Nucleus Software Exports Ltd Management Discussions.

THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forming Part of the Financial Statements for the year ended March 31, 2021

Managements discussion and analysis of the financial condition and results of operations include forward-looking statements based on certain assumptions and expectations of future events. The Company cannot assure that these assumptions and expectations are accurate. Although the Management has considered future risks as part of the discussions, future uncertainties are not limited to Management perceptions.

A. Industry Structure and Development

The overall industry landscape has become highly conducive for the growth of FinTechs. Not only is the venture capital industry supporting this growth as mentioned in a joint report from BCG and FICCI (2021), the need for disruption to fill in gaps in the fast paced lifestyle of society has become very high. FinTechs are revolutionizing conversion of thousands of manual systems to digital ones. A process which would take weeks to complete earlier can now take half a day, due to extreme innovation introduced by FinTechs. This is because FinTechs have looked at every small activity with a fresh perspective.

B. Company Background

The Company was incorporated on January 9, 1989 as Nucleus Software Exports Private Limited with its registered office at 33-35 ThyagrajMarket, New Delhi, India. Subsequently in October 1994, it was converted into a Public Limited Company. In August 1995, Nucleus made an Initial Public Offer and is currently listed at National Stock Exchange of India Ltd. and BSE Ltd.

Nucleus Software is known for its world-class expertise and innovation in lending and transaction banking technology. We have inter-alia, two flagship products, built on the latest technology:

- FinnOne™, 10 time winner - Worlds Best Selling Lending Solution.

- FinnAxia™, an integrated global transaction banking solution used by banks worldwide to offer efficient and Innovative global payments and receivables, liquidity management and business internet banking services.

Nucleus Software operates through integrated and well- networked subsidiaries in India, Japan, the Netherlands, Singapore, USA, Australia and South Africa. Since 1995 product development has been our core strength and the Company has chosen to exclusively develop products and further add value through dedicated Research and Development initiatives.

Over the years we have gained deep experience working closely with Global leaders in the Banking and Financial Services industry. Headquartered in Delhi, India, the Company has seven subsidiaries, as described in table 1 below.

Date of Incorporation/ Acquisition Name of Subsidiary Company Location Percentage of Shareholding
February 25, 1994 Nucleus Software Solutions Pte. Ltd., Singapore 100%
August 5, 1997 Nucleus Software Inc. USA 100%
November 2, 2001 Nucleus Software Japan Kabushiki Kaisha Japan 100%
February 3, 2006 Nucleus Software Netherlands B.V. Netherlands 100%
April 21, 2008 Nucleus Software Ltd. India 100%
February 3, 2014 Nucleus Software Australia Pty. Ltd. Australia 100%
February 10, 2015 Nucleus Software South Africa (Pty) Ltd. South Africa 100%

Table 1

The Company has branch offices in Chennai, Pune and Mumbai in India and in London, UK, and Dubai. The Singapore subsidiary has a representative office in Jakarta in Indonesia and in Manila in the Philippines. These subsidiaries/branch offices help the Company in providing front-end support to customers and explore new opportunities.

The Honourable National Company Law Tribunal (NCLT) of New Delhi vide its Order dated March 18, 2020 approved the Scheme of Amalgamation (referred to as "the Scheme") providing for the merger of the wholly owned subsidiaries of the Company, Virstra I Technology Services Ltd. and Avon Mobility Solutions Pvt. Ltd., with Nucleus Software Exports Ltd. ( the Company).

Consequent to the above Order and subsequent filing of the certified copy with the Registrar of Companies, NCT of Delhi, the Scheme has become effective from July 1, 2020. Upon coming into effect of the Scheme, the business undertakings of Virtsra I Technology Services Ltd. and Avon Mobility Solutions Pvt. Ltd., have been transferred to and vested in the Company w.e.f. 1 April 2019 which was the appointed date in the Scheme.

Some notable accolades won over the years are as follows:

• Nucleus Software was awarded the "Best Technological Innovation in Payments (B2B)" award at the Seamless Middle East 2020 conference in Dubai

• Nucleus Software received first position at the "Corporate Governance and Sustainability Vision Awards 2021", held by Indian Chamber of Commerce

• Nucleus Software received an award for the Annual Report (for FY 19-20) from League of American Communication

Professionals (LACP). We also won the Platinum Award for excellence within the Industry for FY 2019-20 - Technology-Software and the Technical Achievement Award for overall excellence in the art and method of Annual Report communications (This is the first time we got this Award. Last year, we had won the Silver Award for Best In-House Report)

• FinnOne Neo has been recognized as the "#1 Leader in the Lending Solutions Category in the Indian Domestic Sales League Table 2019" and recognized as "#2 Leader in the Lending Solutions Category in the Global Sales League Table 2019" by IBS Intelligence.

• FinnOne Neo also wins the "Best Lending Implementation" award for the project at Roha Housing Finance in the IBS Intelligence FinTech Innovation Awards 2019". Powered by our solution, RattanIndia Finance wins the Celent Model Bank Award 2020 for Retail Lending powered by FinnOne Neo.

• Our Annual Report FY18-19 won the Platinum Award for excellence within the Industry - Technology-Software and a ranking of # 21 amongst the top 100 Annual Reports worldwide by League of American Communications Professionals LLC (LACP).

• We received an award in Mid Corporate Segment-for Excellence in IT & IT Enabled Services, at SME Business Excellence Awards, 2019, organized by Dun & Bradstreet Information Services India Pvt. Ltd (D&B).

"Best Lending Technology Implementation of the Year" award at the BFSI Innovative Technology Awards 2018 for project Lending on cloud for Sai Point Finance with FinnOne Neo.

• Received an award in Mid Corporate Segment-for Excellence in IT/ITES Sector, at SME Business Excellence Awards, 2017 organized by Dun & Bradstreet Information Services India Pvt. Ltd (D&B).

• Annual Report for the Year Ended March 31, 2017 won the Platinum Award for Excellence within the Technology- Software industry and ranked 7th amongst the Worlds Top 100 Annual Reports within the Technology-Software industry and by the League of American Communications Professional (LACP).

bob Finance and FinnOne win The Banking Technology Award 2016, bob Finance AG, a financial service company in Switzerland deployed Nucleus Softwares FinnOne for offering an innovative and completely digitized loan service. This implementation won The Banking Technology Award 2016 - Highly Commended for Best Use of IT in Lending.

• Named as a Model Bank Vendor 2016 Award by Celent for helping multiple clients achieve technology or implementation excellence.

• Recognized amongst the Worlds top 5 Mobile Banking Solution Providers by Forrester Research, inc. in The

Forrester Wave™: Mobile Banking Solutions, Q4 2015.

• Corporate LiveWire - FinTech Excellence Awards 2015 in the category "Excellence in Providing Banking Products"

• FinnOne™ 10 time winner - Worlds Best Selling Lending Solution by IBS Publishing, UK.

C. The Way Forward

The pace of disruption is only going to accelerate in the coming times. Both the breadth and depth of FinTechs are going to rise as time progresses and we may see a new ecosystem develop. The key requirement for such an ecosystem would be integrability between various fintech solutions in the market. Highly digitized banking platforms would emerge as leaders in such a market. While buzzwords around which latest technology is adopted by a bank or fintech may change with time, the underlying need for innovation at the core will remain the same.

D. Company Management

An active and well-informed Board is necessary to ensure the highest standards of corporate governance. At Nucleus, a well-qualified Board consisting of ten members manages the Company.

The Board at Nucleus comprises ten members; five Board members are Non-Executive Independent Directors including two women Directors, and the other five are Executive Directors, including one woman director. All Independent Directors, with their diverse knowledge and expertise, provide valuable contribution in the deliberations and decisions of the Board, maintaining the requisite independence. It develops and promotes the vision, culture and values of the Company and provides entrepreneurial leadership to the Company within a framework of prudent and effective controls.

Only a strong global team can drive excellent performance especially in a challenging business environment. During the year, critical functions of the organisation were strengthened with assessment of Leadership bandwidth to build a strong team aligned to Nucleus fundamentals and culture. Particular emphasis was placed on attracting, developing and retaining talent, especially in emerging markets, through specifically designed programs. At the same time, the focus was on continuously improving and strengthening the leadership team and fostering a unique performance culture at Nucleus. For a global company, a diverse workforce that unites different cultural backgrounds and work experience is an important success factor. We continued recruiting people from across the globe and our endeavour is to smoothly manage and assimilate this diversity in work culture.

Total manpower number stood at 1,932 at the end of the year.

Through these efforts we continue to build a robust Brand Nucleus with business from all global markets, supported through an effective distribution network of partnerships, alliances and acquisitions to achieve seamless and high quality delivery resulting in a high level of customer satisfaction.

E. OPPORTUNITIES AND THREATS

As computing power continues to become cheaper substantially, only hindered by the slight slowing down of Moores law, more and more graduates will gravitate towards software development. This will continue to fuel the growth in number of FinTechs entering the industry. This may potentially lead to a transformation of the entire landscape of the industry.

Greater the number of innovations and pace of innovation that FinTechs bring, greater becomes the threat for their competitors that fail to modernize their approach. At the same time, companies like ours that continue to push the envelope of innovation further and further, increase their chances of not only survival but also leadership.

F. OUTLOOK

One of the sources of strengths for Nucleus is the core value of continuous innovation. Over the past few decades, we shifted gears rapidly and stayed ahead of many of our competitors by focusing on this value. From building software products for the Banking and Financial Services and Insurance (BFSI) sector in the mid-90s to completely revamping our product line when it was already successful, we have always tried to provide our customers with the best that technology has to offer. In fact, this initiative of ours is being widely recognized by the BFSI industry in both domestic and international markets. Many customers of ours who want the latest technologies backing their businesses have reached out to us for their next generation digital transformation. With the many waves of the pandemic, bankers see the need to revamp their systems with the cutting-edge tools present in our FinnOne NEO™ and FinnAxia™ suites.

G. RISKS AND CONCERNS

These are discussed in detail in the Risk Management chapter provided later in this Annual Report.

H. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Internal control systems are a set of policies, processes and procedures put in place to help achieve the strategic objectives of an organization. Good controls encourage operational efficiency and compliance with laws and regulations, as well as minimizing the chance of errors, theft and fraud. At the same time internal controls also enhance the reliability and accuracy of accounting data.

The Company has an Internal Control System commensurate with the size, scale and complexity of its operations. This has been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorised use, executing transactions with proper authorisation and ensuring compliance of corporate policies. The management assessed the effectiveness of the Companys internal control over financial reporting (as defined in Regulation 17 of SEBI Regulations 2015) as of March 31, 2021.

BSR & Associates LLP, the statutory auditors of the Company, have audited the financial statements included in this annual report and have issued an unmodified opinion on the adequacy and operating effectiveness of the Companys internal financial controls over financial reporting.

The Board of Directors has also appointed Internal Auditors as recommended by the Audit Committee with a well-defined internal audit scope. The Internal Auditor reports to the Chairman of the Audit Committee and presents significant audit observations to the Audit Committee. Based on the report of the

Internal Auditor, process owners undertake corrective action in their respective areas and thereby strengthen the controls.

The CEO/CFO certification provided elsewhere in this report also places responsibility on the CEO and CFO to continuously ensure adequacy of our internal control systems and procedures.

I. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES

The IT industry witnessed a challenge in retaining its talent in the last two years - from being the largest employer of software professionals to nurturing the most diverse workforce that drives & delivers excellence. However, the booming industry continues to present challenges in attracting and retaining the talent we need. The increased diversity of human capital has helped the organizations in this industry to be creative, knowledgeable as well as innovative.

Our companys HR function focuses on creating an environment that stimulates the creation of knowledge while acting as a coach, counselor and facilitator. Consequently, strong emphasis has been placed on attracting, managing and retaining talent. As a strategic partner, the HR function sustained numerous initiatives to ensure a high-performing and engaged workforce. The Company has built global talent pool over the years, by recruiting students from premier universities in India and through the need based hiring for other positions. We continuously review and improvise them for still better retention. We are happy to share that we launched various organization-wide HR initiatives to ensure high-performing and engaged workforce like frequent connect sessions with associates, Capability Strengthening Workshops, Critical Resource Retention Program aimed at motivating and retaining key talent to name a few, which helped in actively managing and constantly building the unique capabilities of our human assets.

With great focus to create an enviable workplace, the HR policies/processes framework are reviewed frequently to maintain consistency with the industry best practices and accelerate operational efficiencies for achieving high performance excellence.

J. FINANCIAL PERFORMANCE

The Company has adopted Indian Accounting Standards (Ind- AS) with effect from April 1, 2017 (transition date being April 1, 2016) pursuant to notification issued by Ministry of Corporate Affairs dated February 16, 2015 notifying the Companies (Indian Accounting Standards) Rules, 2015. Accordingly, the financial results have been prepared in accordance with Indian Accounting Standards (Ind-AS) as prescribed under Section 133 of the Companies Act, 2013 read with relevant rules issued thereunder. Consequently the results for the year ended March 31, 2017 have been restated to comply with Ind AS to make them comparable.

The financial statements are prepared in accordance with the Companies (Accounting Standards) Rules, 2015, notified under section 133 of the Act and other relevant provisions of the Act. Accounting policies have been consistently applied except where a newly issued accounting standard, if initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. Management evaluates all recently issued or revised accounting standards on an ongoing basis.

The Company has seven subsidiary companies, all of which are wholly-owned subsidiaries. The Company discloses stand-alone audited financial results on a quarterly and annual basis, consolidated un-audited financial results on a quarterly basis and consolidated audited financial results on an annual basis. The financial results of the Company have been discussed in this report in two parts:

i) Nucleus Software Exports Limited (Standalone) which excludes the performance of subsidiaries of the Company, discussed in this chapter and

ii) Nucleus Software Exports Limited (Consolidated) including performance of subsidiaries of Nucleus Software, and has been discussed in the later chapters of this report.

Standalone financial results are as below:

(Rs. in crore)
For the Year Ended March 31, 2021 % of revenue 2020 %o of revenue Growth %
Revenue from Operations 454.36 100 444.20 100 2.29
Expenses
a) Employee benefit expense 277.47 61.07 266.74 60.05 4.02
b) Operating and other expenses 54.80 12.06 100.18 22.55 (45.29)
c) Finance costs 0.77 0.17 0.75 0.17 1.95
Total Expenses 333.04 73.30 367.67 82.77 (9.42)
Operating Profit (EBITDA) 121.32 26.70 76.53 17.23 58.51
Depreciation 11.43 2.52 11.23 2.53 1.73
Operating Profit after Interest and Depreciation 109.89 24.19 65.30 14.70 68.28
Other Income 36.63 8.06 63.75 14.35 (42.54)
Profit Before Tax 146.52 32.25 129.05 29.05 13.54
Taxation 34.48 7.59 26.83 6.04 28.50
Profit After Tax 112.04 24.66 102.22 23.01 9.61
Other Comprehensive Income 1.75 0.39 (8.49) (1.91) (120.65)
Total Comprehensive Income for the period 113.79 25.04 93.73 21.10 21.40

Revenue from Operations

Our revenues from software development comprise of income from time and material and fixed price contracts. Revenue from time and material contracts is recognised as the services are rendered and revenue from fixed price contracts comprising of license, related customization and implementation is recognised in accordance with the output method based on percentage completion. Revenue from annual technical service contracts is recognized on a pro rata basis over the period in which such services are rendered.

During the year, the revenue from operations is Rs.454.36 crore, against Rs.444.20 crore for the previous year.

Revenue from Products and Services

We are a Product Company and derive most of our revenues from Products and related services. Categorized under revenue from "Products", it comprises of license fee, revenue from customization and implementation of products and postproduction maintenance support. Product revenue for the year is Rs.424.51 crore, 93% of the total revenue, against Rs.408.00 crore, 92% of total revenue, in the previous year.

Software services rendered by the Company, classified under this segment, typically consist of development of software to meet specific customer requirements. These services consist of application development & maintenance, testing, consulting and infrastructure management services with a strong banking domain focus. Software projects and services revenue for the year is Rs.29.85 crore, 7% of the total revenue, against Rs.36.20 crore, 8 % of the total revenue, in the previous year.

Revenue from Various Geographies

Your Company is incorporated in India and caters to customers situated all across the globe and hence significant part of the revenue is derived from international sales. For the year 57% revenue was derived from overseas. The graph below presents a geography-wise distribution for the year as well as the previous year.

EXPENSES

Employee Benefit Expense

Employee benefit expense includes salaries paid to employees in India, with fixed, variable and incentives components; provision for gratuity and compensated absence, contribution to provident fund and expense on staff welfare activities. The employee benefit expenses have increased by 4.02 % to Rs.277.47 crore, 61.07% of revenue against Rs.266.74 crore, 60.05% of revenue in the previous year. The increase is primarily due to increase in employee compensation.

(Rs. in crore)
For the Year Ended March 31, 2021 % of Revenue 2020 % of Revenue Growth %
Salaries 255.14 56.15 242.31 54.55 5.29
Contribution to provident and other funds 13.79 3.03 13.85 3.12 (0.41)
Gratuity 3.99 0.88 3.49 0.79 14.37
Staff welfare 4.55 1.00 7.09 1.60 (35.84)
Total Employee Benefit Expenses 277.47 61.07 266.74 60.05 4.02
Revenue 454.36 100.00 444.20 100.00 2.29

Operating and Other Expenses

Operating and other expense consist of expenses on travel to execute work at client site and for other related activities, cost of software purchased for delivery to clients, bandwidth and communication expense, infrastructure charges, expenses on account of brand building activities, training and recruitment costs, legal and professional charges, repairs and maintenance charges, insurance, provision for doubtful debts, contribution to CSR activities and others.

Operating and other expenses at Rs.55.57 crore, 12.23% of revenue for the year, a decrease of 44.94% against Rs.100.93 crore, 22.72% of revenue in the previous year.

For the Year Ended Mar 31, 2021 % of Revenue 2020 % of Revenue Growth %
Outsourced Technical Service Expense 12.99 2.86 12.26 2.76 5.97
Cost of software purchased for delivery to clients 0.62 0.14 1.28 0.29 (51.56)
Travelling 1.02 0.22 21.37 4.81 (95.23)
Power and fuel 2.70 0.59 4.40 0.99 (38.64)
Rent 0.45 0.10 0.56 0.13 (19.64)
Rates &Taxes 0.26 0.06 0.17 0.04 52.94
Repair and maintenance 4.61 1.01 5.94 1.34 (22.39)
Legal and professional 3.74 0.82 5.14 1.16 (27.24)
Directors remuneration 1.65 0.36 1.43 0.32 15.38
Conveyance 0.34 0.07 1.50 0.34 (77.33)
Communication 0.99 0.22 1.70 0.38 (41.76)
Information technology expenses 11.96 2.63 11.12 2.50 7.55
Provision for doubtful debts/advances/other current assets (3.38) (0.74) 6.24 1.40 (154.17)
Commission to channel partners (0.23) (0.05) 2.02 0.45 (111.39)
Training and recruitment 0.96 0.21 3.23 0.73 (70.28)
Conference, exhibition and seminar 0.15 0.03 3.10 0.70 (95.16)
Advertisement, business development and promotion 1.11 0.24 2.09 0.47 (46.89)
Insurance 0.40 0.09 0.45 0.10 (11.11)
Finance Cost 0.77 0.17 0.75 0.17 2.67
Sales & marketing fee 7.90 1.74 12.04 2.71 (34.39)
Net loss on sale of fixed assets/discarded assets 0.11 0.02 - - -
Withholding tax charged off 3.5 0.77 - - -
Miscellaneous expenses 1.29 0.28 2.69 0.61 (52.04)
Contribution to CSR activities 1.65 0.36 1.45 0.33 13.79
Total Operating and Other Expenses 55.57 12.23 100.93 22.72 (44.94)
Revenue 454.36 100.00 444.20 100 .00 2.28

Finance cost includes bank charges and fee for issuance of bank guarantees. It is Rs.0.77 crore against Rs.0.75 crore in the previous financial year.

The Company has setup Nucleus Software Foundation, a trust for the purpose of undertaking CSR activities of the company. During the year, the Company contributed Rs.1.65 crore towards CSR activities of the Foundation. The details of CSR initiatives undertaken by the Foundation has been provided in a separate section in the Annual Report.

Operating Profit (EBITDA)

Operating Profit of Rs.121.32 crore, 26.70% of revenue against Rs.76.53 crore, 17.23% of revenue in the previous year.

Depreciation

Depreciation on fixed assets is Rs.11.43 crore, 2.52% of revenue for the year against Rs.11.23 crore, 2.53% of revenue in the previous year.

Other income

Other Income represents income received in the form of dividends from current investments, interest on fixed deposits and bonds and capital gains on the sale of current investment:

(Rs. in crore)
For the Year Ended March 31, 2021 2020
Dividend on investment in Mutual Fund 0.26 10.06
Interest income on financial assets carried at amortised cost 13.59 16.25
Dividend from Subsidiary companies - 21.90
Net Gain / (Loss) on foreign currency 0.65 2.79
Profit on sale of assets/investments 1.25 (0.01)
MTM gain or (loss) 19.34 5.50
Others 1.54 7.26
Total 36.63 63.75

Other income for the year is Rs.36.63 crore against Rs.63.75 crore for the previous year.

Foreign Exchange Gain/ (Loss)

Foreign Exchange Gain (Loss) includes gain (loss) from translation of current assets and liabilities at quarter end rates, those arising from realization/payments of receivables/payables. During the year, the Company had a foreign exchange gain of Rs.0.65 crore against a gain of Rs.2.79 crore for the previous year. We conduct major portion of our business transactions in currencies other than the Indian Rupee. Nearly Sixty Five percent of our revenue is denominated in foreign currency, predominantly the US Dollar, while majority of our expenses are in the Indian Rupee and therefore the Company is exposed to continuing risk of foreign exchange fluctuation. The exchange rate between the rupee and the U.S. dollar has changed substantially in recent years and may fluctuate substantially in the future. The exchange rate movement during the year is depicted in the below mentioned chart.

The monthly closing rate of Indian Rupee varied from a high of Rs.75.67 to the Dollar in April 2020 to a low of Rs.72.96 in February 2021 and overall lost 3.4 % against the US Dollar on a March end to March end comparison.

Taxation

Current tax represents the provision for Indian income tax on the profits of the Company as calculated in accordance with the provisions of the Income Tax Act 1961.

Deferred tax is recognized on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods, accordance with accounting standards. Deferred tax is measured using the tax rates and the tax laws enacted or substantially enacted as at the reporting date.

(Rs.in crore)
For the Year Ended March 31, 2021 2020
- Current Tax Expense 28.01 21.07
- Deferred Tax Credit (net) 6.47 5.76
Total 34.48 26.83

Total effective tax for the year is 7.59% of Revenue, in comparison to 6.04% of Revenue for the previous year.

Profit After Tax

Our profit after tax for the year is Rs.112.04 crore, 24.66% of revenue against Rs.102.22 crore, 23.01% of revenue, during the previous year.

Other Comprehensive Income (OCI)

Other comprehensive income represents:

a) Equity instruments through OCI - this is primarily on account of fair valuation of investment for which the company has made an irrevocable option to present the same in the OCI. For the year it is Rs.1.55 crore, against Rs.(4.99) crore in the previous year.

b) Remeasurements of the defined benefit plans - consist mainly of remeasurements gain/losses on our defined benefit plans. For the year it is Rs.(1.47) crore net after Tax, against Rs.(0.91) crore net after Tax in the previous year.

c) Effective portion of gain (loss) on hedging instruments of effective cash flow hedges, net - when a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of derivative is recognised in OCI. For the year it is Rs.1.67 crore net after Tax, against Rs.(2.59) crore in the previous year.

Total other comprehensive income for the year is Rs.1.75 crore, against Rs.(8.49) crore in the previous year.

Share Capital

Share Capital of the Company consists of Equity Share Capital. The paid-up share capital as on March 31, 2021 is 29,040,724 equity shares of Rs.10 each.

Retained Earnings

(Rs. in crore)
Particulars 2021 2020
Opening balance 498.92 426.80
Add: Profit for the year 112.04 102.22
Less : Appropriations
- Final dividend on equity shares - (26.14)
- Interim dividend / Final dividend paid (8.71) -
- Corporate Dividend tax - (3.05)
- Remeasurement of the defined benefit plans, net (1.47) (0.91)
Closing balance 600.78 498.92

Reserves and Surplus

Movement in the components of reserves and surplus is as below:

(Rs. in crore)
Particulars Closing Balance as on March 31, 2021 Additions/ (Deletions) during the o year Opening Balance as n March 31, 2020
Capital Reserve 0.89 - 0.89
Securities Premium 1.00 - 1.00
Retained Earnings 600.78 101.86 498.92
General reserve 6.61 - 6.61
Capital redemption reserve Other Comprehensive Income 3.34 - 3.34
Hedging Reserve 0.27 1.67 (1.40)
Equity instrument through other comprehensive income 5.01 1.55 3.46
Total 617.90 105.08 512.82

Property, plant and equipment and Intangible assets

As at March 31, 2021, Net carrying Amount of Property, Plant and Equipment and Intangible assets is Rs.24.20 crore against Rs.30.44 crore as on March 31, 2020.

(Rs. in crore)
As at March 31, 2021 2020 % Inc/Dec
Gross Carrying Amount
Freehold land 0.34 0.34 -
Plant and equipment 4.43 3.63 0.80
Building 16.58 16.58 -
Office and other equipment 1.52 1.40 0.12
Computers 24.00 23.13 0.87
Vehicles 3.43 4.51 (1.08)
Furniture and fixtures 1.97 1.79 0.18
Software 10.89 10.13 0.75
Total 63.16 61.51 1.65
Less; accumulated depreciation 38.96 31.07 -
Net Carrying Amount 24.20 30.44 (6.24)

Transition to Ind AS 116

Following are the changes in the carrying value of right of use assets:

(Rs. in crore)

As at 31 March 2021

As at 31 March 2020

Particulars Building Lease hold land Total Building Lease hold land Total
Opening balance 5.58 5.28 10.86 4.68 5.36 10.04
Additions - - - 3.54 - 3.54
Amortisation 2.50 0.07 2.57 2.64 0.08 2.72
Closing balance 3.08 5.21 8.29 5.58 5.28 10.86

The aggregate depreciation expense on right of use assets is included under depreciation and amortisation expense in the Standalone Statement of Profit and Loss Account.

The following is the movement in lease liabilities during the year ended 31 March 2021

(Rs. in crore)
Particulars As at 31 March 2021 As at 31 March 2020
Opening balance 5.49 4.68
Additions - 3.05
Finance cost accrued during the period 0.41 0.49
Payment of lease liabilities (2.58) (2.73)
Rent concession on lease liability (0.06) -
Closing balance 3.26 5.49

The Company has applied expedient to one of its lease contracts and accordingly an amount of Rs.6 lacs for rent concession has been recorded for the year ended 31 March 2021 in the Standalone Statement of profit and loss.

Investments

Investments of the Company can be categorized as per the following:

i) Non-current investments totaling Rs.191.44 crore as on March 31, 2021 against Rs.245.77 crore as on March 31, 2020.

a. Investment In subsidiaries -The investment of the Company in the Equity Share capital of its subsidiaries stood at Rs.14.85 crore.

(Rs. in crore)

As at March 31

2021 2020
Nucleus Software Solutions Pte. Ltd., Singapore 1.63 1.63
Nucleus Software Inc., USA 1.63 1.63
Less: Provision for diminution in value of investment in Nucleus Software Inc., USA (1.63) (1.63)
Nucleus Software Japan Kabushiki Kaisha, Japan 0.41 0.41
Nucleus Software Netherlands B.V., Netherlands 4.89 4.89
Less: Provision for diminution in value of investment in Nucleus Software Netherlands B.V., Netherlands (4.89) (4.89)
Nucleus Software Limited, India 11.94 11.94
Nucleus Software Australia Pty. Ltd., Australia 0.55 0.55
Nucleus Software South Africa (Pty.) Limited, South Africa 0.32 0.32

b. Investment in equity shares of a listed company at FVOCI

- Rs.5.26 crore.

c. investment in Preference Shares (quoted)- Nil.

d. Investment in Preference Shares (unquoted)- Nil.

e. Investment in bonds (quoted)- Rs.77.37 crore.

f. Investment in mutual funds (quoted) - Nil.

g. Investment in mutual funds (unquoted) - Rs.93.96 crore.

ii) Current Investments and Bank Balances

Current Investments of Rs.457.29 crore as on March 31, 2021, as per below table.

(Rs. in crore)
Name Value of units as on March 31, 2021
Investment in Mutual Funds (Unquoted)
Aditya Birla Sunlife Arbitrage Fund -Direct Plan - Growth 14.04
HDFC Arbitrage Fund - Direct Plan - Growth 19.28
HDFC Ultra Short term Fund - Direct Plan - Growth 16.00
ICICI Prudential Equity Arbitrage Fund- Direct Plan- Growth 3.32
Kotak Equity Arbitrage Fund- Direct Plan - Growth 36.26
L&T Ultra Short Term Fund - Direct Plan - Growth 6.48
Nippon India Arbitrage Fund - Direct Plan - Growth 12.93
SBI Liquid Fund - Direct Plan - Growth 16.35
Tata Liquid Fund - Direct Plan - Growth 12.52
DSP Ultra Short term Fund - Growth - Direct 6.79
DSP Low Duration Fund - Growth- Direct 20.68
ICICI Prudential Money Market Fund - Direct Plan - Growth 32.89
UTI Money Market Fund - Direct Plan - Growth 21.62
UTI Arbitrage Fund - Direct Plan - Growth 11.76
Aditya Birla Sun Life Money Manager Fund - Direct Plan - Growth 23.92
SBI Arbitrage Opportunities Fund - Direct Plan - Growth 15.00
HDFC Money Market Fund - Direct Plan - Growth 21.61
Axis Treasury Advantage Fund - Direct Plan - Growth 16.16
SBI Savings Fund - Growth- Direct 23.79
Kotak Money Market Fund - Growth-Direct 13.19
Axis Money Market Fund - Growth - Direct 0.81
Tata Treasury Advantage Fund - Growth -Direct 5.93
351.33
Fixed Maturity Plans/Interval Plans (quoted)
Fixed maturity plan at Amortised cost
ICICI Prudential FMP - Series 82 - 1225 Days Plan B 6.28
UTI Fixed Term Income Fund Series XXVIII - IV (1204 Days) 6.28
Nippon India Fixed Horizon Fund XXXV (1227 days) -series 12 6.22
Aditya Birla Sun Life Fixed Term Plan-Series OY (1218 days) 6.28
ICICI Prudential FMP - Series 82 - 1203 Days Plan K 6.27
Nippon India Fixed Horizon Fund XXXVI - Series 6 6.24
UTI Fixed Term Income Fund Series XXVIII -XIV (1147 days) 6.22
43.79
Investment in bonds (quoted)
Bonds securities at Amortised cost
8.09% Power Finance Corporation Tax Free Bonds 2021 4.71
7.51% Power Finance Corporation Tax Free Bonds 2021 5.17
7.55% Indian Railway Finance Corporation Limited Tax Free Bonds 2021 3.06
8.00% Indian Railway Finance Corporation Limited Tax free bonds 2022 20.87
8.20% Power Finance Corporation Tax Free Bonds 2022 0.63
34.44

 

Name Value of units as on March 31, 2021
Investment in Preference Shares (quoted)
Preference shares at Amortised cost
17.38% IL&FS Financial Services Ltd. (Preference Shares - 2021) 1.00
Less: Provision for impairment of investment (1.00)
7.50% Tata Capital Ltd. (Preference Shares - 2020) 5.00
Investment in Preference Shares (unquoted)
Preference shares at Fair value through profit or loss (FVTPL)
10% Tata Motors Finance Ltd (CCPS - 2025) (see note 2.30) 22.73
27.73
Aggregate amount of investment 457.29

As of March 31, 2021 current investments and Bank Balances stood at Rs.23.58 crore as against Rs.73.93 crore as on March 31, 2020.

(Rs. in crore)
As at March 31, 2021 2020
Balances with Bank
Cash in Hand - 0.02
Balances with scheduled banks 9.75 40.08
Balance with non scheduled banks in current accounts 0.53 0.50
Balances with scheduled banks in deposit accounts with original maturity of less than 3 months 0.72 1.79
Balances with scheduled banks in earmarked accounts 0.36 0.38
Balances with scheduled banks in deposit accounts 12.22 31.16
Current Investments 457.29 242.22
Total 480.87 316.15

Operating Cash Flow

Our net cash flow from operating activities before working capital changes is Rs.124.72 crore for the financial year, against Rs.84.75 crore in the previous year. After considering working capital changes, operating cash flow is Rs.105.86 crore against Rs.69.07 crore in the previous year. To summarize the Companys liquidity position, given below are a few ratios:

(in %)
As at March 31, 2021 2020
Operating cash flow as % of revenue 23% 16%
Cash and Equivalents as % of assets 57% 43%
Cash and Equivalents as % of revenue 106% 71%
Current investments as % of assets 54% 33%
Current investments as % of revenue 101% 55%

Trade Receivables

Our trade receivables (net of provision) as on March 31, 2021 are Rs.77.41 crore against Rs.79.96 crore on March 31, 2020. The age profile of the debtors (net of provision) is given below:

(in %)
As at March 31, 2021 2020
Less than three months 88.45% 85.66%
Between 3 and 6 months 2.88% 7.20%
More than 6 months 8.67% 7.14%

Loans and Other Financial Assets

Loans and Other Financial assets have been classified into Non Current and Current based on their period of realization.

(Rs. in crore)
As at March 31, 2021 2020
Non - Current
Staff Loans 0.02 0.06
Loan to subsidiary credit impaired 1.65 1.75
Security deposits 2.44 2.50
Long-term bank deposits 18.22 0.20
Total 22.33 4.51
Current
Staff Loans 0.11 0.35
Security deposits 0.02 0.06
Mark-to-market gain on forward contracts 0.37 -
Expenses recoverable from customers - 0.18
Other recoverable from subsidiaries 0.79 0.69
Unbilled revenue 3.51 1.31
total 4.80 2.59
total Loans and other Financial Assets 27.13 7.10

Security Deposits, utilised primarily for hiring of office premises and staff accommodation, amounts to Rs.2.44 crore as on March 31, 2021 against Rs.2.50 crore as on March 31, 2020. Long term bank deposits amounting to Rs.18.22 crore as on March 31, 2021 include deposits held with bank for maturity more than 12 months from balance sheet date under lien with banks and are restricted from being settled for more than 12 months from the balance sheet date.

Other Assets

Other Assets represents income tax asset, Employee advances, Service income accrued but not due, Balances with Government authorities, Supplier and capital advances, prepaid and deferred expenses. Other assets have been classified into Non Current and Current based on their period of realization.

other Assets

(Rs. in crore)
As at March 31, 2021 2020
Non - Current
Capital advances 0.04 0.30
Employee advances 0.37 0.38
Prepaid expenses 0.05 0.08

 

ft in crore)
As at March 31, 2021 2020
Advance payment to gratuity trust (see note 2.38) - 1.19
Corporate dividend tax * - 3.26
total 0 .46 5.21
Current
Service income accrued but not due 11.19 8.55
Employee Advances 0.14 0.33
Prepaid Expenses 3.40 3.69
Contract Cost 0.03 -
Balances with Government authorities 0.43 1.11
Supplier advances 4.38 4.50
Deferred Expenses 0.01 0.04
total 19.58 18.22
total other Assets 20.04 23.43

Current Liabilities

(Rs. in crore)

As at March 31, 2021 2020
Financial liabilities
Lease Labilities 2.49 2.23
Trade Payables 13.86 18.19
Unpaid dividends 0.36 0.38
Mark-to-market gain/loss on forward contracts - 1.87
Payable for purchase of fixed assets 0.19 0.07
Employee payable 32.80 28.79
Other current liabilities
Advances from customers/Advance Billing 57.67 65.73
Deferred Revenue 69.36 52.97
Payable to Gratuity Trust - -
Statutory dues 8.64 7.95
Short term provisions Compensated absences 2.24 2.35
Provision for Tax 3.86 0.63
Total 191.47 181.16

Current liabilities represent trade payables, short-term provisions, other financial liabilities and other current liabilities. As on March 31, 2021 the Current liabilities are Rs.191.47 crore (Rs. 181.16 crore as on March 31, 2020).

Trade payables represent the amount payable for providing goods and services and are Rs.13.86 crore as on March 31, 2021 against Rs.18.19 crore as on March 31, 2020.

Statutory dues are the amounts accrued for taxes deducted at source by the Company, staff provident fund, employee state insurance liabilities, GST, etc. As on March 31, 2021 it is Rs.8.64 crore against Rs.7.95 crore as on March 31, 2020.

Short term provisions for leave encashment and taxes are those for which liability is expected to arise in near future. A sum total of all these short-term provisions as on March 31, 2021 are Rs.2.24 crore against Rs.2.35 crore as on March 31, 2020.

Non-Current Liabilities

Non-Current Liabilities as on March 31, 2021 were Rs.12.03 crore against Rs.12.54 crore as on March 31, 2020. The break-up of noncurrent liabilities at the year-end is given below:

(Rs. in crore)
As at March 31, 2021 2020
Financial liabilities
Lease Liabilities 0.77 3.26
Employee Payable - 1.17
NON-CURRENT PROVISIONS 9.93 8.11
Deferred tax liabilities (net) 1.33 -
Total 12.03 12.54

A liability or provision is recognised when there is 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.

Provision for Leave encashment represents provisions made by the Company based on actuarial valuation.