R Systems International Ltd 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 management accepts responsibility for the integrity and objectivity of these financial statements and various estimates and judgments used therein. 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

The world has theatrically changed over the last two years, with the pandemic impacting every aspect of our lives. The new innovative world is now unleashing the wave of digitisation, agility, and breakthroughs. From accelerated digitisation to the virtualisation of businesses, enterprises have been transformed with innovations and the introduction of next-gen solutions.

With rapidly maturing modern technologies, such as Artificial Intelligence, Machine Learning and Robotics, technology companies can now redesign the value propositions of existing services and solutions with renewed business models to create a competitive edge. As a result, they can help their customers scale operations, enterprise collaboration and increase productivity at a rate never experienced before.

We will now witness rapid development in the IT industry and progress in enterprises, diving into the next wave of digital transformation, utilising technologies and resources to their full potential. There lies a prime opportunity for businesses across sectors to capitalise on these disruptive technologies to generate actionable business insights that can create a vast difference in their business outcome.

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 and incorporated under the provisions of the Companies Act, 1956, 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 Groups services and solutions span over five major business verticals: Technology, Telecom, Healthcare and Life Science, Finance and Insurance, Retail and e-commerce.

The Company has the following subsidiaries:

Subsidiary Holding as of December 31,2021 Holding as of December 31,2020 Country of incorporation and other particulars
R Systems, Inc., USA 100% 100% A company registered under the laws of California, USA, in 1993 and a subsidiary of the Company since January 2, 2001.
R Systems (Singapore) Pte Limited, Singapore 100% 100% A company registered under the laws of Singapore in 1997 and a subsidiary of the Company since September 19, 2000.
R Systems Technologies Limited, USA 100% 100% A company registered under the laws of Delaware, USA, in 1996 and a subsidiary of the Company since April 1,2002.
R Systems Consulting Services Limited, Singapore 99.75% 99.75% A company registered under the laws of Singapore in 1996. The Company acquired the majority share on January 8, 2004. R Systems Consulting Services Limited, Singapore has subsidiaries in Malaysia, Thailand, China, Hong Kong and Japan.
The shareholding by the Company and R Systems (Singapore) Pte Limited is 69.37% and 30.38%, respectively.
R Systems Computaris International Limited, UK 100% 100% A company registered under the laws of the U.K. in 2006. The Company acquired the entire share on January 26, 2011. R Systems Computaris International Limited, U.K., has subsidiaries in Romania, Poland, Moldova, Malaysia, Switzerland and the Philippines.
RSYS Technologies Ltd., Canada 100% 100% A company registered under the laws of Canada in 2012 and a subsidiary of the Company since October 29, 2012.
IBIZ Consultancy Services India Private Limited, India 100% 100% A company registered under the laws of India in 2008 and a subsidiary of the Company since April 30, 2015.

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

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

Name Holding as of December 31,2021 Holding as of December 31,2020 Country of incorporation
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 % Peoples 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 Computaris International Limited, U.K., has the following wholly-owned subsidiaries:

Name Holding as of December 31,2021 Holding as of December 31,2020 Country of incorporation
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. Inc. 100 % 100 % Philippines
R Systems Computaris Suisse Sarl, Switzerland 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 the following wholly-owned subsidiaries:

Name Holding as of December 31, 2021 Holding as of December 31,2020 Country of incorporation
IBIZ Consulting Services Pte Ltd 100 % 100 % Singapore
R Systems IBIZCS 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 Peoples Republic of China

C. Opportunities and Threats

As per the Markets and Markets study, the digital transformation market size to grow from USD 521.5 billion in 2021 to USD 1247.5 billion by 2026, at a CAGR of 19.1% during the forecast period. Artificial intelligence, machine learning, cloud computing and big data are the major enabling technologies supporting a solid growth rate of the digital transformation market.

R Systems has continued to invest in sales, pre-sales, and newer technologies to unleash next-gen digital evolution. Digital transformation is forcing customers to change their business models and adapt to the new market reality. R Systems is helping them to navigate their journey of successful digital transformations. Therefore, At R Systems, we have structured and positioned ourselves to partner with global ISVs and enterprise customers to speed up their transformation journey.

As every opportunity comes up with inherent risk 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 11,556.39 million during the year 2021 as against revenue of 8,805.91 million during the year 2020. The revenue grew by 31.23% during the year 2021.

Consolidated Profit after tax during the year 2021 was 1,414.36 million as against net Profit for the year 2020 of 817.99 million.

The basic earnings per share (based on the consolidated financial statement) during the year 2021 was 11.85 per share as against 6.84 per share in year 2020 of the face value of 1 each.

R Systems maintains a solid financial position with shareholder funds of 4,602.96 million, including net cash and bank balance of 2,774.47 million as of December 31,2021, to invest towards the future growth of the business.

R Systems is well-positioned to leverage the following factors, which are pertinent to its differentiated strategy for growth in the marketplace:

F. Risk and Concerns

At R Systems, risk management is a dynamic process with an attempt to constantly identify 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 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 Auditors Report also includes an unmodified opinion on the adequacy and operating effectiveness of the Company 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 internal control systems and procedures.

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 FY2021, R Systems has a talent pool of 4,035 associates, including 487 sales and support associates.

I. Discussion on financial performance with respect to operational performance

Financial Position as of December 31,2021

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.

Particulars Consolidated Standalone
20211 2020 2021 2020
Property, plant and equipment (net) 583.58 471.67 433.72 359.14
Right-to-use assets 528.30 470.42 329.74 364.74
Intangible assets
- Goodwill on Consolidation 97.54 97.24 -

-

- Other intangible assets (net) 39.19 49.12 2.08 3.97
Capital work in progress - 0.21 - -
Total 1,248.61 1,088.66 765.54 727.85

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

Particulars

Consolidated

Standalone

2021 2020 2021 2020
Property, plant and equipment 274.12 205.34 186.27 140.59
Right-to-use assets 186.47 224.16 - 167.01
Intangible assets
- Goodwill 1.03

-

-

-

- Other intangible assets 9.66 7.52 0.09 5.08

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 31,2021, was 18.90 million as against 20.37 million as of December 31,2020.

3. Non-Current Investment (Rs. in million)

Particulars Consolidated

Standalone

2021 2020 2021 2020
Investment in subsidiaries - 1,034.28 1,023.50
Other investment 0.03 0.03 0.03 0.03
Total 0.03 0.03 1,034.31 1,023.53

The Company has reversed the provision recorded in earlier years towards diminution in the value of investment amounting to 10.78 million for one of its subsidiaries in the USA, considering its net worth exceeds the investment amount and its future business plan.

4. Other Non-Current Financial Assets

Particulars

Consolidated

Standalone

2021 2020 2021 2020
Security deposits 40.79 32.72 19.74 15.75
Margin money deposits 47.68 46.05 29.04 25.16
Interest accrued on bank deposits 0.10 0.75 0.10 0.75
Staff advance 0.07 0.01 0.07 0.01
Total 88.64 79.53 48.95 41.67

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, MAT credit entitlement (results in deferred tax assets), the difference on account of revenue recognition, 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 in deferred tax liability).

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

(Rs. in million)

Particulars

Consolidated

Standalone

2021 2020 2021 2020
Deferred Tax Assets (net) 174.08 133.44 132.46 89.07

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.

(Rs. in million)

Particulars

Consolidated

Standalone

2021 2020 2021 2020
Income tax assets (net) 22.59 67.13 10.57 32.17
Income tax liability (net) 65.45 67.14 27.96 47.78

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

7. Other Non-Current Assets (Rs. in million)

Particulars

Consolidated

Standalone

2021 2021 2020
Capital advances 4.97

-

4.97 -
Prepaid expenses 7.81 18.84 5.35 18.48
Total 12.78 18.84 10.32 18.48

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, 2021, were 132.25 million as against 128.02 million as of December 31, 2020, 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 (Rs. in million)

Particulars

Consolidated

Standalone

2021 2020 2021 2020
Trade receivables (gross) 1,798.78 1,341.47 845.20 665.86
Less : Allowance for doubtful debts (expected credit loss allowance) 19.02 28.93 6.02 7.66
Trade receivables (net) 1,779.76 1,312.54 839.18 658.20

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.

(Rs. in million)

Particulars

Consolidated

Standalone

2021 2020 2021 2020
Cash and cash equivalents
Cash on hand 1.21 1.07 0.55 0.51
Balances with scheduled banks 466.79 681.34 434.91 654.74
Balances with other banks 1,575.68 1,453.43 186.63 60.23
Cash and cash equivalents (A) 2,043.68 2,135.84 622.09 715.48
Other bank balances
Deposit with an original maturity of more than 3 months but less than 12 months 234.17 368.48 234.17 283.35
Balances in unclaimed dividend account 1.82 2.14 1.82 2.14
Other bank balances (B) 235.99 370.62 235.99 285.49
Total Cash and Bank Balance (A+B) 2,279.67 2,506.46 858.08 1,000.97

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 (Rs. in million)

Particulars

Consolidated

Standalone

2021 2020 2021 : 2020
Staff advance 6.04 8.85 3.18 1.80
Recoverable from related parties - - 2.24 0.68
Unbilled revenue other than from fixed bid contract 461.83 162.55 337.83 99.66
Securities deposit 5.91 11.20 4.79 5.89
Bank deposits with original maturity of more than 12 months 337.76 626.36 337.76 591.28
Mark-to-market gain on derivative instruments 51.81 54.66 51.81 54.66
Interest accrued on bank deposits 6.89 8.95 6.90 7.88
Others 29.65 16.94 11.43 6.84
Total 899.89 889.51 755.94 768.69

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 custome

12. Other Current Assets

Particulars

Consolidated

Standalone

2021 2020 20211 2020
Balances with indirect tax authorities 36.86 44.00 36.79 43.59
VAT recoverable 2.20 7.15 - -
Unbilled revenue from fixed bid contract 66.74 59.59 0.12 1.25
Prepaid expenses 150.82 130.33 101.89 78.08
Advance to vendors 9.17 10.51 7.73 3.62
Tour and travel advance 0.33 0.04 0.33 0.04
Total 266.12 251.62 146.86 126.58

13. Share Capital

The Company authorised share capital is 206 million as of December 31,2021, and December 31,2020. The Company issued, subscribed and paid-up capital as of December 31,2021, and December 31, 2020, is 118.31 million and 119.64 million, respectively.

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 (Rs. in million)

Particulars

Consolidated

Standalone

2021 2020 2021 2020
Reserve and Surplus
Securities premium account - 46.66 - 46.66
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 3.69 5.02 3.69
General Reserve - 155.04 - 155.04
Retained earnings 4,175.27 3,606.67 3,427.74 3,116.03
Other Comprehensive Income
Re-measurement of defined benefit plans (11.09) (11.98) (11.09) (11.98)
Foreign currency translation reserve 315.76 348.84 - 0.18
Total Other Equity 4,484.65 4,148.61 3,421.33 3,309.28

During the year ended December 31, 2021, the Company bought back 1,333,000 equity shares of 1 each at a price of 225/- per equity share, payable in cash for a total consideration of 299.93 million by utilising the securities premium account of 46.66 million, a general reserve of 155.04 million and retained earnings to the extent of 96.90 million. The capital redemption reserve was created out of retained earnings for 1.33 million being the nominal value of equity shares bought back in terms of Section 68 of the Companies Act, 2013. The equity shares bought back were extinguished on October 14, 2021. Further, the Company has apportioned 69.87 million out of retained earnings towards tax on aforesaid buy-back.

The Company has paid the first interim dividend of 2.5/- per equity share of face value of 1/-each on July 14, 2021.

The Company has paid a second interim dividend of 3.20/- per equity share of face value of 1/- each on November 26, 2021.

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) (Rs. in million)

Particulars

Consolidated

Standalone

2021 2020 2021 2020
Term loans
- Motor vehicles Loan from non-banking financial corporation (secured) 10.61 8.12 10.61 8.12
- PPP forgivable Loan - 222.05 - 31.76
10.61 230.17 10.61 39.88
Less : Current maturity disclosed under other current liabilities 4.15 146.55 4.15 24.64
Total 6.46 83.62 6.46 15.24

In the year ended December 31,2020, the Company and its US subsidiaries had obtained a forgivable loan of 222.05 mn (USD 3.01 mn) under the Paycheck Protection Program (PPP) by the Small Business Administration, United States of America ("SBA").

During the year ended December 31, 2021, the Company and its US subsidiaries received the forgiveness of the entire loan amount upon satisfaction of the underlying conditions. Consequently, the amount of loan forgiven was recognised as other income.

17. Other Non-Current Financial Liabilities (Rs. in million)

Particulars

Consolidated

Standalone

2021 2020 2021 2020
Contingent consideration for business acquisition - 44.27

-

-

Security deposit 3.45 2.42 3.45 2.42
Lease liabilities 480.83 425.36 345.51 359.88
Total 484.28 472.05 348.96 362.30

18. 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 193.98 million as of December 31,2021, as against 174.94 million as of December 31,2020.

19. Trade Payables (Rs. in million)

Particulars

Consolidated

Standalone

2021 2020 2021 2020
Trade Payable 360.82 216.53 69.78 38.86

20. Other Current Financial Liabilities (Rs. in million)

Particulars

Consolidated

Standalone

2021 2020 2021 2020
Current maturities of term loans:
- Motor vehicle loan 4.15 4.30 4.15 4.30
- PPP forgivable loan - 142.25 - 20.34
Payable to subsidiary company - - 30.03 20.79
Security deposits received 10.78 10.13 10.78 10.14
Lease liabilities 85.87 62.80 14.40 15.62
Investor education and protection fund (not due) - Unclaimed dividend 1.82 2.14 1.82 2.14
Particulars

Consolidated

Standalone

2021 2020 2021 2020
Employee benefits payable 323.03 225.23 203.14 151.00
Capital creditors 3.64 3.92 3.64 3.92
Contingent consideration for business acquisition 49.72

-

-

-

Advance from Customer 8.89 5.44 2.47 -
JSS benefit payable * 4.67 26.50 - -
Other financial liabilities 11.40 8.65 3.39 4.70
Total 503.97 491.36 273.82 232.95

* This represents the Job Support Scheme (JSS) benefit received in Singapore for IT consulting operations. As per the scheme, this amount is either required to be passed to end customers or returned to the Government. The balance as of December 31, 2021, represents the amount payable to the Government.

21. Provisions (Short Term) (Rs. in million)

Particulars

Consolidated

Standalone

2021 2020 2021 2020
Provision for employee benefits
-Gratuity 9.69 5.07 9.69 5.07
-Compensated absences 244.26 218.94 148.03 123.88
Total 253.95 224.01 157.72 128.95

22. Other Current Liabilities (Rs. in million)

Particulars

Consolidated

Standalone

2021 2020 2021 2020
Statutory dues payable
Tax deducted at source / Witholding tax payable 38.12 26.53 30.93 19.83
PF / 401 K / other payables 76.18 62.29 27.50 21.01
GST / Sales tax / VAT payable 30.14 33.45 4.73 3.47
Others 0.54 0.43 0.53 0.43
Unearned revenues 306.47 360.46 71.35 160.92
Deferred grant from Government - 15.09 - -
Total 451.45 498.25 135.04 205.66

23. Liquidity

The consolidated cash and cash equivalents as of December 31, 2021, were 2,043.68 million as against 2,135.84 million as of December 31, 2020.

Net cash generated from operating activities was 873.15 million for the year ended December 31, 2021, compared to 1,253.92 million for the year ended December 31,2020.

Cash inflow from investing activities was 211.89 million for the year ended December 31, 2021, and mainly comprised proceeds from long term deposits with bank of 421.93 million (net), interest income of 67.81 million as offset by the purchase of property, plant and equipment of 278.96 million.

Cash used in financing activities was 1,159.17 million for the year ended December 31, 2021, and mainly comprised of payment of an interim dividend of 677.66 million, Buy-back of equity shares (including tax) of 369.80 million and payment of lease liabilities of 107.01 million.

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

R Systems has taken credit facilities (fund based as well as non-fund based) from Axis Bank Limited and ICICI Bank Limited. As of December 31,2021, the total credit balance was nil under fund based line of credit. Further, borrowings as of December 31, 2021, represent a loan taken for motor vehicles amounting to 10.61 million.

Analysis and Discussions of Operating Performance for the Year Ended December 31,2021

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: jn mjjjjon)

Particulars 2021 % of Total Income 2020 % of Total Income Change %
Income
Revenue from operations 11,556.39 96.50 8,805.91 98.56 31.23
Other income 418.96 3.50 129.00 1.44 224.78
Total income 11,975.35 100.00 8,934.91 100.00 34.03
Expenses
Employee benefits expense 7,798.25 65.12 6,116.27 68.45 27.50
Finance costs 49.12 0.41 56.66 0.63 (13.31)
Depreciation and amortisation expense 276.93 2.31 256.04 2.87 8.16
Other expenses 2,150.33 17.96 1,525.08 17.07 41.00
Total expenses 10,274.63 85.80 7,954.05 89.02 29.17
Profit before tax and exceptional items 1,700.72 14.20 980.86 10.98 73.39
Exceptional Items - - 18.65 1.00 (100.00)
Profit before tax 1,700.72 14.20 962.21 10.77 76.75
Tax expense 286.36 2.39 144.22 1.61 98.56
Net Profit for the year 1,414.36 11.81 817.99 9.15 72.91
Other comprehensive income / (loss) (32.19) (0.27) 75.92 0.85 (142.40)
Total comprehensive income for the year 1,382.17 11.54 893.91 10.00 54.62

Standalone Statement of Profit and Loss for the year:

Particulars 2021 % of Total 2020 % of Total Change %
Income Income
Income
Revenue from operations 5,775.01 92.51 4,387.15 97.21 31.63
Other income 467.27 7.49 125.93 2.79 271.06
Total income 6,242.28 100.00 4,513.08 100.00 38.32
Expenses
Employee benefits expense 3,969.88 63.60 2,972.00 65.85 33.58
Finance costs 38.26 0.61 37.02 0.82 3.35
Depreciation and amortisation expense 146.49 2.35 134.61 2.98 8.83
Other expenses 728.72 11.68 553.65 12.27 31.62
Total expenses 4,883.35 78.23 3,697.28 81.92 32.08
Profit before tax 1,358.93 21.77 815.80 18.08 66.58
Tax expense 201.46 3.23 118.73 2.63 69.68
Net Profit for the year 1,157.47 18.54 697.07 15.45 66.05
Other comprehensive income / (loss) 0.71 0.01 (11.01) (0.24) (106.45)
Total comprehensive income for the year 1,158.18 18.56 686.06 15.20 68.82

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 there is no uncertainty as to the measurement or collectability of the consideration.

1.1.1 Based on Consolidated Financial Statement (Rs. in million)

Particulars Year ended December 31,2021 % Year ended December 31,2020 % change %
Information technology services 10,753.43 93.05 8,144.49 92.49 32.03
Business process outsourcing services 802.96 6.95 661.42 7.51 21.40
Total 11,556.39 100.00 8,805.91 100.00 31.23

1.1.2 Based on Standalone Financial Statement (Rs. in million)

Particulars Year ended December 31,2021 % of Total Income Year ended December 31,2020 % change %
Information technology services 4,947.04 85.66 3,700.67 84.35 33.68
Business process outsourcing services 827.97 14.34 686.48 15.65 20.61
Total 5,775.01 100.00 4,387.15 100.00 31.63

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 othe A significant proportion of the revenues were derived from clients located in North America. The geographic breakdown is given below:

Year ended December 31,2021 Year ended December 31, 2020
North America 68.86% 68.02%
Europe 13.52% 13.22%
SEAC 14.55% 16.25%
India 2.30% 1.58%
Others 0.77% 0.93%
100.00% 100.00%

1.1.4 Consolidated Revenue by Client Concentration

The breakdown of R Systems consolidated revenue on the basis of client concentration for the year ended December 31,2021, and 2020 is as follows:

Year ended December 31,2021 Year ended December 31,2020
Top 10 Clients 24.19% 28.48%
Top 5 Clients 16.44% 18.96%
Top 3 Clients 12.33% 14.06%
Largest Client 7.14% 7.68%

1.2 Other Income

Particulars

Consolidated

Standalone

2020 20211 2020
Interest income 66.85 53.20 64.29 47.35
Dividend From subsidiary companies - - 238.88 -
Forgiveness of PPP Loan 224.04 - 31.76 -
Rental income from investment property 6.72 6.44 6.72 6.44
Foreign exchange fluctuation (net) 87.54 33.30 96.39 47.22
Reversal of Provision for doubtful debts (net) 4.82 - 0.04 -
Lease rent concession 15.11 15.51 13.12 11.97
Profit on sale of property, plant and equipment (net) - - - 0.04
Profit on cancellation of leases (net) - 2.32 - -
Net gain arising on financial assets measured at FVTPL 4.23 12.43 4.23 12.43
Reversal of Provision for diminishing value of investments - - 10.78 -
Miscellaneous income 9.65 5.80 1.06 0.48
Total other income 418.96 129.00 467.27 125.93

Expenditures

2.1 Personnel Expenses

Personnel expenses primarily consist of salaries, bonuses, commissions, provision for compensated absences, gratuity benefits, contribution towards provident and other funds, employee share-based payments expense and staff welfare expenses.

2.1.1 Based on Consolidated Financial Statement: ( in mjjjjon)

Particulars Year ended December 31,2021 % Year ended December 31,2020 % change %
Salaries, wages and bonus 7,202.06 60.14 5,640.27 63.13 27.69
Gratuity expenses 39.48 0.33 31.63 0.35 24.82
Contribution to provident and other funds 363.44 3.03 285.25 3.19 27.41
Employees share based payments expense - - 0.15 0.00 (100.00)
Staff welfare expenses 193.27 1.61 158.97 1.78 21.58
Total 7,798.25 65.12 6,116.27 68.45 27.50

2.1.2 Based on Standalone Financial Statement:

Particulars Year ended December 31,2021 % Year ended December 31,2020 % change %
Salaries, wages and bonus 3,714.72 59.51 2,775.18 61.49 33.86
Gratuity expenses 39.48 0.63 31.63 0.70 24.82
Contribution to provident and other funds 136.96 2.19 103.30 2.29 32.58
Employees share based payments expense - - 0.15 0.00 (100.00)
Staff welfare expenses 78.72 1.26 61.74 1.37 27.50
Total 3,969.88 63.60 2,972.00 65.85 33.58

2.2 Finance cost (Interest expenses)

Particulars

Consolidated

Standalone

2021 2020 2021 2020
On term loan 1.47 2.76 0.73 1.20
On lease liabilities 40.95 41.37 35.48 35.78
On fair value of contingent consideration 4.65 12.49 - -
On income tax 2.05 0.04 2.05 0.04
Total 49.12 56.66 38.26 37.02

2.3 Depreciation and Amortisation Expense

Particulars

Consolidated

Standalone

2021 2020 2021 2020
Depreciation of property, plant and equipment 153.48 118.34 108.05 86.65
Depreciation on right-of-use assets 102.00 112.19 35.00 44.27
Depreciation of investment property 1.47 1.47 1.47 1.47
Amortisation of intangible assets 19.98 24.04 1.97 2.22
Total Depreciation and Amortisation 276.93 256.04 146.49 134.61
% of Total income 2.31 2.87 2.35 2.98

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), advance written off, contributions towards corporate social responsibility and other miscellaneous items.

2.4.1 Based on Consolidated Financial Statement: ( in ^lli^)

Particulars Year ended December 31,2021 % Year ended December 31,2020 % change %
Power and fuel 41.02 0.34 41.04 0.46 (0.05)
Rent - premises 50.84 0.42 37.73 0.42 34.75
Software subscription charges 128.45 1.07 94.44 1.06 36.01
Repair and maintenance 50.94 0.43 60.31 0.67 (15.54)
Commission 17.52 0.15 15.04 0.17 16.49
Travelling and conveyance 102.57 0.86 120.39 1.35 (14.80)
Communication costs 102.90 0.86 105.22 1.18 (2.20)
Legal and professional fees (including subcontracting expenses) 1,100.65 9.19 686.61 7.68 60.30
Cost of third party items 245.79 2.05 133.93 1.50 83.52
Auditors remuneration 24.26 0.20 25.10 0.28 (3.35)
Provision for doubtful debts (net) - - 2.90 0.03 (100.00)
Provision for doubtful advance (net) - - 2.60 0.03 (100.00)
Loss on sale / discarding of property, plant and equipment (net) 2.18 0.02 0.19 0.00 1,047.37
Loss on cancellation of leases (net) 0.11 0.00

-

-

100.00
Contribution towards corporate social responsibility 11.49 0.10 5.26 0.06 118.44
Miscellaneous expenses 271.61 2.27 194.32 2.17 39.77
Total 2,150.33 17.96 1,525.08 17.07 41.00

2.4.2 Based on Standalone Financial Statement:

Particulars Year ended December 31, 2021 % Year ended December 31,2020 % change %
Power and fuel 26.58 0.43 30.24 0.67 (12.10)
Rent - premises 24.25 0.39 13.84 0.31 75.22
Software subscription charges 105.68 1.69 79.70 1.77 32.60
Repair and maintenance 37.96 0.61 45.67 1.01 (16.88)
Commission 17.52 0.28 15.04 0.33 16.49
Travelling and conveyance 64.51 1.03 61.39 1.36 5.08
Communication costs 71.62 1.15 76.75 1.70 (6.68)
Legal and professional fees (including subcontracting expenses) 218.57 3.50 132.83 2.94 64.55
Auditors remuneration 6.10 0.10 5.69 0.13 7.21
Provision for doubtful debts (net) - - 6.24 0.14 (100.00)
Loss on sale / discard of property, plant and equipment (net) 1.10 0.02 - - 100.00
Contribution towards corporate social responsibility 11.49 0.18 5.26 0.12 118.44
Miscellaneous expenses 143.34 2.30 81.00 1.79 76.96
Total 728.72 11.67 553.65 12.27 31.62

2.5 Exceptional Items

Particulars

Consolidated

Standalone

2021 2020 2021 2020
Impairment of Goodwill - 106.68

-

-

Other fair value gain on contingent consideration - (88.03) - -
Total - 18.65 - -

2.6 Tax expense

Tax expense comprises current tax and deferred tax.

Particulars

Consolidated

Standalone

2021 2020 2021 2020
Profit Before Tax 1,700.72 962.21 1,358.93 815.80
Current tax 327.63 206.17 245.27 149.86
Deferred tax credit (41.27) (61.95) (43.81) (31.13)
Total Tax Expense 286.36 144.22 201.46 118.73
Effective Tax Rate (%) 16.84 14.99 14.82 14.55

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 therefor, including:

Ratio Consolidated

Standalone

20211 2020 Variance 2021 2020 Variance
Debtors Turnover (in days) 50 53 -6.3% 49 50 -0.7%
Inventory Turnover NA NA NA NA
Interest Coverage * 27.09 16.03 69.0% 24.31 19.64 23.8%
Current Ratio 3.28 3.40 -3.6% 4.12 4.11 0.3%
Debt Equity Ratio @ 0.00 0.05 -95.7% 0.00 0.01 -74.2%
Operating Profit Margin 11.5% 10.3% 11.6% 16.1% 16.6% -2.8%
Net Profit Margin # 12.2% 9.3% 31.8% 20.0% 15.9% 26.1%
Return on Net worth # 30.7% 19.2% 60.3% 32.7% 20.3% 60.9%

@ Debt equity ratio has decreased due to the forgiveness of the PPP loan during the year ended December 31,2021, which was considered as debt during the year ended December 31,2020.

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

# Increase in net profit margins and return on net worth is mainly on account of an increase in revenue from operations coupled with exchange gain. Further, there was one-time income due to forgiveness of the PPP loan (included in Other Income).

Note :

Debtors Turnover = Average Trade Receivables / Billed Revenue * 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 = Long term Borrowings / Net worth

Operating Profit Margin = Operating profit / Revenue

Net Profit Margin = Profit after tax (PAT) / Revenue

Return on Net worth = Profit after tax (PAT) / Net Worth.

On behalf of the Board
For R Systems International Limited
Sd/- Sd/-
Dr. Satinder Singh Rekhi Lt. Gen. Baldev Singh (Retd.)
(DIN: 00006955) (DIN: 00006966)
(Managing Director & Chief Executive Officer) (President & Senior Executive Director)
Place: Singapore Place : NOIDA
Date : February 18, 2022 Date : February 18, 2022