Market Overview
The demand environment continues to remain challenging as high level of inflation continues to worry the central banks. Geopolitical conditions remain challenging with actual conflicts and serious risk scenarios creating uncertainty for the world economy. 2024 will also see a record number of elections in major countries of the world. While the immediate macroeconomic impact of these elections is expected to be limited, their outcome will influence the outlook for the coming year. Growth outlook in advanced economies is likely to be feeble as high price level and tight monetary policies dampen new investment as well as consumption. Annual inflation rates are expected to stay above target in many major economies. Overall risks to the growth outlook are thus tilted to the downside. Geopolitics will remain an important risk factor for the world economy. In an environment of rather weak growth and falling inflation, major central banks are expected to lower bank rates towards later part of 2024. During early pandemic years, as companies accelerated their digital transformation efforts, technology industry flourished. However during last year, high inflation and elevated interest rates softened global tech spending. It was a turbulent year for the tech sector with many leading tech companies announcing layoffs. Despite these challenges, there are hopes for tech comeback to be imminent. With economists lowering the assessment of recession risks, there are expectations for tech sector to return to modest growth. Tech companies have extended their reach into other industries using digital advancements. Artificial Intelligence (AI) is anticipated to lead the charge in growth as companies seek AI solutions to increase productivity and drive profitability. No matter what the macroeconomic outlook looks like, Chief Information Officers must work through the various risks of technology and lead their teams to meet or exceed business objectives, and they still have to run efficient and cost effective operations that will navigate the Company through this phase.
Company Overview
We are a global solutions company having technical expertise and industry experience of over 30 years. We imagine, design and deliver new digital experience, revenue streams and business models to meet rising customer expectations. We are focused on staying connected to our clients and employees while building technology solutions. Over last 30+ years, we have invested in establishing partnerships and getting our teams skilled to help our clients navigate through disruptive technology shifts and achieve business differentiation through innovative, yet resilient composition of technology. We are committed to unleashing full potential of every team member by helping them accelerate their professional growth while impacting the world in powerful and positive way by using the latest technology.
Digital adoption has accelerated dramatically, leading to the world in which software is everywhere. We are the digital engineering partner who can help win in this software driven world. Our digital engineering expertise is helping transform market leaders across industries. With our impactful projects, ranging from groundbreaking IoT solutions to cutting edge advancements in cloud computing and artificial intelligence, we have been at the forefront of the technology wave thats shaping the digital landscape. The Company emerged as one of Indias fastest growing IT companies. We crossed $ 1 Billion in revenue in FY 2022-23 and are working towards crossing $ 2 Billion within next three years. The journey is being steered by dynamic group of professionals. Our client list consists of numerous industry leaders. We were awarded "Most Promising Company of the Year" by CNBC-TV18. We have delivered significant shareholder value, with shareholder returns of 1,152.9% over the last 5 years.
Opportunities & Challenges
Technology industry is in the business of solving everyone elses problem but tech companies are facing its own issues. The IT sector has undergone significant changes since the onset of COVID-19 and technology companies need to prepare for the new challenges in the coming years. Firstly, tech businesses have to keep up with all the new lightning changes in the technology trends. Secondly, given the difficult economic situation, rising inflation curtails tech spending, which impacts demand scenario, though the demand to embrace technology to accelerate business growth has increased. However adopting technology comes with unprecedented challenges. In our digital world, adopting emerging technology is a MUST for companies to stay competitive. However, potential benefits and risks of new technology is difficult to predict. One way to balance technologys potential risk and benefits is encouraging collaboration and promoting the culture of innovation. While customer demand is volatile, one of the major challenges is the shortage of skilled talent in the new technologies. Its a significant problem in introduction of innovative technology. To retain existing talent, companies have been offering attractive pay packages which has resulted in the elevated salary levels. The global talent shortage has burdened the job market. With tech advancement accelerating by the day, its possible the problem gets worse. Problem in communication between remote workforce and office workforce can have a negative impact on the productivity of the entire company. For enhancing productivity, it is important to create a corporate culture where each employee would feel like a participant in the work process. Another common problem in technology companies is the organisation of internal multicultural communication. When the team is made up of different nationalities, it is necessary to develop an inclusive corporate culture. At the same time, diversity of the workforce also helps improve productivity and competitiveness. Geographic spread of a business also brings in complexity in compliance requirements. Failure to comply with specific regulations result in fines and penalties that can paralyse the business. Another important threat is of data breach. It affects the financial health and competitive advantage of a business. Successful navigation through all these challenges may even open doors for new opportunities. Cyber security, multi-cloud operability, and its integration are some of the opportunities that can help drive growth.
Next year looks to be an exciting year for the technology industry. Not only the AI revolution is taking place but there is a transition going on from Web2 to Web3 which Goldman Sachs, Morgan Stanley and Citibank say is worth 8 to 12 trillion dollars. It will be common ground for companies to have digital first strategy where companies will build things digitally before they build it physically. There will be many complexities and regulatory compliances which leaders will have to look at as they attempt to execute their strategies for growth and innovation. To remain agile will be the key.
Business Strategy
No matter what the companys size is, todays business landscape is throwing challenges and disruptions from every direction. After a difficult year in tech sector, everyone is hoping for a comeback. There is much less talk on the recession and hence, a renewed optimism that we could be entering the recovery stage prevails. Economic uncertainty persists, inflation remains stubborn, talent shortage has not been solved. Technical debt is increasing. Under such circumstances, a report from Gartner suggest that IT services will be the largest segment of IT spend. Thus tech leaders should be prepared to shift strategies to meet these demands. It is expected that majority of the IT enterprise software and services companies will integrate Gen AI into their offerings. The fastpaced developments in the world of AI have led to much excitement as well as controversy. Secondly, increasing data regulation and security standard require new governance standards. The growth of data privacy regulations has also elevated consumer expectations about data protection and security. Along with legislative data regulations, businesses must meet evolving industry specific compliance standards while also investing in technology strategy that implements modern security solutions to keep customer data safe. A strategic plan needs to be developed that uses technology initiatives to drive business growth. Resource utilisation should be optimised to serve both high priority business goals and technology ROI. There should be a method to mitigate potential risks, including data breach and technology failure and other unforeseen cybersecurity threats.
Talent Management
Talent management has become a buzzword in the corporate world. Right talent is an important asset and retaining this talent is an important task. At Persistent, we make sure that employees with right skill stick with the Company for a longer time. Our Human Resource management takes care of recruiting, managing, assessing, developing and maintaining an Organisations most important resource i.e. people. Talent management brings together various management initiatives. Our growth mindset has also helped us to build a meaningful work culture.
In this fast-changing tech world, work culture is most important. At Persistent, we promote an environment where employees feel empowered to collaborate and contribute. All our policies and practices demonstrate our peoplefirst approach. Our reflection of core mission and values have helped to find ways to continuously improve and grow putting people at the center. Empathy, communication and transparency are the basis of all our interactions with the team. The shift to remote work has also made it possible to hire people all around the world which helps to create a diverse environment.
Internal Audit & Control
The Board is responsible for establishing and maintaining adequate internal financial control as per Section 134 of the Companies Act, 2013. Company has an Internal Control System in accordance with Section 134(5)(e) of the Act, commensurate with the size, scale and complexity of its operations.
The company has an independent in-house internal audit team. Company also takes help of specialized third-party consultants and professionals for specific reviews as and when deemed necessary in line with the audit plan. In order to maintain objectivity and independence, The head of internal audit team reports to the Chairperson of Audit Committee of the Board. The audits are conducted based on risk based internal audit plan, which is reviewed and approved by the Audit Committee.
An extensive program of internal audits and management reviews supplement the process of internal financial control framework. The Internal auditors perform an independent check of effectiveness of key controls in identified areas of internal financial control reporting along with operational controls and fraud risk controls. Significant audit observations and necessary corrective actions are presented to the Audit Committee in its quarterly meetings. Based on the internal auditors report process owners undertake corrective action in their respective areas and thereby strengthen the controls.
Financial Analysis
The following discussion is based on the audited consolidated financial statements of Persistent Systems Limited and its following wholly-owned subsidiaries, step-down subsidiaries and controlled trust: 1\ Persistent Systems Inc.
2\ Persistent Systems Pte. Ltd. 3\ Persistent Systems France SAS 4Persistent Systems Malaysia Sdn. Bhd. 5\ Persistent Systems Germany GmbH 6\ CAPIOT Software Private Limited
7\ Persistent Systems UK Limited (formerly known as Aepona Limited) 8Persistent Telecom Solutions Inc. (step-down subsidiary) 9\ Persistent Systems Lanka (Private) Limited (step-down subsidiary) 10\ Aepona Group Limited (step-down subsidiary) 11\ Persistent Systems Mexico S.A. de C.V. (step-down subsidiary) 12\ Persistent Systems Israel Ltd. (step-down subsidiary)
13\ Persistent Systems Switzerland AG (formerly known as PARX Werk AG) (step-down subsidiary) 14\ PARX Consulting GmbH (Merged w.e.f. August 25, 2023) (step-down subsidiary) 15\ Youperience GmbH (Merged w.e.f. August 21, 2023) (step-down subsidiary) 16\ Youperience Limited (Dissolved w.e.f. June 27, 2023) (step-down subsidiary) 17\ CAPIOT Software Inc. (Dissolved w.e.f. December 29, 2023) (step-down subsidiary)
18\ Persistent Systems Australia Pty Ltd (formerly known as CAPIOT Software Pty Ltd) (step-down subsidiary) 19\ CAPIOT Software Pte Limited (Dissolved w.e.f. April 6, 2023) (step-down subsidiary) 20\ Persistent Systems S.R.L. (Dissolved w.e.f. February 26, 2024) (step-down subsidiary) 21\ Software Corporation International (step-down subsidiary) 22\ SCI Fusion360 LLC (Dissolved w.e.f. May 31, 2023) (step-down subsidiary)
23\ Persistent Systems Costa Rica Limitada (formerly known as Data Glove IT Solutions Limitada) (step-down subsidiary)
24\ MediaAgility India Private Limited 25\ MediaAgility Inc. (step-down subsidiary)
26\ Digitalagility S de RL de CV (step-down subsidiary) 27MediaAgility UK Limited (step-down subsidiary) 28\ MediaAgility Pte Ltd (step-down subsidiary) 29\ Persistent Systems S.R.L. Romania (step-down subsidiary) 30\ Persistent Systems Poland sp z.o.o. (step-down subsidiary) 31\ PSPL ESOP Management Trust (controlled trust)
In this report, Persistent Systems and its subsidiaries, step-down subsidiaries and controlled trust collectively have been referred to as "the Company", reflecting the financial position in the consolidated financial statements. The Financial Year 2023-24 has been referred to as "the year" and the Financial Year 2022-23 has been referred to as "the previous year". The consolidated financial statements have been prepared in accordance with Ind AS.
Financial Position and Results of Operations
Persistent Systems Limited was listed on National Stock Exchange of India Limited (NSE) and the BSE Limited (BSE) on April 6, 2010. The financial statements of the Company have been prepared on an accrual basis and under the historical cost convention except for certain financial instruments, equity settled employee stock options and initial recognition of assets acquired under business combinations which have been measured at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. The accounting policies are consistently applied by the Company during the year and are consistent with those used in previous year except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
Financial performance summary
Financial Year | % to | Financial Year | % to | |||
Particulars | Unit | 2023-24 | revenue | 2022-23 | revenue | Growth |
Revenue | _ Million | 98,215.87 | 83,505.92 | 17.62% | ||
Other Income | 1,280.20 | 706.17 | ||||
Total Income | 99,496.07 | 84,212.09 | ||||
Revenue | $ Million | 1,186.05 | 1,035.98 | 14.48% | ||
Earnings before interest, depreciation, amortisation and taxes | _ Million | 18,037.06 | 18.36% | 15,897.42 | 19.04% | 10.31% |
Profit Before Tax | _ Million | 14,476.06 | 14.74% | 12,408.52 | 14.86% | 16.66% |
Profit After Tax | _ Million | 10,934.91 | 11.13% | 9,210.93 | 11.03% | 18.72% |
Earnings Per Share (EPS) | ||||||
Basic | _ | 72.44 | 61.87 | 17.08% | ||
Basic (pre-split) | _ | 144.88 | 123.73 | |||
Diluted | _ | 71.07 | 60.26 | 17.94% | ||
Diluted (pre-split) | _ | 142.14 | 120.52 |
Share Capital
The authorised share capital of the Company as of March 31, 2024 was _ 2,000.00 Million divided into 400 Million equity shares of _ 5 each. The paid-up share capital as of March 31, 2024 was _ 770.25 Million divided into 154.05 Million equity shares of _ 5 each. (Previous year _ 764.25 Million divided into 76.425 Million equity shares of _ 10 each). The Board of Directors of the Company at its meeting held on January 20, 2024, recommended the sub-division / split of 1 (One) fully paid-up equity share having a face value of _ 10 each into 2 (Two) fully paid-up equity shares having a face value of _ 5 each by alteration of capital clause of the Memorandum of Association (MOA) subject to the approval of Members of the Company. The Members of the Company approved the sub-division / Split of 1 (One) fully paid-up equity share of _10 each into 2 (Two) fully paid up equity shares of _5 each through a postal ballot with a requisite majority and the voting results were declared on March 11, 2024.
During the year, the Company has allotted to the ESOP Trust by way of fresh issue (Pre-split) 500,000 shares at a price of _ 2,789 in April 2023 and 100,000 shares at a price of _ 2,133 in February 2024.
Other Equity
The Other Equity as at March 31, 2024 stood at _ 48,806.82 Million as against _ 38,886.53 Million as at March 31, 2023, showing a growth of 25.51%. The details of Other Equity are as below: (In Rs. Million)
Particulars | As at March 31, 2024 | As at March 31, 2023 |
General Reserve | 25,842.99 | 20,824.45 |
Share Options Outstanding Reserve | 2,227.71 | 2,222.02 |
Gain on bargain purchases | 63.61 | 62.67 |
Capital redemption reserve | 35.75 | 35.75 |
Retained Earnings | 19,346.09 | 16,607.36 |
Securities premium reserve | 1,601.80 | 0.00 |
Treasury shares | (2,085.84) | (2,435.67) |
PSPL ESOP Management Trust Reserve | 140.64 | 70.31 |
Effective portion of cash flow hedges | 23.85 | (5.76) |
Exchange differences on translating the financial statements of foreign operations | 1,610.22 | 1,505.40 |
Total | 48,806.82 | 38.886.53 |
General Reserve
During the Financial Year 2023-24, the Company transferred _ 3,965.23 Million out of the profits of the year to General Reserve in accordance with the Companys Policy of Transfer of Profits to General Reserve. Further, there has been transfer of _ 1,087.56 Million from Share Options Outstanding Reserve on exercise/expiry of stock options by the employees. The balance in General Reserve stood at _ 25,842.99 Million as at March 31, 2024 as against _ 20,824.45 Million as at March 31, 2023.
Please refer "Other Equity" under Statement of Changes in Equity in the consolidated financials for details.
Share Options Outstanding Reserve
In accordance with Ind AS 102 "Share Based Payments", the cost of equity-settled transactions is determined by the fair value of the options at the date of the grant and recognised as employee compensation cost over the vesting period following graded vesting method.
The amount of stock options outstanding as at March 31, 2024 was _ 2,227.71 Million for 0.94 Million options exercisable as on that date (The corresponding amount in stock options outstanding account as on March 31, 2023 was _ 2,222.02 Million for 1.66 Million options exercisable as on that date). Please refer "Other Equity" under Statement of Changes in Equity in the consolidated financials for details.
Gain on Bargain Purchases
As per Ind AS 103 - "Business Combinations", if the net fair value of the identifiable assets, liabilities and contingent liabilities acquired exceeds the cost of business acquisition, a gain is recognised as Gain on bargain purchases under other comprehensive income. The Company has carried out the fair valuation of all identifiable assets, liabilities and contingent liabilities acquired under the business acquisitions after the date of transition to Ind AS (i.e. April 1, 2015). Based on this, the Gain on bargain purchases stood at _ 63.61 Million as at March 31, 2024 as compared to _ 62.67 Million as at March 31, 2023. Please refer "Other Equity" under Statement of Changes in Equity in the consolidated financials for details.
Capital Redemption Reserve
Capital redemption reserve represents the nominal value of the shares bought back; and is created and to be utilised in accordance with Section 69 of the Companies Act, 2013. The Capital redemption reserve was unchanged and stood at _ 35.75 Million as at March 31, 2024 and March 31, 2023. Please refer "Other Equity" under Statement of Changes in Equity in the consolidated financials for details.
Retained Earnings
The balance retained in the Statement of Profit and Loss as at March 31, 2024 is _ 19,346.09 Million, after appropriation towards dividend of _ 4,153.95 Million and transfer to General Reserve of _ 3,965.23 Million.
The details of changes in Retained Earnings are as follows:
(In Rs. Million)
For the year ended | For the year ended | |
Particulars | March 31, 2024 | March 31, 2023 |
Opening balance | 16,607.36 | 13,553.90 |
Net profit for the year | 10,934.91 | 9,210.93 |
Items recognised in / from other comprehensive income for | (77.00) | (12.38) |
the year | ||
Dividend | (4,153.95) | (2,980.58) |
Transfer to general reserve | (3,965.23) | (3,164.51) |
Closing balance | 19,346.09 | 16,607.36 |
Please refer "Other Equity" under Statement of Changes in Equity in the consolidated financials for details.
Securities Premium Reserve
Securities premium reserve is used to record the premium on issue of shares. The reserve is utilised in accordance with the provision of section 52 of the Companies Act, 2013. The securities premium reserve has a balance of _ 1,601.80 Million as at March 31, 2024. Please refer "Other Equity" under Statement of Changes in Equity in the consolidated financials for details.
Treasury shares
Treasury shares represent the numbers of shares held by PSPL ESOP Management Trust. The treasury shares has a balance of _ 2,085.84 Million as at March 31, 2024 as compared to _ 2,435.67 Million as at March 31, 2023. Please refer "Other Equity" under Statement of Changes in Equity in the consolidated financials for details.
PSPL ESOP Management Trust reserve
PSPL ESOP Management Trust reserve represents the dividend received by ESOP Management trust from the Company. The PSPL ESOP Management Trust reserve has balance of _ 140.64 Million as at March 31, 2024 as compared to _ 70.31 Million as at March 31, 2023. Please refer "Other Equity" under Statement of Changes in Equity in the consolidated financials for details.
Effective Portion of Cash Flow Hedges
The Company derives a substantial part of its revenues in foreign currency while a major part of its expenses is incurred in Indian Rupees. This exposes the Company to the risk of loss due to fluctuations in foreign currency rates.
The following chart shows movement of monthly spot and forward rates of the Rupee against the USD in Financial year
2023-24, indicating the volatility that the currency faced throughout the year:
_/$ Currency Movement
The Company minimises the foreign currency fluctuation risk as per Companys Foreign Exchange Risk Management Policy. The Company holds plain vanilla forward contracts against expected future receivables in USD to hedge the risk of changes in exchange rates.
As per the accounting principles laid down in Ind AS 109 "Financial Instruments" relating to cash flow hedges, derivative financial instruments which qualify for cash flow hedge accounting are fair valued at the balance sheet date and the effective portion of the resultant loss/(gain) is debited/(credited) to the hedge reserve under other comprehensive income and the ineffective portion is recognised in the statement of profit and loss. Derivative financial instruments are carried as forward contract receivable when the fair value is positive and as forward contract payable when the fair value is negative.
Changes in the fair value of derivative instruments that do not qualify for hedge accounting are recognised in the statement of profit and loss as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold, or terminated, or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss on the hedging instrument recognised under other comprehensive income is transferred to the statement of profit and loss when the forecasted transaction occurs or affects profit or loss or when a hedged transaction is no longer expected to occur.
Accordingly, the Hedge Reserve (net of tax effects) as at March 31, 2024 stood at a credit balance of _ 23.85 Million as against a debit balance of _ (5.76) Million as at March 31, 2023. Please refer "Other Equity" under Statement of Changes in Equity in the consolidated financials for details.
Exchange Differences on Translating the Financial Statements of Foreign Operations
While consolidating the financial statements of subsidiaries (including step down subsidiaries) with the financial statements of the Parent Company, the assets and liabilities are stated in Indian Rupees by applying the closing exchange rates, equity is stated in Indian Rupees by applying the historical exchange rates and income and expenditure are stated in Indian Rupees by applying the average exchange rates. This creates exchange difference on consolidation which is accumulated under foreign currency translation reserve.
The balance in the foreign currency translation reserve was _ 1,610.22 Million as at March 31, 2024 as against _ 1,505.40 Million as at March 31, 2023. Please refer "Other Equity" under Statement of Changes in Equity in the consolidated financials for details.
Non-current Assets (other than non-current financial assets)
The non-current assets (other than non-current financial assets) as at March 31, 2024 stood at _ 22,549.98 Million as against _ 23,574.67 Million as at March 31, 2023. The details are as below: (In Rs. Million)
Particulars | As at March 31, 2024 | As at March 31, 2023 |
Property, Plant and Equipment | 4,420.03 | 4,859.95 |
Capital work-in-progress | 335.26 | 161.38 |
Right of use assets | 2,307.18 | 2,198.21 |
Goodwill | 10,912.56 | 7,183.71 |
Other Intangible assets | 4,574.95 | 9,171.42 |
Total | 22,549.98 | 23,574.67 |
The reduction in Other Intangible assets is mainly due to reclassification on purchase price allocation of business combination - _ 3,322.19 accounted as Goodwill in the current year.
Property, Plant and Equipment
The gross block of Property, Plant and Equipment amounted to _ 12,354.06 Million as at March 31, 2024 as against _ 11,936.12 Million as at March 31, 2023. The increase is primarily because of acquisition of computers during the year.
Capital Work-in-progress
Capital work-in-progress (Capital WIP) stood at _ 335.26 Million as at March 31, 2024 as against _ 161.38 Million as at March 31, 2023. The increase is partly attributable to the investment in software used for internal systems needed to support the increased scale of operations and partly to new office facilities.
Right of Use Assets
The gross block of Right of Use assets stood at _ 3,772.07 Million as at March 31, 2024 as against _ 3,126.27 Million as at March 31, 2023. Net additions of _ 645.80 Million have been made towards renewals/ additions of leased office premises.
Goodwill
Goodwill represents the cost of business acquisition in excess of the Companys interest in the net fair value of identifiable assets, liabilities and contingent liabilities of the acquired entities. The Goodwill as at March 31, 2024 was _ 10,912.56 Million as against _ 7,183.71 Million as at March 31, 2023. The increase is due to reclassification on purchase price allocation of Business Combination completed in the current year.
Other Intangible Assets
The gross block of intangible fixed assets amounted to _ 15,688.86 Million as at March 31, 2024 as against _ 18,644.66 Million as at March 31, 2023. This amount as at March 31, 2024 is after the reclassification on purchase price allocation of
Business Combinations.
Please refer note no. 44 of the consolidated financial statements for details.
Non-current Financial Assets
The non-current financial assets as at March 31, 2024 were _ 6,794.63 Million as against _ 6,145.05 Million as at March 31, 2023. The details of non-current financial assets are as follows:
(In Rs. Million)
Particulars | As at March 31, 2024 | As at March 31, 2023 |
Trade receivable | 730.18 | 709.45 |
Investments | 5,539.14 | 4,516.00 |
Other non-current financial assets | 525.31 | 919.60 |
Total | 6,794.63 | 6,145.05 |
Non-current Financial Assets: Trade receivable
In some IP deals, we have deferred credit arrangement with certain large enterprise customers. These customer outstanding being realisable after 12 months, are shown as Non-current trade receivables. It was _ 730.18 Million as at March 31, 2024 as against _ 709.45 Million in the previous year.
Non-current Financial Assets: Investments
The total non-current investments as on March 31, 2024, stood at _ 5,539.14 Million as against _ 4,516.00 Million in the previous year. The net increase in non-current investments is mainly due to increase in investment in mutual funds net of impairment of investment in Trunomi Inc. the value of impairment being _ 20.85 Million.
Please refer note no. 6 of the consolidated financials for details.
Other Non-current Financial Assets
Other non-current financial assets consist of the non-current deposits with banks and the financial institutions including interest accrued on these deposits.
The Company has fully provided for the deposits of _ 130.00 Million with IL&FS Ltd and _ 300.00 Million with IL&FS Financial Services Ltd.
During the year, the Company has received proceeds from maturity of the deposits of HDFC Limited of _ 400 Million. Please refer note no. 8 of the consolidated financials for details.
Deferred Tax Assets and Deferred Tax Liabilities
The net deferred tax assets on March 31, 2024 amounted to _ 1,340.88 Million as against _ 1,129.29 Million as on March 31, 2023 Please refer note no. 9 of the consolidated financials for component-wise details of deferred tax balances.
Other Non-current Assets (other than financial assets)
Other non-current assets other than financial assets includes Income tax assets (net) and other non-current assets. The amount of Income tax assets (net) was _ 387.05 Million as at March 31, 2024 as against _ 451.71 Million as at March 31, 2023 and Other non-current assets was _ 1,413.03 Million as at March 31, 2024 as against _ 959.29 Million as at March 31, 2023. The details for the Other non-current assets are given below: (In Rs. Million)
Particulars | As at March 31, 2024 | As at March 31, 2023 |
Capital advances | 826.67 | 629.15 |
Simple Agreement for Future Equity (SAFE)* | 165.75 | - |
Prepayments | 420.61 | 330.14 |
Total | 1,413.03 | 959.29 |
*Investment in SAFE relates to a design firm in the area of semiconductors | ||
Current Financial Assets | ||
(In Rs. Million) | ||
Particulars | As at March 31, 2024 | As at March 31, 2023 |
Investments | 2,726.54 | 1,879.66 |
Trade receivables (net) | 16,761.13 | 15,253.22 |
Cash and cash equivalents | 6,625.15 | 4,670.12 |
Bank balances other than cash and cash equivalents | 3,603.71 | 4,362.68 |
Other current financial assets | 6,621.83 | 4,882.17 |
Total | 36,338.36 | 31,047.85 |
Current Investments
As per the Investment Policy approved by the Board of Directors, the Company invests its surplus funds in liquid and debt schemes and fixed maturity plans of reputed mutual funds with a focus on capital preservation, liquidity and optimisation of returns.
Investment in mutual funds classified under current investments stood at _ 2,726.54 Million as at March 31, 2024 as compared to _ 1,879.66 Million as at March 31, 2023.
Trade Receivables
Trade receivables (net of provision for doubtful debts) amounted to _ 16,761.13 Million as at March 31, 2024 as against _ 15,253.22 Million as at March 31, 2023.
The Company uses a provisioning policy approved by the Board of Directors to compute the expected credit loss allowance for trade receivables. The policy takes into account available external and internal credit risk factors and the historical payment track record of customers. Further, the policy incorporates the provisioning of all customer balances which are overdue for a period of more than 180 days.
Provision for doubtful debts stood at _ 398.64 Million as at March 31, 2024 as against _ 188.96 Million as at March 31, 2023. Please refer Note 12 of the consolidated financials for details.
DSO as at March 31, 2024 was 63 days as against 68 days as at March 31, 2023.
Cash and Cash Equivalents
Cash and cash equivalents include bank balances and cash on hand. Cash and cash equivalents increased to _ 6,625.15 Million as at March 31, 2024 from _ 4,670.12 Million as at March 31, 2023.
Bank balances other than cash and cash equivalents
Deposits with banks having maturity of less than twelve months from the balance sheet date including interest thereon and the balances on unpaid dividend accounts are considered under other bank balances. These deposits amounted to _ 3,600.79 Million as at March 31, 2024 as compared to _ 4,359.63 Million as at March 31, 2023. The balances on unpaid dividend accounts was _ 2.92 Million as at March 31, 2024 as against _ 3.05 Million as at March 31, 2023. Please refer Note 14 of the consolidated financials for details.
Other Current Financial Assets
Other current financial assets were _ 6,621.83 Million as at March 31, 2024 as compared to _ 4,882.17 Million as at March 31, 2023. Following are the components of other current financial assets: (In Rs. Million)
Particulars | As at March 31, 2024 | As at March 31, 2023 |
Security deposits | 57.95 | 26.56 |
Forward contracts receivable | 42.54 | - |
Other receivable | - | 184.38 |
Unbilled revenue | 6,521.34 | 4,671.23 |
Total | 6,621.83 | 4,882.17 |
The amount of forward contracts receivable represented favourable position (i.e. Mark To Market gain) as at the Balance Sheet date in respect of the forward contracts entered by the Company. Unbilled revenue represents revenue recognised in relation to work done until the Balance Sheet date for which billing has not taken place. Please refer Note 16 of the consolidated financials for details.
Other Current Assets
Other current assets were _ 4,893.49 Million as at March 31, 2024 as compared to _ 3,418.26 Million as at March 31, 2023. Other current assets include advances recoverable in cash or kind within a period of twelve months from the Balance Sheet date and VAT and GST receivable.
Current ratio was 1.89 as at March 31, 2024 as against 1.71 as at March 31, 2023.
Non-current Liabilities
(In Rs. Million)
Particulars | As at March 31, 2024 | As at March 31, 2023 |
Financial liabilities | ||
Borrowings (non-current portion) | 99.15 | 2,057.59 |
Lease liabilities | 1,608.09 | 1,592.20 |
Provisions | 546.96 | 373.03 |
Other financial liabilities (Liability towards contingent consideration) | - | 2,888.92 |
Other non-current liabilities | 44.44 | 34.83 |
Total | 2,298.64 | 6,946.57 |
Non-current Financial Liabilities- Borrowings
Under the scheme of New Millennium India Technology Leadership Initiative (NMITLI), the Company has undertaken a project on the System based Computational Model of Skin. As a part of this scheme, Council for Scientific and Industrial Research (CSIR) has granted a financial help in the form of a loan at a nominal rate of interest of 3% p.a. Based on the project costs, an amount of _ 40.71 Million had been sanctioned as a long-term loan. The loan is repayable in ten equal annual instalments commencing from October 2015. Loan amount outstanding under this scheme amounted to _ 1.85 Million as on March 31, 2024 as against _ 3.69 Million as on March 31, 2023.
Under the COVID-19 scheme for medium and small scale industries by the Government of Switzerland, the step-down subsidiary company has received an interest free loan in March 2020 for a term of 5 years for an amount of CHF 500,000. Loan amount outstanding amounted to Nil as on March 31, 2024 as against _ 33.61 Million as on March 31, 2023.
The Company has obtained three loans from HSBC for funding the business acquisitions of SCI Fusion, Data Glove and MediaAgility. The Parent Company has provided a Letter of Comfort to the Lender.
Following are the key terms of loans outstanding as on March 31, 2024:
Repayment terms | _ Million | Interest rate |
Loan 1: Repayable over a period of 3 years in equal monthly instalments commencing from November 2021 | 405.42 | SOFR + 155 bps |
Loan 2: Repayable over a period of 3 years in equal monthly instalments commencing from April 2022 | 973.00 | SOFR + 155 bps |
Loan 3: Repayable over a period of 3 years in equal monthly instalments commencing from May 2022 | 681.10 | SOFR + 155 bps |
Total | 2,059.52 |
The overall break-up of total borrowings is summarized below:
(In Rs. Million)
Particulars | As at March 31, 2024 | As at March 31, 2023 |
Term Loans | ||
Indian Rupee loan | 1.85 | 3.69 |
Interest accrued but not due | 0.02 | 0.06 |
Foreign Currency loan from others | ||
Loan from Govt. of Switzerland | - | 33.61 |
Loan from HSBC | 2,059.52 | 4,247.73 |
Interest accrued on loan from HSBC | 11.80 | 21.85 |
Total | 2,073.19 | 4,306.95 |
Out of the total outstanding balance of _ 2,073.19 Million, the balance of _ 1,974.04 Million is repayable within twelve months from the Balance Sheet date and hence, reclassified to Other Current Financial Liabilities.
Please refer Note 19 of the consolidated financials for details.
Debt-equity ratio as at March 31, 2024 was 0.04:1 as against 0.11:1 as at March 31, 2023.
Non-current Liabilities- Lease liabilities
The balance of _ 1,608.09 Million represents the non-current portion of Lease Liability as at March 31, 2024 as against previous year balance of _ 1,592.20 Million.
Non-current Liabilities- Provisions
The long-term provisions are those provisions which are not expected to be settled within twelve months from the date of the Balance Sheet. Long term provisions include the liability towards long service award. The total long-term provisions have increased to _ 546.96 Million as at March 31, 2024 as compared to _ 373.03 Million as at March 31, 2023 mainly due to an increase in the number of employees.
Non-current Liabilities- Other financial liabilities
The balance of _ 44.44 Million represents the non-current portion of Unearned revenue as at March 31, 2024 as against previous year balance of _ 34.83 Million.
Current Liabilities
(In Rs. Million)
Particulars | As at March 31, 2024 | As at March 31, 2023 |
Financial liabilities | ||
- Trade payables | 8,138.62 | 5,689.08 |
- Lease liabilities | 830.01 | 676.39 |
- Borrowings | 1,974.04 | 2,249.36 |
- Other financial liabilities | 3,718.27 | 3,922.85 |
Other current liabilities | 3,302.82 | 2,647.71 |
Provisions | 3,330.66 | 4,649.24 |
Income tax liabilities (net) | 547.29 | 294.14 |
Total | 21,841.71 | 20,128.77 |
Trade Payables
Trade payables increased to _ 8,138.62 Million as at March 31, 2024 from _ 5,689.08 Million as at March 31, 2023 essentially on account of the growth in operations of the Company.
Lease Liability
The balance of _ 830.01 Million represents the current portion of Lease Liability as at March 31, 2024 as against previous year balance of _ 676.39 Million.
Other Current Financial Liabilities
Other current financial liabilities include capital creditors, accrued employee liabilities, unpaid dividend and other contractual liabilities. Other current financial liabilities have decreased to _ 3,718.27 Million as at March 31, 2024 from _ 3,922.85 Million as at March 31, 2023 due to reduction in capital creditors. During the year, the Company has done the fair valuation of contingent consideration payable towards the acqusitions of business to the erstwhile shareholders of Data Glove Inc., Software Corporation International and SCI Fusion 360, LLC and Shree Partners. Based on the fair valuation, the liability has been adjusted by _ 743.03 Million and the effect of the same has been taken to Other expenses in Profit & Loss account.
The details of major components of other current financial liabilities are shown below:
(In Rs. Million)
Particulars | As at March 31, 2024 | As at March 31, 2023 |
Capital creditors | 79.97 | 583.07 |
Accrued employee liabilities | 1,092.42 | 840.04 |
Unpaid dividend | 2.92 | 3.05 |
Other liabilities | 78.41 | 12.11 |
Foreign exchange forward contracts | - | 67.67 |
Liability towards contingent consideration | 2,464.55 | 2,416.91 |
Total | 3,718.27 | 3,922.85 |
Other Current liabilities
Other current liabilities include unearned revenue, advances from customers and statutory and other liabilities. Unearned revenue represents the billing in respect of contracts for which the revenue is not recognised. The other current liabilities have increased to _ 3,302.82 Million as at March 31, 2024 from _ 2,647.71 Million as at March 31, 2023.
Please refer Note 24 of the consolidated financials for details.
Current Liabilities - Provisions
The short term provisions denote the employee liabilities and other provisions expected to be settled within a period of twelve months from the date of the Balance Sheet. The short term provisions were _ 3,330.66 Million as at March 31, 2024 as against _ 4,649.24 Million as at March 31, 2023. The details of the components of short term provisions are given below:
(In Rs. Million)
Particulars | As at March 31, 2024 | As at March 31, 2023 |
Provision for employee Benefits | ||
Gratuity | 0.13 | 0.09 |
Leave encashment | 1,651.87 | 1,167.97 |
Long service awards | 34.02 | 34.18 |
Other Employee benefits | 1,644.64 | 3,447.00 |
Total | 3,330.66 | 4,649.24 |
Income Tax Liabilities (Net)
Current tax liabilities were _ 547.29 Million as at March 31, 2024 as against _ 294.14 Million as at March 31, 2023.
Revenue from Operations (Net)
The Company provides product engineering services, platform-based solutions and IP-based software products for global customers.
The revenue for the year in USD terms was up by 14.48% at USD 1,186.05 Million as against USD 1,035.98 Million in the previous year. In Rupee terms the revenue was _ 98,215.87 Million against _ 83,505.92 Million representing a growth of
17.62% over the previous year. The average rate of rupee depreciated by 2.72% during the year against US Dollar. The operating segments of the Group are:
\ Banking, Financial Services and Insurance (BFSI)
\ Healthcare & Life Sciences
\ Software, Hi-Tech and Emerging Industries
Following is the graphical presentation of the contribution of the segments in the total revenue:
Revenue Shares by Segments
Particulars | FY24 | FY23 |
- Software, Hi-Tech and Emerging Industries | 46.78% | 48.04% |
- Healthcare & Life Sciences | 21.26% | 19.35% |
- BFSI | 31.96% | 32.61% |
Particulars | For the Year ended March 31, 2024 | For the Year ended March 31, 2023 | Growth |
Segmental revenue | |||
- BFSI | 31,385.58 | 27,231.45 | 15.25% |
- Healthcare & Life Sciences | 20,880.32 | 16,161.07 | 29.20% |
- Software, Hi-Tech and Emerging Industries | 45,949.97 | 40,113.40 | 14.55% |
Total | 98,215.87 | 83,505.92 | 17.62% |
Segmental Operating Income | |||
- BFSI | 11,523.86 | 10,004.47 | 15.19% |
- Healthcare & Life Sciences | 8,671.22 | 8,013.54 | 8.21% |
- Software, Hi-Tech and Emerging Industries | 11,804.66 | 12,282.50 | (3.89%) |
Total | 31,999.74 | 30,300.51 | 5.61% |
Segmental Operating margin % | |||
- BFSI | 36.72% | 36.74% | |
- Healthcare & Life Sciences | 41.53% | 49.59% | |
- Software, Hi-Tech and Emerging Industries | 25.69% | 30.62% |
The segment operating margins for Healthcare and Software and Hi-Tech segments decreased, as the growth was led by onsite business, which has structurally lower margin.
In terms of geographical mix of revenue, North America continued to dominate by contributing 79.6% of the total revenue.
Contribution from Europe was 9.0%, from India it was 9.9% while Rest of the World contributed 1.5% of total revenue.
The details in respect of percentage of revenues generated from top customer, top 5 customers and top 10 customers are as under:
Revenue Concentration | 2023-24 | 2022-23 |
Top 1 | 9.40% | 9.22% |
Top 5 | 27.70% | 27.00% |
Top 10 | 39.00% | 36.74% |
Other Income
As explained in Note 27 of the consolidated financials, Other Income consists of income from investment of surplus funds in the form of dividend from mutual funds, profit on sale of investments, interest on deposits and bonds, foreign exchange gain and miscellaneous income. Other income has increased to _ 1,280.20 Million for the year ended March 31, 2024 from _ 706.17 Million for the year ended March 31, 2023. The increase in Other Income is attributable to higher investment income on surplus funds, Foreign Exchange Gain of _ 84.97 Million as against an Exchange Loss of _ 133.24 Million in the previous year and increase in Miscellaneous Income to _ 343.67 Million as against _ 130.26 Million in the previous year. The details of other income are given below: (In Rs. Million)
Particulars | For the Year ended March 31, 2024 | For the Year ended March 31, 2023 | Change |
Investment income (including interest, dividend, fair value gain/loss and profit on sale of investments) | 851.56 | 709.15 | 20.08% |
Foreign exchange gain | 84.97 | (133.24) | (163.77%) |
Miscellaneous Income (including Advances and excess provisions written back and profit on sale of fixed assets) | 343.67 | 130.26 | 163.83% |
Total | 1,280.20 | 706.17 | 81.29% |
Personnel Expenses
Personnel Expenses for the year amounted to _ 71,102.40 Million against _ 60,121.66 Million for the previous year, showing an increase of 18.26%. As a percentage of revenue, these expenses were 72.39% during the year as compared to 72.00% in the previous year.
Please refer Note 28 of the consolidated financials for details.
Other Expenses
Operating and other expenses for the year amounted to _ 10,356.61 Million against _ 8,193.01 Million in the previous year. As a percentage of revenue, the expenses increased to 10.54% from 9.81%.
The main reasons for variations in Operating and other expenses are as below:
\ Travelling and conveyance costs went up by _ 273.47 Million due to increased travel post pandemic and increase in tariffs
\ Purchase of software licenses went up by _ 2,196.46 Million mainly due to increased headcount and an increase in the cost of sale for few partner IP transactions as part of managed services contracts.
\ Legal and professional fees have increased by _ 137.69 Million on account of due diligence and other legal fees incurred for acquired businesses.
Please refer Note 29 of the consolidated financials for more details.
Profit Before Interest, Tax, Depreciation and Amortisation
During the year, the Company reported Profit before interest, tax, depreciation and amortisation of _ 18,037.06 Million representing an increase of 13.46% over Profit before interest, tax, depreciation and amortisation of _ 15,897.42 Million during the previous year. The margin of Profit before interest, tax, depreciation and amortisation decreased to 18.36% during the year as compared to 19.04% in the previous year. The decrease in margin is mainly due to increased cost of operations, investments made in sales and marketing and in building capabilities to adapt to changes in the market.
Depreciation and Amortisation
The depreciation and amortisation for the year amounted to _ 3,093.73 Million as against _ 2,718.95 Million in the previous year. Increase is mainly on account of amortisation of intangibles acquired under business combinations and new addition during the year in Property, Plant and Equipment.
Depreciation and amortisation as a percentage of revenue was 3.15% for the year against 3.26% for the previous year. The details on depreciation and amortisation is as given below: (In Rs. Million)
Particulars | For the year ended March 31, 2024 | For the year ended March 31, 2023 |
On Property, Plant and Equipment | 1,187.51 | 1,008.93 |
On Other Intangible assets | 651.50 | 484.08 |
On Right of Use assets | 1,254.72 | 1,225.94 |
Total | 3,093.73 | 2,718.95 |
Exceptional item
In respect of export incentives pertaining to previous periods amounting to _ 255.52 Million, which have been refunded under protest with interest of _ 41.03 Million, aggregating to _ 296.55 Million, the Company had filed an application with Directorate General of Foreign Trade (DGFT). The Company believes that its services were eligible for the export incentives and the dispute is purely an interpretational issue given the highly technical nature. With the intention of avoiding litigation and settling the dispute, the Company had applied before the Settlement Commission for settlement of the case and had offered to forego _ 296.55 Million. The Company had recognised a provision of _ 296.55 Million for the quarter ended 31 December 2022, which was presented as an "exceptional item" in the statement of profit and loss for that period. During the year, the Settlement Commission has approved the Companys application and has settled the liability of _ 296.55 Million including interest. As the amount has already been provided for in full by the Company, no further adjustment is necessary in these financial statements.
Tax Expense
Tax expense consists of current tax and deferred tax.
The Companys two major tax jurisdictions are India and the United States, though the Company also files tax returns in other overseas jurisdictions.
The tax expense for the year amounted to _ 3,752.84 Million (including tax charge in respect of earlier years of _ 73.19 Million) against _ 3,111.77 Million [including tax charge in respect of earlier years of _ (3.54) Million] in the previous year. The deferred tax credit for the year was _ 211.69 Million against deferred tax debit of _ 85.82 Million in the previous year.
The total tax expense for the year amounted to _ 3,541.15 Million against _ 3,197.59 Million for the previous year. The Effective Tax Rate (ETR) for the year amounted to 24.46% as compared to 25.77% in the previous year.
Please refer Note 33 for reconciliation of estimated income tax expense at Indian statutory income tax rate to income tax expense reported in statement of profit and loss.
Net Profit after Tax
The Net Profit for the year amounted to _ 10,934.91 Million against _ 9,210.93 Million for the previous year, an increase of 18.72%. The Net Profit margin for the year was 11.13% as compared to 11.03% in the previous year.
Dividend
The interim dividend per share for the year was _ 32 per share of _ 10 each. The proposed final dividend is _ 10 per share of _ 5 each (post sub-division). For a like-to-like comparison, pre-split, comparable numbers are _ 52 for this year as compared to _ 50 for the previous year and on post-split basis, comparable amount of dividend is _ 26 per share for this year as compared to _ 25 per share in the previous year.
The total appropriation towards interim dividend for the year was _ 2,461.60 Million as against _ 2,139.90 Million for the previous year.
On approval of final dividend of _ 10 per share of _ 5 each which was recommended by the Board in its meeting held in April 2024, the amount of _ 1,540.50 Million will be appropriated from reserves. Subject to approval in the AGM, dividend will be paid on the basis of outstanding shares as on the date of distribution.
Summary of dividends declared
Financial Year 2023-24 |
Financial Year 2022-23 |
||||
Type of Dividend | Interim | Final | Interim | Final | |
Month of Declaration/recommendation | Jan-24 | Apr-24 | Jan-23 | Apr-23 | |
Amount of Dividend Per Equity Share of _ 5 each | (In Rs.) | 16 | 10* | 14 | 11 |
% of Dividend | 160% | 100% | 140% | 110% | |
Total Dividend* | (In Rs. Million) | 2,461.60 | 1,540.50 | 2,139.90 | 1,692.35 |
Total Dividend Outflow for the Year (In Rs. Million) | 4,002.10 | 3,832.25 |
The dividend payout ratio (including proposed final dividend) for the year was 36.60% as compared to 41.61% for the previous year which included special dividend on the occasion of the Company crossing $1B in revenues. Without considering special dividend the dividend payout ratio was 33.25%. All numbers are after considering impact of share split.
*Subject to approval in the AGM, dividend will be paid on the basis of outstanding shares as on the date of distribution..
Earnings Per Share (EPS)
Basic and Diluted earnings per share went up to _ 72.44 per share (_ 144.88 pre-split) and _ 71.07 per share (_ 142.14 pre-split) respectively, compared to _ 61.87 per share (_ 123.73 pre-split) and _ 60.26 per share (_ 120.52 pre-split) respectively in the previous year, recording an increase of 17.08% and 17.94% respectively. The impact of share split is considered for calculation of EPS.
Ratio Analysis and its Elements
March 31, | March 31, | Reason for variance | |||
Sr. No | Ratio | 2024 | 2023 | % change | (If more than 25%) |
1\ | Current ratio | 1.89 | 1.71 | 10.53% | |
2\ | Debt-Equity ratio | 4.18% | 10.86% | (6.68)% | - |
3\ | Debt Service Coverage ratio | 8.49 | 6.51 | 30.41% | The increase in interest rates and incremental borrowings during the year ended March 31, 2024, primarily resulted in higher finance expense. |
4\ | Return on Equity ratio | 24.94% | 25.66% | (0.72)% | - |
5\ | Trade Receivables turnover ratio | 5.51 | 5.13 | 7.29% | - |
6\ | Trade payables turnover ratio | 2.73 | 3.23 | (15.62)% | - |
7\ | Net capital turnover ratio | 5.07 | 5.82 | (13.03)% | - |
8\ | Net profit ratio | 11.13% | 11.03% | 0.10% | - |
9\ | Return on Capital employed | 28.58% | 30.43% | (1.85)% | - |
10\ | Return on investment | 6.86% | 5.28% | 1.60% | - |
** Earnings available for debt service = Profit Before Tax + Finance cost + Depreciation & Amortisation - Other income - Lease payments
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