditure during the year to the statement of profit and loss.
Earnings Per Share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all potential dilutive equity shares.
SIGNIFICANT DEVELOPMENTS AFTER JUNE 30, 2021 THAT MAY AFFECT OUR FUTURE RESULTS OF OPERATIONS
Except as stated below and disclosed elsewhere in this Draft Red Herring Prospectus, there have been no significant developments after June 30, 2021 that may affect our future results of operations.
Investment in Subsidiary, Business Transfer and other acquisitions:
? Our Company by way of the resolution of the Shareholders dated August 25, 2021 and the resolution of the Board of Directors dated August 31, 2021, approved the investment to be made in the securities of CPL amounting to USD 10.25 million to acquire 1,385,135,135 ordinary shares of USD 0.0074 each.
? Pursuant to the business and loan transfer agreement dated November 1, 2021, our Promoter, CTIPL, transferred its business undertaking, comprising the business of providing software licensing, services and solutions to businesses in certain areas and related assets and liabilities on a going concern basis to our Subsidiary, CPL. CPL and CTIPL also agreed on a novation of the loan amounting to USD three million from Innoven Capital Singapore Pte. Ltd. to CTIPL as borrower under that loan to CPL with effect from November 1, 2021. Accordingly, CPL is now obliged to repay the loan and meet other obligations under the loan arising both before as well as after 1 November 2021. Various of CPLs subsidiaries and CTIPL guarantee CPLs performance of its obligations under the loan. In addition, CPL has entered into a debenture and share pledge under which it has provided security for the loan and associated liabilities. CTIPL provided warrants to Innoven Capital Singapore Pte Ltd allowing it to subscribe for CTIPL shares and such an obligation remains with CTIPL. As such warrants were part of the original loan arrangement, CPLs security for the loan extends to it too. Further, our Promoter, CTIPL entered into a deed of assignment dated November 20, 2021, with our Subsidiary, CPL, wherein CTIPL has assigned, assured, transferred, unto CPL, absolutely, irrevocably and in perpetuity with full title guarantee, all rights, title, interests and benefits (whether vested, contingent or future) of CTIPL in Singapore and throughout the world, all its registered and unregistered trademarks and patents intellectual property. Additionally, pursuant to the Gift Deed China, Gift Deed Dubai, Gift Deed Malaysia and Gift Deed Indonesia, our Promoter, CTIPLs entire share capital along with its rights, title, interests and benefit in its subsidiaries, Capillary Shanghai, Capillary Dubai, Capillary Malaysia, and Capillary Indonesia were transferred to our Subsidiary, CPL. For details in relation to the Business Transfer, the deed of novation, the deed of assignment, and the gift deeds see "History and Certain Corporate Matters - Material acquisitions or divestments of business or undertakings, mergers, amalgamations or revaluation of assets in the last ten years" on page 217.
? Pursuant to the acquisition agreement dated September 1, 2021, entered into between PLC, PHI and CPL, our Subsidiary, acquired ownership of PLC and PHI for consideration payable in cash and stock linked in an earn out formula in terms of the acquisition agreements. For details in relation to the acquisition agreement, see "History and Certain Corporate Matters - Material acquisitions or divestments of business or undertakings, mergers, amalgamations or revaluation of assets in the last ten years" on page 217.
Other material developments:
? Pursuant to a resolution passed by our Shareholders at the extra-ordinary general meeting held on November 17, 2021, our Company sub-divided its authorised equity share capital, were sub-divided of 2 each on November 26, 2021 i.e., the record date.
? On November 24, 2021, our Company allotted 37,814,671 bonus equity shares in the ratio of 3.1 equity shares for every 1 equity share held to all the Shareholders whose name appear on the register of member of our Company as on the record date i.e. November 26, 2021.
? Pursuant to the resolution of the Board of Directors and Shareholders each dated October 29, 2021, our Company adopted the ESOP 2021. For details, see "Capital Structure Employees Stock Options Scheme" on page 98.
IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000
IIFL Capital Services Support WhatsApp Number
+91 9892691696
Download The App Now
Follow us on
2025, IIFL Capital Services Ltd. All Rights Reserved
IIFL Capital Services Limited - Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248, DP SEBI Reg. No. IN-DP-185-2016, BSE Enlistment Number (RA): 5016
ARN NO : 47791 (AMFI Registered Mutual Fund Distributor)
This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.