r systems international ltd management board meetings sectoral Management discussions

Overview

The consolidated financial statements of the Group have been prepared in accordance with the Indian Accounting Standards (Ind-AS) prescribed under Section 133 of the Companies Act, 2013, read with Companies (Indian Accounting Standard) Rules as amended from time to time. The estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis so that the financial statements reflect in a true and fair manner the form and substance of transactions and reasonably present the state of affairs, profits, and cash flows for the year.

A. Industry Structure and Developments

Over the last two years, the Covid-19 pandemic has increased the relevance of digital transformation projects across the globe. They are triggering investments across front-end transformations and personalization of the customer experience, as well as at the back end, to operate seamlessly, simplify and digitize processes, reduce turnaround times for customer service requests and enhance the end-to-end customer journeys. While the pandemic and macroeconomic headwinds affected businesses and industries, economies are experiencing a strong but unbalanced recovery. This disruption has created space for organizations across industries to drive innovation in services and products with Artificial Intelligence, Augmented Reality (AR) / Virtual Reality (VR), Cloud, Internet of Things (IoT), among others.

The IT industry is rapidly progressing and diving into the next wave of digital transformation, utilising technologies and resources to their full potential. IT spending in India is projected to grow 2.6% year on year in 2023, according to a forecast by global research firm Gartner Inc. There lies a prime opportunity for businesses across sectors to capitalise on these disruptive technologies to generate actionable business insights that can create differentiated business outcomes.

The Company has the following subsidiaries:

Name	Holding as at
	December	December
	31, 2022	31, 2021
R Systems, Inc., USA (refer to	100%	100%
Note a below)
R Systems (Singapore) Pte	100%	100%
Limited, Singapore
R Systems Technologies	100%	100%
Limited, USA
R Systems Consulting Services	99.75%	99.75%
Limited Singapore
R Systems Computaris	100%	100%
International Limited, UK
RSYS Technologies Ltd.,	100%	100%
Canada
IBIZ Consultancy Services	-	100%
India Private Limited, India (IBIZ
India) (refer to Note b below)

B. Company Overview

R Systems International Limited (the ‘Company’ or ‘the Parent Company’) and its subsidiaries (hereinafter collectively referred to as ‘the Group’) is a public company domiciled in India having its registered office at New Delhi. Its shares are listed on the National Stock Exchange of India Limited and BSE Limited. The Group is a leading global provider of technology, artificial intelligence, RPA services and solutions, along with knowledge services. The Group delivers its services and solutions to leading technology companies and businesses to enable their digital transformation. The Group’s services and solutions span over five major business verticals: Technology, Telecom, Healthcare and Life Science, Finance and Insurance, Retail and e-commerce.

Country of incorporation and other particulars

A company registered under the laws of California, USA in 1993 and subsidiary of the Company since January 2, 2001. A company registered under the laws of Singapore in 1997 and subsidiary of the Company since September 19, 2000. A company registered under the laws of Delaware, USA in 1996 and subsidiary of the Company since April 1, 2002. A company registered under the laws of Singapore in 1996. The Company has acquired majority share on January 8, 2004. R Systems Consulting Services Limited, Singapore has subsidiaries in Malaysia, Thailand, China, Hong Kong, Japan and Vietnam. The shareholding by the Company and R Systems (Singapore) Pte Limited is 69.37% and 30.38% respectively. A company registered under the laws of U.K. in 2006. The Company has acquired the entire share on January 26, 2011. R Systems Computaris International Limited, U.K. has subsidiaries in Romania, Poland, Moldova, Malaysia, Switzerland and Philippines.

A company registered under the laws of Canada in 2012 and subsidiary of the Company since October 29, 2012. A company registered under the laws of India in 2008 and subsidiary of the Company since April 30, 2015.

a. R Systems Inc., USA held 100% membership interest in Innovizant, LLC w.e.f. January 1, 2019. Effective August 31, 2021, Innovizant, LLC has been merged with R Systems Inc.

b. During the year, IBIZ India has gone into voluntary liquidation under Section 59 of Insolvency and Bankruptcy Code, 2016 read with Insolvency and Bankruptcy Board of India (Voluntary Liquidation) Regulations, 2017. Subsequent to the year ended December 31, 2022, the application for approving the voluntary liquidation and dissolution of IBIZ India, along with the final report of the liquidator, has been filed with the Hon’ble National Company Law Tribunal, New Delhi.

R Systems Consulting Services Limited , Singapore has following wholly owned subsidiaries:

Name	Holding as at	Country of incorporation
	December 31, 2022	December 31, 2021
R Systems Consulting Services (M) Sdn. Bhd.	100%	100%	Malaysia
R Systems Consulting Services (Thailand) Co., Ltd.	100%	100%	Thailand
R Systems Consulting Services (Shanghai) Co., Ltd.	100%	100%	People’s Republic of China
R Systems Consulting Services (Hong Kong) Ltd.	100%	100%	Hong Kong
R Systems Consulting Services Kabushiki Kaisha	100%	100%	Japan
R Systems Consulting Services Company Limited (incorporated on October 17, 2022)	100%	–	Vietnam

R Systems Computaris International Limited, UK has following wholly owned subsidiaries:

Name	Holding as at	Country of incorporation
	December 31, 2022	December 31, 2021
R Systems Computaris Europe SRL	100%	100%	Romania
R Systems Computaris Poland sp z. o.o	100%	100%	Poland
R Systems Computaris S.R.L	100%	100%	Moldova
R Systems Computaris Malaysia Sdn. Bhd.	100%	100%	Malaysia
R Systems Computaris Philippines Pte. Ltd.	100%	100%	Philippines
Inc.
R Systems Computaris Suisse Sarl.	100%	100%	Switzerland

R Systems IBIZCS Pte. Ltd., Singapore is a wholly owned subsidiary of R Systems (Singapore) Pte Limited, Singapore w.e.f. April 30, 2015 and has following wholly owned subsidiaries:

Name	Holding as at	Country of incorporation
	December 31, 2022	December 31, 2021
IBIZ Consulting Services Pte. Ltd.	100%	100%	Singapore
R Systems IBIZ Sdn. Bhd.	100%	100%	Malaysia
PT. R Systems IBIZCS International	100%	100%	Indonesia
IBIZ Consulting (Thailand) Co. Ltd.	100%	100%	Thailand
IBIZ Consulting Service Limited (IBIZ HK)	100%	100%	Hong Kong
IBIZ Consulting Service Shanghai Co., Ltd	100% by IBIZ HK	100% by IBIZ HK	People’s Republic of China

C. Opportunities and Threats

Even as fears of a global slowdown depress sentiment, Digital will continue to drive the IT industry agenda for year 2023. As per the latest Gartner report, the software and IT services segments are projected to grow 9.3% and 5.5% in 2023, respectively. R Systems having transformational DNA, navigating businesses to use technology to redefine their businesses model in the present uncertain environment to realize their respective business objectives.

As every opportunity comes up with inherent risks and challenges, however, over the years, R Systems has learnt to reckon with as well as address such risks and challenges, including threats from competitors including their disruptive tactics, new technologies, cyber security, intensifying demand for global talent, retention of employees and stringent governing norms regarding restrictions on outsourcing services.

At R Systems, these threats and uncertainties are managed proactively through our risk mitigation processes and strategies.

D. Segment-wise and Product-wise Performance

Detailed information about segment-wise and product-wise performance has been given in the Consolidated Financial Statements and Standalone Financial Statements.

E. Performance and Outlook

R Systems reported consolidated revenue of 15,158.31 million during the year 2022 as against revenue of

11,556.39 million during the year 2021. The revenue grew by 31.17% during the year 2022.

Consolidated Profit after tax during the year 2022 was

1,396.81 million as against net Profit for the year 2021 of

1,414.36 million.

The basic earnings per share (based on the consolidated financial statement) during the year 2022 was 11.81 per share as against 11.85 per share in 2021 of the face value of Re. 1 each.

R Systems maintains a solid financial position with shareholder funds of 5,454.70 million, including net cash and bank balance of 2,680.79 million as of December 31, 2022, to invest towards the future growth of the business.

F. Risk and Concerns

At R Systems, risk management is a dynamic process with an attempt to constantly identifies all the emerging risks and propose solutions to manage them meticulously. This is further explained in detail in Risk Management Report.

G. 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 organisation. The Company’s Internal Control System is commensurate with the size, scale and complexity of its operations. It 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 with corporate policies. In addition, the Company has identified and documented the key risks and controls for each process that has a relationship to the financial operations and reporting. Internal teams test identified vital controls at regular intervals to ensure their existence and operating effectiveness. Further, the internal auditors also perform an independent check of the effectiveness of key controls in identified areas of internal financial control reporting. The Statutory Auditor’s Report also includes an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls over financial reporting.

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

H. Material Development in Human Resources / Industrial Relations Front, including Number of People Employed

At R Systems, we identify our associates as our most valued assets, and we recognise their commitment to the growth journey of our organisation. It is critical to attract, develop, deploy, and retain talent in the IT and ITES industry. Therefore, R Systems has also defined and implemented a people management initiative, in line with the industry best practices and the People Capability Maturity Model (People CMM). It effectively manages the life cycle to ensure that individuals are committed to the broader organisational goals and show pro-activeness at the workplace.

As of FY2022, R Systems has a talent pool of 4,420 associates, including 546 sales and support associates.

I. Discussion on financial performance with respect to operational performance. Financial Position as of December 31, 2022

1.Property, Plant and Equipment (PPE), Right-to-use Assets (ROU) and Intangible Assets

PPE includes building, leasehold improvement, computer hardware, furniture & fittings, vehicle, office, and electrical equipment. ROU includes land, building, computer hardware, computer software, vehicle, and furniture & fittings. Intangible assets include Goodwill on consolidation, computer software, non-compete and customer contracts.

( in million)

Particulars	Consolidated	Standalone
	2022	2021	2022	2021
Property, plant and equipment (net)	705.95	583.58	547.67	433.72
Right-to-use assets	692.40	528.30	539.68	329.74
Intangible assets
- Goodwill on Consolidation	108.62	97.54	-	-
- Other intangible assets (net)	31.39	39.19	9.11	2.08
Capital work in progress	25.38	-	25.06	-
Total	1,563.74	1,248.61	1,121.52	765.54

Details of total additions to gross block during the year in:

( in million)

Particulars	Consolidated	Standalone
	2022	2021	2022	2021
Property, plant and equipment	330.60	274.12	270.96	186.27
Right-to-use assets	269.12	186.47	247.27	-
Intangible assets
- Goodwill	-	1.03	-	-
- Other intangible assets	10.60	9.66	9.61	0.09

Note: Refer Consolidated Financial Statement and Standalone Financial Statement for head wise details.

2.Investment Property

Investment Property represents the land and building in Pune, which have been given on lease. Investment Property value (net) as of December 31, 2022, was 17.43 million as against 18.90 million as of December 31, 2021.

3.Non-Current Investment

( in million)

Particulars	Consolidated	Standalone
	2022	2021	2022	2021
Investment in subsidiaries	-	-	1,033.81	1,034.28
Other investment	0.03	0.03	0.03	0.03
Total	0.03	0.03	1,033.84	1,034.31

During the year, IBIZ Consultancy Services India Private Limited (IBIZ India), wholly owned subsidiary of the Company, has gone into voluntary liquidation. Being the sole shareholder of IBIZ India, the Company has received final proceeds amounting to 0.62 million during the year ended December 31, 2022. This amount is adjusted against the investment amount of 0.47 million and the balance amount is recorded as other income.

Subsequent to the year ended December 31, 2022, the application for approving the voluntary liquidation and dissolution of IBIZ India, along with the Final Report of the liquidator, has been filed with the Hon’ble National Company Law Tribunal, New Delhi.

4.Other Non-Current Financial Assets

( in million)

Particulars	Consolidated	Standalone
	2022	2021	2022	2021
Security deposits	34.96	40.79	27.14	19.74
Margin money deposits	30.20	47.68	5.86	29.04
Interest accrued on bank deposits	0.36	0.10	0.36	0.10
Staff advance	0.05	0.07	0.05	0.07
Total	65.57	88.64	33.41	48.95

5.Deferred Tax Liability/Assets (Net)

Deferred tax reflects the timing differences between the financials and tax books arising mainly from employees benefit provisions, difference in book values and tax base values of right-of-use assets and lease liabilities, Provision for doubtful debts, tax losses, M2M loss on derivative instruments, MAT credit entitlement (results in deferred tax assets), differences between accounting base and tax base for depreciable assets, the net gain arising on financial assets measured at FVTPL and M2M gain on derivative instruments (results into deferred tax liability).

Deferred tax assets and deferred tax liabilities across various tax jurisdictions, which cannot offset against each other, are presented separately.

( in million)

Particulars	Consolidated	Standalone
	2022	2021	2022	2021
Deferred Tax Assets (net)	219.87	174.08	175.03	132.46

6.Income Tax Assets/Liability

Income tax assets represent the excess of tax paid over liability. It has been classified as non-current tax assets in the financial statement. Income tax liability represents the excess of tax liability over advance tax. It has been classified as current tax liability in a financial statement as the Company is required to settle the same within 12 months from reporting date.

( in million)

Particulars	Consolidated	Standalone
	2022	2021	2022	2021
Income tax assets (net)	53.46	22.59	27.81	10.57
Income tax liability (net)	50.17	65.45	26.39	27.96

Income tax assets/liabilities across various tax jurisdictions which cannot offset against each other are presented separately.

7.Other Non-Current Assets

( in million)

Particulars	Consolidated	Standalone
	2022	2021	2022	2021
Capital advances	16.07	4.97	8.80	4.97
Prepaid expenses	92.84	7.81	80.29	5.35
Total	108.91	12.78	89.09	10.32

The Capital Advance represents mainly the advance given to the vendor for the procurement of capital assets.

8.Current Investments

Current investments as of December 31, 2022, were 138.65 million as against 132.25 million as of December 31, 2021, mainly represent the surplus fund invested in Debt Liquid Mutual Fund to optimise the net tax yield based on the treasury management policy.

9.Trade Receivables

( in million)

Particulars	Consolidated	Standalone
	2022	2021	2022	2021
Trade receivables (gross)	2,636.05	1,798.78	1,228.37	845.20
Less: Allowance for doubtful debts (Expected credit loss	65.17	19.02	49.67	6.02
allowance)
Trade receivables (net)	2,570.88	1,779.76	1,178.70	839.18

10. Cash and Bank Balance

Cash and cash equivalents comprise cash at bank, cash in hand and short term deposits with an original maturity period of three months or less.

( in million)

	2022	2021	2022	2021
Cash and cash equivalents
Cash on hand	0.89	1.21	0.20	0.55
Balances with scheduled banks	737.32	466.79	714.85	434.91
Balances with other banks	1,324.09	1,575.68	110.65	186.63
Cash and cash equivalents (A)	2,062.30	2,043.68	825.70	622.09
Other bank balances
Deposit with an original maturity of more than 3	240.34	234.17	2.10	234.17
months but less than 12 months
Balances in unclaimed dividend account	2.56	1.82	2.56	1.82
Other bank balances (B)	242.90	235.99	4.66	235.99
Total Cash and Bank Balance (A+B)	2,305.20	2,279.67	830.36	858.08

Note: For detailed movement in cash and cash equivalent, please refer to the Consolidated and Standalone statement of cash flow.

11. Other Current Financial Assets

( in million)

Particulars	Consolidated	Standalone
	2022	2021	2022	2021
Staff advance	9.30	6.04	2.37	3.18
Recoverable from related parties	-	-	18.17	2.24
Unbilled revenue other than from fixed bid contract	635.51	461.83	503.47	337.83
Securities deposit	10.51	5.91	2.90	4.79
Bank deposits with original maturity of more than 12	232.12	337.76	232.12	337.76
months
Mark-to-market gain on derivative instruments	-	51.81	-	51.81
Interest accrued on bank deposits	1.69	6.89	0.02	6.90
Other	21.95	29.65	0.16	11.43
Total	911.08	899.89	759.21	755.94

Unbilled revenue constitutes amounts that are not billed to customers at year-end, which is expected to be billed in due course in accordance with the contract with the respective customers.

12. Other Current Assets

( in million)

Particulars	Consolidated	Standalone
	2022	2021	2022	2021
Balances with indirect tax authorities	68.68	36.86	68.68	36.79
VAT recoverable	5.38	2.20	-	-
Unbilled revenue from fixed bid contract	70.86	66.74	10.48	0.12
Prepaid expenses	220.59	150.82	147.97	101.89
Advance to vendors	6.99	9.17	6.33	7.73
Tour and travel advance	3.17	0.33	3.17	0.33
Total	375.67	266.12	236.63	146.86

13. Share Capital

The Company’s authorised share capital is 206 million as of December 31, 2022, and December 31, 2021. The Company’s issued, subscribed and paid-up capital as of December 31, 2022, and December 31, 2021, is 118.31 million.

Detailed information about the movements in share capital has been given in Note no. 11 of notes to the Consolidated Financial Statements.

14. Other Equity

( in million)

Particulars	Consolidated	Standalone
	2022	2021	2022	2021
Reserve and Surplus
Securities premium account	-	-	-	-
Capital reserve under common control	(0.34)	(0.34)	(0.34)	(0.34)
Capital reserve other	0.03	0.03	-	-
Capital redemption reserve	5.02	5.02	5.02	5.02
Retained earnings {including remeasurement of	4,796.37	4,164.18	3,779.16	3,416.65
defined benefit plan (net)}
Other Comprehensive Income
Foreign currency translation reserve	535.30	315.76	-	-
Total Other Equity	5,336.39	4,484.65	3,783.84	3,421.33

15. Non-Controlling Interest

During the year, there is no change in the non-controlling interest in the Consolidated Financial Statement.

16. Borrowings (Non-Current portion)

( in million)

Particulars	2022	2021
Term loans
- Motor vehicles Loan from non-banking financial company (secured)
Non-Current Portion	20.44	10.61
Current Portion	7.21	4.15
Total Term loan	13.23	6.46

17. Lease liabilities

( in million)

Particulars	Consolidated		Standalone
	2022	2021	2022	2021
Non-current	666.11	480.83	576.56	345.51
Current	84.69	85.87	13.24	14.40
Total Lease liabilities	750.8	566.7	589.8	359.91

18. Other Non-Current Financial Liabilities

Other Non-Current Financial Liabilities represent the Security deposits received which is required to be paid after the 12 months from the reporting date based on contractual agreement. Security deposit as of December 31, 2022, was 8.76 million as against 3.45 million as of December 31, 2021.

19. Provisions (Long Term)

Long-term provisions represent the Provision towards the gratuity liability due after 12 months from the reporting date based on actuarial valuation. The Provision amounts to 207.95 million as of December 31, 2022, as against 193.98 million as of December 31, 2021.

20. Trade Payables

( in million)

Particulars	Consolidated		Standalone
	2022	2021	2022	2021
Trade Payable	355.87	360.82	67.60	69.78

21. Other Current Financial Liabilities

( in million)

Particulars	Consolidated		Standalone
	2022	2021	2022	2021
Payable to subsidiary company	-	-	54.66	30.03
Security deposits received	9.96	10.78	9.96	10.78
Investor education and protection fund (not due) -	2.56	1.82	2.56	1.82
Unclaimed dividend
Employee benefits payable	438.01	323.03	256.26	203.14
Capital creditors	21.97	3.64	21.97	3.64
Contingent consideration for business acquisition	-	49.72	-	-
Advance from Customer	8.65	8.89	0.34	2.47
JSS benefit payable	-	4.67	-	-
Other financial liabilities	9.51	11.40	3.45	3.39
Mark-to-market loss on derivative instruments	98.06	-	98.06	-
Total	588.72	413.95	447.26	255.27

During the year, Group has settled the contingent consideration by paying 27.46 million and reversed the balance contingent consideration as "Other fair value gain on contingent consideration" under Other Income.

22. Provisions (Short Term)

( in million)

Particulars	Consolidated		Standalone
	2022	2021	2022	2021
Provision for employee benefits
- Gratuity	24.43	9.69	24.43	9.69
- Compensated absences	279.27	244.26	182.51	148.03
Total	303.70	253.95	206.94	157.72

23. Other Current Liabilities

( in million)

Particulars	Consolidated		Standalone
	2022	2021	2022	2021
Statutory dues payable
- Tax deducted at source / Witholding tax payable	64.25	38.12	55.21	30.93
- PF / 401 K / other payables	100.81	76.18	35.69	27.50
- GST / Sales tax / VAT payable	33.59	30.14	2.13	4.73
- Others	0.77	0.54	0.76	0.53
Unearned revenues	389.96	306.47	70.60	71.35
Deferred grant from Government	-	-		-
Total	589.38	451.45	164.39	135.04

24. Liquidity

The consolidated cash and cash equivalents as at December 31, 2022 were 2,062.30 mn. as against

2,043.68 mn. as on December 31, 2021.

Net cash generated from operating activities was 963.86 mn for the year ended December 31, 2022 compared to

873.15 mn. for the year ended December 31, 2021.

Cash used in investing activities was 213.71 mn. for the year ended December 31, 2022 and mainly comprised of purchase of fixed assets of 358.96 mn, as offset by proceeds from investment in term deposit with bank 115.60 mn.

Cash used in financing activities was 864.00 mn. for the year ended December 31, 2022. Interim Dividend paid during the year was 768.97 mn.

R Systems’ policy is to maintain sufficient liquidity to fund the anticipated capital expenditures, operational expenses and investments for strategic initiatives.

R Systems has a credit facility (fund based as well as non-fund based) from the Axis Bank Limited and ICICI Bank Limited. As at December 31, 2022, the total credit balance was nil under fund based line of credit. Further, borrowings as on December 31, 2022, comprises of loan for motor vehicles purchased amounting to 20.44 mn.

Analysis and Discussions of Operating Performance for the Year Ended December 31, 2022

The following section discusses in detail the composition of different items in the Consolidated and Standalone Statement of Profit and Loss Account.

Consolidated Statement of Profit and Loss for the year:

( in million)

Particulars	2022	% of Total Income	2021	% of Total Income	Change %
Income
Revenue from operations	15,158.31	99.33	11,556.39	96.50	31.17
Other income	102.89	0.67	418.96	3.50	(75.44)
Total income	15,261.20	100.00	11,975.35	100.00	27.44
Expenses
Employee benefits expense	10,194.05	66.80	7,798.25	65.12	30.72
Finance costs	48.98	0.32	49.12	0.41	(0.29)
Depreciation and amortisation expense	349.78	2.29	276.93	2.31	26.31
Other expenses	2,966.82	19.44	2,150.33	17.96	37.97
Total expenses	13,559.63	88.85	10,274.63	85.80	31.97
Profit before tax	1,701.57	11.15	1,700.72	14.20	0.05
Tax expense	304.76	2.00	286.36	2.39	6.43
Net Profit for the year	1,396.81	9.15	1,414.36	11.81	(1.24)
Other comprehensive income / (loss)	223.89	1.47	(32.19)	(0.27)	(795.53)
Total comprehensive income for the year	1,620.70	10.62	1,382.17	11.54	17.26

Standalone Statement of Profit and Loss for the year:

( in million)

Particulars	2022	% of Total Income	2021	% of Total Income	Change %
Income
Revenue from operations	8,138.90	99.14	5,775.01	92.51	40.93
Other income	70.44	0.86	467.27	7.49	(84.93)
Total income	8,209.34	100.00	6,242.28	100.00	31.51
Expenses
Employee benefits expense	5,533.61	67.41	3,969.88	63.60	39.39
Finance costs	42.64	0.52	38.26	0.61	11.45
Depreciation and amortisation expense	195.83	2.39	146.49	2.35	33.68
Other expenses	1,096.77	13.37	728.72	11.67	50.51
Total expenses	6,868.85	83.67	4,883.35	78.23	40.66
Profit before tax	1,340.49	16.33	1,358.93	21.77	(1.36)
Tax expense	213.38	2.60	201.46	3.23	5.92
Net Profit for the year	1,127.11	13.73	1,157.47	18.54	(2.62)
Other comprehensive income / (loss)	4.37	0.05	0.71	0.01	515.49
Total comprehensive income for the year	1,131.48	13.79	1,158.18	18.55	(2.31)

1.Revenue

1.1 Revenue from Operations

R Systems derives revenue primarily from Information Technology services and Business Process Outsourcing services (knowledge services). Revenue is recognised when the performance obligations as promised have been satisfied with a transaction price and when where there is no uncertainty as to the measurement or collectability of the consideration.

1.1.1 Based on Consolidated Financial Statement

( in million)

Particulars	Year ended	%	Year ended	%	change %
	December		December
	31, 2022		31, 2021
Information technology services	13,950.02	92.03	10,753.43	93.05	29.73
Business process outsourcing services	1,208.29	7.97	802.96	6.95	50.48
Total	15,158.31	100.00	11,556.39	100.00	31.17

1.1.2 Based on Standalone Financial Statement

( in million)

Particulars	Year ended	%	Year ended	%	change %
	December		December
	31, 2022		31, 2021
Information technology services	6,930.61	85.15	4,947.04	85.66	40.10
Business process outsourcing services	1,208.29	14.85	827.97	14.34	45.93
Total	8,138.90	100.00	5,775.01	100.00	40.93

1.1.3 Consolidated Revenue by Geography

R Systems earns income from five principal geographic territories, namely North America, Europe, South East Asian countries ("SEAC"), India and others. A significant proportion of the revenues were derived from clients located in North America. The geographic breakdown is given below: ( in million)

Particulars	Year ended	Year ended
	December 31, 2022	December 31, 2021
North America	74.20%	68.86%
Europe	10.39%	13.52%
SEAC	12.54%	14.55%
India	1.88%	2.30%
Others	0.99%	0.77%
	100.00%	100.00%

1.1.4 Consolidated Revenue by Client Concentration

The breakdown of R Systems’ consolidated revenue based on client concentration for the year ended December 31, 2022, and 2021 is as follows: ( in million)

Revenue from Top 10 Clients	Year ended
	December 31, 2022	December 31, 2021
Top 10 Clients	22.81%	24.19%
Top 5 Clients	15.25%	16.44%
Top 3 Clients	11.59%	12.33%
Largest Client	6.66%	7.14%

1.2 Other Income

( in million)

Particulars	Consolidated		Standalone
	2022	2021	2022	2021
Interest income	40.45	66.85	34.96	64.29
Dividend From subsidiary companies	-	-	3.40	238.88
Rental income from investment property	6.72	6.72	6.72	6.72
Forgiveness of PPP Loan	-	224.04	-	31.76
Foreign exchange fluctuation (net)	-	87.54	-	96.39
Lease rent concession	7.47	15.11	7.10	13.12
Other fair value gain on contingent consideration	25.79	-	-	-
Net gain arising on financial assets measured at FVTPL	6.40	4.23	6.40	4.23
Reversal of Provision for diminishing value of	-	-	-	10.78
investments
Other miscellaneous income	16.06	14.47	11.86	1.10
Total Other Income	102.89	418.96	70.44	467.27

2. Expenditures 2.1 Personnel Expenses

Personnel expenses primarily consist of salaries, wages, bonus, Provision for compensated absences, gratuity benefits, contribution towards provident and other funds and staff welfare expenses.

2.1.1 Based on Consolidated Financial Statement

( in million)

Particulars	2022	% of Total	2021	% of Total	Change %
		Income		Income
Salaries, wages and bonus	9,408.89	61.65	7,202.06	60.14	30.64
Gratuity expenses	49.00	0.32	39.48	0.33	24.10
Contribution to provident and other funds	478.19	3.13	363.44	3.03	31.57
Staff welfare expenses	257.97	1.69	193.27	1.61	33.48
Total	10,194.05	66.80	7,798.25	65.12	30.72

2.1.2 Based on Standalone Financial Statement

( in million)

Particulars	2022	% of Total	2021	% of Total	Change %
		Income		Income
Salaries, wages and bonus	5,174.12	63.03	3,714.72	59.51	39.29
Gratuity expenses	49.00	0.60	39.48	0.63	24.11
Contribution to provident and other funds	192.84	2.35	136.96	2.19	40.80
Staff welfare expenses	117.65	1.43	78.72	1.26	49.45
Total	5,533.61	67.41	3,969.88	63.60	39.39

2.2 Finance cost (Interest expenses)

( in million)

Particulars	Consolidated		Standalone
	2022	2021	2022	2021
On term loan	1.16	1.47	1.16	0.73
On lease liabilities	46.80	40.95	41.40	35.48
On fair value of contingent consideration	0.77	4.65	-	-
On income tax	0.25	2.05	0.08	2.05
Total	48.98	49.12	42.64	38.26

2.3 Depreciation and Amortisation Expense

( in million)

Particulars	Consolidated		Standalone
	2022	2021	2022	2021
Depreciation of property, plant and equipment	216.05	153.48	155.23	108.05
Depreciation on right-of-use assets	111.01	102.00	36.56	35.00
Depreciation of investment property	1.47	1.47	1.47	1.47
Amortisation of intangible assets	21.25	19.98	2.57	1.97
Total Depreciation and Amortisation	349.78	276.93	195.83	146.49
% of Total income	2.29	2.31	2.39	2.35

2.4 Operational and other expenses

Operational and other expenses include power and fuel, expenses on travelling and conveyance, software subscription charges, short term lease rent, commission, communication, legal and professional expenses including sub-contractors costs, cost of third party items, audit fees, Provision for doubtful debts (net), Foreign exchange fluctuation loss (net), advance written off, contributions towards corporate social responsibility and other miscellaneous items.

2.4.1 Based on Consolidated Financial Statement:

( in million)

Particulars	2022	% of Total	2021	% of Total	Change %
		Income		Income
Power and fuel	52.59	0.34	41.02	0.34	28.21
Rent - premises	62.08	0.41	50.84	0.42	22.11
Software subscription charges	174.75	1.15	128.45	1.07	36.05
Repair and maintenance	72.35	0.47	50.94	0.43	42.03
Commission	7.64	0.05	17.52	0.15	(56.39)
Travelling and conveyance	201.89	1.32	102.57	0.86	96.83
Communication costs	129.61	0.85	102.90	0.86	25.95
Legal and professional fees (including	1,495.80	9.78	1,100.65	9.19	35.61
subcontracting expenses)
Cost of third party items	267.83	1.75	245.79	2.05	8.97
Auditors remuneration	24.66	0.18	24.26	0.20	14.95
Provision for doubtful debts (net)	51.87	0.34	-	-	-
Contribution towards corporate social	17.60	0.12	11.49	0.10	53.17
responsibility
Foreign exchange fluctuation (net)	79.47	0.52	-	-	-
Miscellaneous expenses	328.68	2.15	273.90	2.29	20.00
Total	2,966.82	19.44	2,150.33	17.96	37.97

2.4.2 Based on Standalone Financial Statement:

( in million)

Particulars	2022	% of Total	2021	% of Total	Change %
		Income		Income
Power and fuel	33.35	0.41	26.58	0.43	25.47
Rent – premises	30.76	0.37	24.25	0.39	26.85
Software subscription charges	138.62	1.69	105.68	1.69	31.17
Repair and maintenance	53.45	0.65	37.95	0.61	40.81
Commission	7.62	0.09	17.52	0.28	(56.51)
Travelling and conveyance	128.32	1.56	64.51	1.03	98.91
Communication costs	95.05	1.16	71.63	1.15	32.71
Legal and professional fees (including	302.15	3.68	218.57	3.50	38.24
subcontracting expenses)
Auditors remuneration	6.30	0.08	6.10	0.10	3.28
Provision for doubtful debts (net)	46.72	0.57	-	-	-
Contribution towards corporate social	17.60	0.21	11.49	0.18	53.17
responsibility
Foreign exchange fluctuation (net)	47.77	0.58	-	-	-
Miscellaneous expenses	189.06	2.30	144.44	2.32	30.89
Total	1,096.77	13.36	728.72	11.67	50.51

2.5 Tax Expense

Tax expense comprises current tax and deferred tax

( in million)

Particulars	Consolidated		Standalone
	2022	2021	2022	2021
Profit Before Tax	1,701.57	1,700.72	1,340.49	1,358.93
Current tax	387.19	327.63	296.55	245.27
Deferred tax credit	(82.43)	(41.27)	(83.17)	(43.81)
Total Tax Expense	304.76	286.36	213.38	201.46
Effective Tax Rate (%)	17.91	16.84	15.92	14.82

J. Details of significant changes i.e. change of 25% or more as compared to the immediately previous financial year, in key financial ratios, along with detailed explanations therefore, including:

( in million)

Particulars		Consolidated			Standalone
	2022	2021	Variance	2022	2021	Variance
Debtors Turnover (in days)	52	48	7.3%	45	47	-4.8%
Inventory Turnover	NA	NA		NA	NA
Interest Coverage*	33.64	27.09	24.2%	30.79	24.31	26.7%
Current Ratio	3.18	3.28	-2.8%	3.37	4.12	-18.1%
Debt Equity Ratio@	0.14	0.13	12.73%	0.16	0.10	49.4%
Operating Profit Margin	10.9%	11.5%	-5.6%	16.1%	16.1%	0.2%
Net Profit Margin#	9.2%	12.2%	-24.7%	13.8%	20.0%	-30.9%
Return on Net worth	27.8%	31.9%	-12.9%	30.7%	35.7%	-14.1%

* Interest coverage ratio has increased mainly due to higher profits from operations, keeping the Interest cost almost same.

 

@Debt equity ratio has increased mainly due to increase in lease liabilities due to new office premises taken on lease.

 

# Decrease in consolidated net profit margins, in last year there was one-time income due to forgiveness of the PPP loan under USA operations whereas in standalone accounts, it was mainly due to dividend received from subsidiaries during last year.

Note:

Debtors Turnover = Average Trade Receivables / Revenue from operations * 360

Operating Profit = Profit before tax (PBT) less Finance cost, exceptional items and other income Interest Coverage = Operating profit / Finance cost Current Ratio = Current Assets / Current Liability Debt Equity Ratio = Total Debt (borrowings + lease liabilities) / Shareholders’ equity Operating Profit Margin = Operating profit / Revenue Net Profit Margin = Profit after tax (PAT) / Revenue Return on Net worth = Profit after tax (PAT) / Average shareholders’ equity.