tata technologies ltd share price Management discussions
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the following discussion of our financial condition and results of operations together with the Restated Consolidated Financial Information as of and for the six-months period ended September 30, 2023 and September 30, 2022 and Fiscals 2023, 2022 and 2021, including the notes and significant accounting principles thereto and the report thereon, which appear beginning on page 271 of this Red Herring Prospectus. These financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act), Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act.
Our fiscal year ends on March 31 of each year, so all references to a particular Fiscal or fiscal year are to the twelve-month period ended March 31 of that year. Financial information for the six-months period ended September 30, 2023 and September 30, 2022 is not indicative of full year results and is not comparable with the annual financial statements presented in this Red Herring Prospectus.
The following discussion contains forward-looking statements and reflects our current views with respect to future events and financial performance. Actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors such as those set forth in the section titled "Risk Factors" and "Forward Looking statements" on page 34 and 33, respectively of this Red Herring Prospectus and elsewhere in this Red Herring Prospectus.
We have included various operational and financial performance indicators in this Red Herring Prospectus, including certain non-GAAP financial measures and operational measures and certain other industry measures related to our operations and financial performance, that may vary from any standard methodology that is applicable across our industry and some of which may not be derived from our Restated Consolidated Financial Information or otherwise subjected to an audit or review by our auditors. The manner in which such operational and financial performance indicators, including non-GAAP financial measures, are calculated and presented, and the assumptions and estimates used in such calculation, may vary from that used by other companies. Investors are accordingly cautioned against placing undue reliance on such information in making an investment decision, and should consult their own advisors and evaluate such information in the context of the Restated Consolidated Financial Information and other information relating to our business and operations included in this Red Herring Prospectus. For further details on risks related to reliance on non-GAAP financial measures, see "Risk Factors 49. We have included certain non-GAAP measures, industry metrics and key performance indicators related to our operations and financial performance in this Red Herring Prospectus that are subject to inherent challenges measurement. These non-GAAP measures, industry metrics and key performance indicators may not be comparable with financial, or industry related statistical information of similar nomenclature computed and presented by other companies. Such supplemental financial and operational information is therefore of limited utility as an analytical tool for investors and there can be no assurance that there will not be any issues or such tools will be accurate going forward." on page 65 and "Risk Factors 54. Significant differences exist between Ind AS, U.S. GAAP and IFRS, which may be material to investors assessments of our financial condition. Accordingly, financial statements included in this Red Herring Prospectus might not provide meaningful information to readers whose level of familiarity with Indian accounting practices is limited." on page 67.
Unless otherwise indicated, industry and market data used in this section has been derived from the report titled "ER&D Market Deep Dive With A Focus on Automotive, Aerospace Industrial and Transportation, Construction & Heavy Machinery" dated October 16, 2023, prepared and issued by Zinnov Management Consulting Private Limited ("Zinnov Report"), which has been commissioned and paid for by us, pursuant to a statement of work executed on August 16, 2023, only for the purposes of understanding the industry exclusively in connection with the Offer. Unless otherwise indicated, all financial, operational, industry and other related information derived from the Zinnov Report and included herein with respect to any particular year refers to such information for the relevant financial year.
Overview
We are a leading global engineering services company offering product development and digital solutions, including turnkey solutions, to global original equipment manufacturers ("OEMs") and their tier 1 suppliers (Source: Zinnov Report). We endeavor to create value for our clients by helping them develop products that are safer, cleaner and improve the quality of life for their end-customers. We have deep domain expertise in the automotive industry and leverage this expertise to serve our clients in adjacent industries, such as in aerospace and transportation and construction heavy machinery ("TCHM"). As a global organization, we bring together diverse teams from different parts of the world with multiple skill sets to collaborate in real time and solve complex engineering problems for our clients.
In a world that is becoming increasingly complex, with shortening product innovation timelines and rapid technological change, we believe that our globally distributed onshore-offshore service delivery capability helps us to suitably address our clients requirements. We leverage our deep manufacturing domain knowledge to deliver value-added services to our clients in support of their digital transformation initiatives including product development, manufacturing and customer experience management.
We primarily categorize our lines of business as follows:
Services:
Our primary business line is services ("Services"), which includes providing outsourced engineering services and digital transformation services to global manufacturing clients helping them conceive, design, develop and deliver better products. Our Services business contributed 35,311.55 million and 19,863.90 million to our revenue from operations in Fiscal 2023 and the six-months period ended September 30, 2023, respectively, comprising 80.00% and 78.62% of our revenue from operations for the respective periods.
Technology Solutions:
We complement our service offerings with our Products and Education businesses (collectively, "Technology Solutions").
Through our Products business we resell third-party software applications, primarily product lifecycle management ("PLM") software and solutions and provide value-added services such as consulting, implementation, systems integration and support.
Our Education business provides "phygital" education solutions in manufacturing skills including upskilling and reskilling in relation to the latest engineering and manufacturing technologies to public sector institutions and private institutions and enterprises through curriculum development and competency center offerings through our proprietary iGetIT platform. In Fiscal 2023 and the six-months period ended September 30, 2023, our Technology Solutions business contributed 8,830.22 million and 5,403.12 million to our revenue from operations, respectively, comprising 20.00% and 21.38% of our revenue from operations for the respective periods.
Zinnov has estimated the global engineering, research and development ("ER&D") spend to be approximately $1.81 trillion as of 2022 and expects it to grow to approximately $2.67 trillion by 2026. The ER&D spend outsourced to third-party service providers reached $105 billion to $110 billion in 2022 and is anticipated to grow at a 11-13% compound annual growth rate
("CAGR") between 2022 and 2026 (Source: Zinnov Report). Key drivers for growth within the ER&D market, particularly the automotive market, include an increasing propensity to outsource services (following the COVID-19 pandemic), increased regulatory interventions for safer and cleaner products, shrinking product innovation cycles and next-generation product technologies that underpin autonomous, connected, electrification and shared ("ACES") technologies. Additional growth drivers include a heightened focus on smart manufacturing, reducing product development time and cost, connecting the digital thread and enhancing customer experience. Typically, the TCHM industry lags behind the automotive industry by three to five years, but the demand for outsourced engineering services is driven by similar regulatory and technological challenges. Following the COVID-19 pandemic, the aerospace industry has experienced a notable resurgence with a renewed focus on research and development, as companies seek to innovate in areas such as digitalization, sustainability and improving manufacturing throughput to meet increased demand (Source: Zinnov Report). We intend to continue leveraging our strengths to address the opportunities in the ER&D industry generally and more specifically in the automotive, TCHM and aerospace industries.
We are a pure-play manufacturing focused ER&D company, primarily focused on the automotive industry and we are currently engaged with seven out of the top 10 automotive ER&D spenders and five out of the 10 prominent new energy ER&D spenders in 2022 (Source: Zinnov Report). Our automotive revenue attributable to the Services segment for Fiscal 2023 and the six-months period ended September 30, 2023 was 31,314.66 million and 17,457.56 million, respectively, comprising 88.68% and 87.89% of our revenue attributable to the Services segment for the respective periods. Additionally, our revenue attributable to the Services segment from verticals other than automotive for Fiscal 2023 and the six-months period ended September 30, 2023 was 3,996.89 million and 2,406.34 million, respectively, comprising 11.32% and 12.11% of our revenue attributable to the Services segment for the respective periods.
Our domain expertise has also been recognized by industry bodies and external analysts. We are positioned in the "leadership zone" by Zinnov Zones for ER&D services ratings in 2023 for the seventh consecutive year. We are also ranked first among all India-based ER&D service providers and are among the top two globally, in electrification. For automotive ER&D services, we are ranked first among India service providers and third globally among rated service providers by Zinnov. In addition, we are also ranked in the "leadership zone" in the aerospace ER&D ratings in 2023 by Zinnov Zones and were ranked in the
"leadership zone" for digital thread by Zinnov Zones in 2021. We are also ranked in the "established-expansive" zone in the 2023 rankings for Industry 4.0 by Zinnov Zones. Additionally, Frost & Sullivan recognized us as the ‘Company of the Year in 2020 for global digital solutions in the enterprise modernization industry. For further details, see "History and Certain
Corporate Matters Awards, Accreditations, and Accolades received by our Company" on page 213.
We have a diversified global client base. The table below sets forth our revenue from operations from clients in India, Europe, North America and the rest of the world for the periods indicated:
Six-months period ended September 30, 2023 |
Fiscal 2023 |
|||
| Region | Portion of Revenue from Operations |
% of Revenue from Operations |
Portion of Revenue from Operations |
% of Revenue from Operations |
| India | 8,877.84 | 35.14% | 13,138.31 | 29.76% |
| Europe | 6,795.74 | 26.90% | 10,076.24 | 22.83% |
| North America | 4,866.61 | 19.26% | 9,465.35 | 21.44% |
| Rest of the world | 4,726.83 | 18.71% | 11,461.87 | 25.97% |
| Revenue from Operations | 25,267.02 |
100.00% |
44,141.77 |
100.00% |
The strength of our client relationships is also evidenced by our improving net promoter score ("NPS") where we are positioned among the top 20 percentile of technology services players and our 98.38% repeat rate (based on the percentage of revenue attributable to the Services segment in a period generated from existing clients) for Fiscal 2023 as well as our 97.72% repeat rate for the six-months period ended September 30, 2023.
Our global delivery model leverages the skills and capabilities of our employees from our various regional centers, delivering value to our clients. As of September 30, 2023, we have 19 global delivery centers spread across North America, Europe and Asia Pacific, with each center staffed by a majority of local nationals enabling us to provide uninterrupted service to our clients and tap into specialist skill sets in different geographies. As of September 30, 2023, we had 12,451 employees, comprising 11,608 full-time employees ("FTEs") and 843 contracted employees.
We are part of the Tata Group, which has been recognized as the most valuable brand in India by Brand Finance, a leading international brand valuation agency (Source: Brand Finance India 100 2022 report). As a subsidiary of Tata Motors Limited
(" TML"), we benefit from long-term relationships with both TML and JLR. The long-standing engagements with TML and
JLR (collectively, our "Anchor Clients") have enabled the incubation of skills and capabilities that has assisted us in pursuing opportunities outside of the Tata Group. For details, see "Our Business History and Corporate Structure" on page 189.
Key Performance Indicators
In evaluating our business, we consider and use certain key performance indicators that are presented below as supplemental measures to review and assess our operating performance. The presentation of these key performance indicators is not intended to be considered in isolation or as a substitute for the Restated Consolidated Financial Information included in this Red Herring Prospectus. We present these key performance indicators because they are used by our management to evaluate our operating performance. Further, these key performance indicators may differ from the similar information used by other companies, including peer companies, and hence their comparability may be limited. Therefore, these matrices should not be considered in isolation or construed as an alternative to GAAP measures of performance or as an indicator of our operating performance, liquidity, profitability or results of operation.
The following table sets forth certain of our key performance indicators for the periods indicated below:
| Particulars^# | Six-months period ended |
Fiscal |
|||
September 30, 2023 |
September 30, 2022 |
2023 |
2022 |
2021 |
|
| Revenue from Operations(1) | 25,267.02 | 18,879.06 | 44,141.77 | 35,295.80 | 23,809.11 |
| Revenue from Operations ($ million)(2) | 306.50 |
240.11 |
546.87 |
473.51 |
321.53 |
| Revenue attributable to the Services segment(3) | 19,863.90 |
16,408.80 |
35,311.55 |
26,513.51 |
19,143.71 |
| Revenue attributable to the Services segment (% of Revenue from operations)(4) | 78.62% |
86.92% |
80.00% |
75.12% |
80.40% |
| YoY growth in Revenue from Operations (%)(5) | 33.84% |
N.A. |
25.06% |
48.24% |
(16.52%) |
| YoY constant currency growth in Revenue from Operations (%) (6) | 28.59% |
N.A. |
24.02% |
45.18% |
(19.74%) |
| Profit for the period/year(7) | 3,519.01 | 2,590.61 | 6,240.37 | 4,369.91 | 2,391.73 |
| Profit Margin for the period/year (%)(8) | 13.93% |
13.72% |
14.14% |
12.38% |
10.05% |
| EBITDA(9) | 5,254.72 | 3,950.03 | 9,086.86 | 6,944.64 | 4,305.36 |
| Adjusted EBITDA(10) | 4,647.50 | 3,725.19 | 8,209.34 | 6,456.62 | 3,857.09 |
| Adjusted EBITDA Margin (%)(11) | 18.39% | 19.73% | 18.60% | 18.29% | 16.20% |
^ Other than the KPIs listed herein, no other KPIs have been disclosed to our investors in the immediately preceding three years.
# The KPIs disclosed in the table above have been approved by our Audit Committee pursuant to their resolution dated November 2, 2023, and have been verified and certified by Manian and Rao, Chartered Accountants pursuant to their certificate dated November 13, 2023. This certificate has been designated a material document for inspection in connection with the Offer. See "Material Contracts and Documents for Inspection" on page 488.
Notes:
(1) Revenue from operations is the revenue generated by us and is comprised of (i) the sale of services, (ii) sale of technology solutions and (iii) other operating revenues, as set out in the Restated Consolidated Financial Information. For further details, see "Restated Consolidated Financial Information Notes forming part of the Restated Consolidated Financial Information Note 22: Revenue from operations" on page 327. (2) Revenue from operations where the revenue from operations is accounted for on a monthly basis and converted using the average of the $ conversion rates during each month for the relevant currencies. (3) Revenue attributable to the Services segment as set out in the Restated Consolidated Financial Information. For further details, see "Restated Consolidated Financial Information Notes forming part of the Restated Consolidated Financial Information Note 34: Segment Reporting" on page 334. (4) Revenue attributable to the Services segment as a percentage of our revenue from operations. (5) Year-on-year growth in revenue from operations based on revenue. (6) Year-on-year growth in revenue by constant currency revenue generated in foreign currencies translated into $ using comparable foreign currency exchange rates from the prior period. (7) Profit for the period/year is our profit for the period/year as set out in the Restated Consolidated Financial Information. (8) Profit Margin for the period/year represents the profit for the period/year as a percentage of our revenue from operations. (9) EBITDA is calculated as profit before exceptional items and tax plus finance cost, depreciation and amortization expenses. For a detailed calculation of
EBITDA, see "Other Financial Information Reconciliation of Non-GAAP Measures" on page 386.
(10) Adjusted EBITDA is calculated as EBITDA less other income. For a detailed calculation of Adjusted EBITDA, see "Other Financial Information Reconciliation of Non-GAAP Measures" on page 386.
(11) Adjusted EBITDA Margin is the percentage of adjusted EBITDA divided by revenue from operations. For a detailed calculation of Adjusted EBITDA
Margin, see "Other Financial Information Reconciliation of Non-GAAP Measures" on page 386.
Factors Affecting Our Results of Operations
Our results of operations and financial condition have been, and will continue to be, affected by a number of factors, events and actions, some of which are beyond our control. In this section, we discuss several factors that we believe have, or could have, an impact on our financial condition and results of operations.
Expanding relationship with existing clients and winning new clients
Expanding relationship with existing clients
Client relationships are at the core of our business. As of September 30, 2023, our clients are comprised of more than 35 traditional automotive OEMs and tier 1 suppliers and more than 12 new energy vehicle companies and we aim to grow the number of client accounts exceeding $1 million in the Services business.
Our client portfolio includes our Anchor Clients, leading traditional OEMs and tier 1 suppliers such as Airbus, McLaren, Honda, Ford, and Cooper Standard as well as new energy vehicle companies such as VinFast, among others such as Cabin Interiors and Engineering Solutions, ST Engineering Aerospace. Our top accounts include seven out of the top 10 and 12 of the top 20 global automotive ER&D spenders and five out of the 10 prominent new energy ER&D spenders globally (Source: Zinnov Report).
Our ability to meet our growth plans in the near future will depend upon the successful continuation of our relationship with our Top 5 Clients and particularly our Anchor Clients. Additionally, among our Top 5 Clients, VinFast has contributed a substantial portion of the revenue from our Top 5 Clients (excluding the revenue from our Anchor Clients) in the six-months period ended September 30, 2023 and September 30, 2022 and Fiscal 2023.
The following table sets out our revenue attributable to the Services segment generated from our Top 5 Clients and, particularly, our Anchor Clients for the six-months period ended September 30, 2023 and September 30, 2022 and Fiscals 2023, 2022 and 2021:
( in million, except for percentages)
Clients |
Six-months period ended |
Fiscal |
||||||||
September 30, 2023 |
September 30, 2022 |
2023 | 2022 |
2021 |
||||||
Portion of revenue attributa ble to the Services segment |
% of revenue attributa ble to the Services segment |
Portion of revenue attributa ble to the Services segment |
% of revenue attributa ble to the Services segment |
Portion of revenue attributa ble to the Services segment |
% of revenue attributa ble to the Services segment |
Portion of revenue attributa ble to the Services segment |
% of revenue attributa ble to the Services segment |
Portion of revenue attributa ble to the Services segment |
% of revenue attributa ble to the Services segment |
|
| Top 5 Clients(1) | 14,086.69 | 70.92% | 11,852.91 | 72.24% | 25,847.59 | 73.20% | 17,434.13 | 65.76% | 12,347.44 | 64.50% |
| Anchor Clients(2) | 9,130.39 | 45.96% | 6,418.63 | 39.12% | 14,210.43 | 40.24% | 10,696.45 | 40.34% | 9,839.52 | 51.40% |
(1) Top 5 clients by revenue generated in Fiscal 2023.
(2) Anchor clients comprise of Tata Motors Group, including JLR.
While we derive a substantial portion of revenues from our Anchor Clients, we have benefitted from supporting their priorities over many economic and technological cycles which has provided us the opportunity to incubate our capabilities across the automotive value chain and deliver value at scale and we have leveraged these capabilities to grow our non-anchor accounts. We actively engage with clients on multiple projects and have a high repeat rate of over 97.72%, 98.38%, 97.24% and 95.71% across our Services business in the six-months period ended September 30, 2023, Fiscal 2023, Fiscal 2022 and Fiscal 2021, respectively. We have developed a strong client NPS globally, achieving a NPS of 58 for the twelve months ended September 2023, 64 for the twelve months ended September 2022 and 63 for the twelve months ended September 2021, as compared to an NPS of 40 for technology services providers, placing us in the top 20 percentile of technology services players.
We believe we have a substantial opportunity to grow our client base and increase the use of our services and solution offerings within our existing client base to drive deeper, long term strategic engagements and there continues to be potential to increase wallet share among existing clients as they increase outsourcing. Additionally, while we have a strong business development strategy for new energy vehicle companies, some of our new energy vehicle company clients have experienced and may continue to experience issues with their financial health and/or business continuity. However, through our long term engagement with them, in some instances we have been able to procure a payment guarantee or agree to a payment plan to ensure that we can continue our relationship with such clients and enable future engagements with them. See "Risk Factors
6. We expect a significant amount of future revenue to come from new energy vehicle companies, many of whom may be startup companies. Uncertainties about their funding plans, future product roadmaps, ability to manage growth, creditworthiness and ownership changes may adversely affect our business, financial condition and results of operations." on page 39.
Our aim is to increase our revenue from our existing clients by expanding the scope of services and technology solutions offered to that client through cross selling our various offerings and solutions. Our fundamental approach of client centricity, long-term strategic partnering and joint engagement governance has consistently enabled us to develop and expand our long-term relationships.
Currently, our top 20 clients, by revenue attributable to the Services segment, account for 88.40% of our revenue attributable to the Services segment for Fiscal 2023. We plan to drive further value by prioritizing the right high potential accounts through strategic account planning. We plan to identify opportunities and investment requirements, set-up and scale account coverage through established roles, key performance indicators, incentives and processes across sales, delivery and enabling functions and deepen practice and account-based marketing capability to drive improved client outcomes for us. To achieve this, we undertake sales analytics driven identification for cross selling and account planning in our top accounts. For further information, see "Our Business Sales and Marketing" on page 199. We are also investing in building capabilities of our frontline sales teams in priority domains and aim to conduct proactive campaigns and cultivate relationships across our top accounts to increase penetration of our priority offerings. We also leverage our account-based marketing approach and highly skilled subject matter experts to gain industry insights and develop customer specific value propositions in order to cultivate deeper engagements.
Winning new clients
We believe that attracting and scaling business with new clients will be a key growth enabler for our business. Our experience in the automotive sector has allowed us to also tap into the large opportunity in the adjacent aerospace and TCHM sectors.
We tailor our sales approach based on our evaluation of the specific needs of each client; for a few clients, we utilize a more directed sales and marketing approach and leverage relationships, for others, we employ more tactical engagement which emphasizes excellence in the management of existing engagements, and for others, we take a more consultative sales approach. We also have dedicated sales team members with clear allocation of responsibilities for the acquisition of new clients. For example, our business development capabilities, such as the Key Account Management ("KAM") approach, have led to growth and scale in accounts. Our consultative sales approach and new client acquisition process has led to a significant increase in programs with accounts. We have also recently been empaneled by Airbus which makes us well-positioned to benefit from the growth in aerospace market. We aim to develop new client relationships by identifying potential customers that operate within the same or adjacent verticals as our existing clients.
Our pricing models and employee utilization
In our Services and Education business, our pricing model typically reflects the nature of the responsibility we undertake in the engagement with the clients. Staffing as well as the time and material services are typically priced using the rate card which generally reflects the expertise, experience and cost of the resources involved, while the deliverable based engagements where we are responsible for specific outcomes of a program with a defined scope, are typically in the form of fixed bid contracts.
In time and materials contracts, revenue from sale of services is recognized when services are rendered and related costs are incurred based on time sheets and billable hours to clients. With respect to time-and-material contracts, pricing is rate card based which is typically driven by experience, expertise and cost required to deliver the respective service. We typically invoice on a monthly basis for the time and materials services that we provide to our clients. For such contracts, our profits and margins are affected by the utilization rates of our employees (with higher utilization typically driving higher revenues) and the recovery rates of the fees billed to our clients. The hourly rates vary by complexity of the project and the mix of staffing as more complex engagements requiring global teams and more senior engineers increases our ability to charge higher rates.
In the case of fixed bid contracts, we estimate our potential efforts based on scenario analysis of various factors such as skill mix, geographic coverage and risk assessment based on our experience. In fixed bid contracts (or fixed bid and deliverables based contracts), revenue is recognized on either the percentage of completion method (where payment is linked to defined milestones across the program tenure) on the basis of actual cost burnt versus planned cost to deliver the project, or on the basis of billing cycles where frequency of invoicing is fixed, such as monthly or quarterly billing. For contracts or deliverables serviced directly through third-party vendors, revenue is recognized based on consumption. Foreseeable losses on such contracts are recognized when these are significantly probable and are unmitigated.
We typically utilize fixed bid contracts for our engineering and digital services delivered under our supervision and utilize time and materials contracts for delivery centers deployed by us for clients, onsite technical workforce and staffing solutions.
We have evolved our business model to provide a range of flexible solutions to our clients while endeavoring to increase our focus on fixed bid contracts that provide better levers to optimize costs and improve margins. The margin on our services is impacted primarily by employee expenses influenced by wage inflation and other factors. We manage utilization by monitoring project requirements and timetables. Further, the number of employees, mix of expertise levels and the onshore/offshore mix that we assign to a project will vary according to the size, complexity, duration and demands of the project. Management of these parameters impact the margins realized in a project. In addition we seek to secure higher profit margin assignments, with our global delivery model enabling us to achieve the right balance between client proximity while leveraging our low cost delivery centers as well as through the use of accelerators and automation to reduce the cost for fixed-price projects. For further details, please see the "Our Business - Global Delivery Model" on page 197.
The table below sets forth the details of our revenue from operations by contract type for the periods indicated.
( in million, except for percentages)
Type of Contract |
Six-months period ended |
Fiscal |
||||||||
September 30, 2023 |
September 30, 2022 |
2023 |
2022 |
2021 |
||||||
Portion of revenue attributa ble to the Services segment |
% of revenue attributa ble to the Services segment |
Portion of revenue attributa ble to the Services segment |
% of revenue attributa ble to the Services segment |
Portion of revenue attributa ble to the Services segment |
% of revenue attributa ble to the Services segment |
Portion of revenue attributa ble to the Services segment |
% of revenue attributa ble to the Services segment |
Portion of revenue attributa ble to the Services segment |
% of revenue attributa ble to the Services segment |
|
Fixed bid contracts |
11,518.81 | 57.99% | 9,825.82 | 59.88% | 21,331.38 | 59.84% | 13,962.07 | 52.66% | 7,539.64 | 39.38% |
Time and materials contracts |
8,345.09 |
42.01% |
6,582.98 |
40.12% |
13,980.16 |
40.16% |
12,551.44 |
47.34% |
11,604.07 |
60.62% |
Revenue attributable to the Services segment |
19,863.90 |
100.00% |
16,408.80 |
100.00% |
35,311.55 |
100.00% |
26,513.51 |
100.00% |
19,143.71 |
100.00% |
The table below sets forth the utilization (defined as total billable hours spent by our personnel on client projects by the available base hours of the employees) in our Services business for the periods indicated.
Six-months period ended |
Fiscal |
||||
September 30, 2023 |
September 30, 2022 |
2023 |
2022 |
2021 |
|
Global Utilization rate |
87.60% | 88.40% | 87.10% | 86.80% | 75.80% |
In our products business, revenue from the resale of third-party PLM software is recognized at the point in time when control is transferred to the client. We also receive a license/subscription fee on the sale of our iGetIT solutions. If demand for our services grows, we may be able to raise our pricing, either on an hourly basis or on fixed-fee contracts, which would increase our revenues and profit margins. Conversely, if we are unable to provide innovative services or solutions to clients, either at all or at an acceptable price, or if our clients are dissatisfied with our work for any other reason, we would expect to lose business from our existing clients or find it difficult to expand our business, which would have an adverse effect on our revenue and our profits.
Demand for engineering services
Our business primarily depends on the demand for our ER&D services. Zinnov has estimated the global ER&D spend to be approximately $1.81 trillion as of 2022 and expects it to grow to approximately $2.67 trillion by 2026. The ER&D spend outsourced to third party service providers reached $105 billion to $110 billion in 2022 and is anticipated to grow at a 11-13% compound annual growth rate ("CAGR") between 2022 and 2026 (Source: Zinnov Report). The key drivers for growth within the ER&D market, particularly the automotive market, include an increasing propensity to outsource services (following the COVID-19 pandemic), increased regulatory interventions for safer and cleaner products, shrinking product innovation cycles and next-generation product technologies that underpin autonomous, connected, electrification and shared ("ACES") technologies. Additional growth drivers include a heightened focus on smart manufacturing, connecting the digital thread and customer experience. These technology trends are accelerating the demand for engineering services outsourcing.
However, the growth of the engineering services industry is linked to the outsourced research and development ("R&D") expenditures and budgets of clients. Trends in R&D budgets are exposed to general macroeconomic factors and to demand and production trends in industrial sectors. Any adverse change in these factors may lead to a significant change in a clients outsourcing strategy, which in turn can have a material adverse impact on the business provided to us. For further details see
"Risk Factors 28. Our clients may stop or reduce the scope of outsourced engineering services work or may set up captive research and development centres, which may result in a reduction in our volumes of work. Additionally, a reduction in the research and development budgets of our existing and prospective clients could affect our pricing and volume of work." on page 55.
Through our comprehensive portfolio of engineering services, we believe that we are well positioned to address the product development and enterprise optimization needs of traditional OEMs and new energy vehicle companies and their associated supply chains. For details in relation to our Services offerings, see "Our Business Lines of Business Services" on page 189. We endeavor to secure projects with top R&D spenders within our focus verticals of automotive and adjacent verticals including aerospace and TCHM. Automotive ER&D is highly concentrated among the top 20 companies, in terms of ER&D spend for 2022, which account for 73% of the global spend (Source: Zinnov Report). We aim to strengthen our dedicated business development strategy to focus on high potential accounts with large annual R&D spends and new energy vehicle companies. We have also recently been empaneled by Airbus which is expected to become a strong avenue of growth. Further, we believe there is a significant opportunity within our current client base to increase the use of our solution offerings and further develop deeper, long-term strategic engagements. Given the high concentration of ER&D spend among select automotive, aerospace and TCHM companies globally, we methodically target large spenders in our chosen industries, devoting substantial time and resources in cultivating those relationships.
395
Our ability to develop new services and technology solutions and enhance existing services and solutions in accordance with evolving client needs
We have developed and continue to develop a comprehensive range of innovative and complex service offerings and technology solutions for our clients. See "Our Business Our Competitive Strengths" and "Our Business Lines of Business" beginning on pages 182 and 189, respectively. We depend on our ability to innovate by enhancing services and technology solutions offerings for our clients to drive revenue growth. The requirements of our clients vary across a wide range of industries, geographies and service or technical requirements. To service and grow our relationships with our existing clients and to secure new clients, we must be able to provide them with services and technology solutions that address their needs, anticipate and understand trends in their relevant markets and continually address their dynamic requirements.
In this regard, we believe that our innovative approach, highly skilled employees, core values of "one team with customers", "global mindset" and "can-do attitude", proprietary platforms and accelerators and global delivery model have enabled us to expand the range of our offerings, provide reskilling and upskilling education services to our clients and improve the delivery of our technology solutions and services. We have expanded our range of offerings to include turnkey solutions (including the leveraging of our eVMP platform), light weighting capabilities, smart manufacturing and customer experience solutions.
As long as we are able to anticipate and respond to our clients requirements competitively and on a timely and cost-efficient manner, we would expect to receive repeat business from existing clients and win new clients. We also aim to leverage new client relationships from applicable adjacent industry verticals and engage in the cross selling of our products and solutions. Conversely, if we are unable to provide innovative services or solutions to our clients, either at all or at an acceptable price, or if our clients are dissatisfied with our work for any other reason, we would expect to lose business from our existing clients or to find it difficult to expand our business, which could have a material adverse effect on our revenue and our profits. See also
"Risk Factors 30. Our success also depends on our ability to innovate, and our business could be adversely affected if we fail to upgrade and adapt our services and solutions to evolving clients requirements or if we fail to make changes to our pricing model to keep up with clients expectations." on page 56.
Recruitment, retention, cost and capability of employees
Our success is dependent, in large part, on our ability to keep our supply of market-leading skills and capabilities in balance with client demand and our ability to attract and retain people with the expertise and skills to lead our business globally. We service our clients using our global sales and delivery network comprising 19 global delivery centers in North America, Europe and Asia Pacific, leveraging our balanced on-shore/offshore global delivery model. As of September 30, 2023, we had 12,451 employees, of which 11,608 were full time employees ("FTEs") and the rest were contracted employees. In the six-months period ended September 30, 2023 we hired 2,267 employees, of which 1,973 were FTEs, our attrition rate was 17.20% and the average tenure of our FTEs was 4 years.
To ensure that our people are trained and skilled to meet our clients needs, we have a strong talent management and capability building programs. We must hire or reskill, retain and motivate appropriate numbers of talented people with diverse skills in order to serve our clients globally. To address this requirement, we have launched various brand campaigns to attract new talent and we continue to invest in several learning and development programs for retaining employees and strengthening our value proposition. For example, in 2021, we launched LeaderBridge, a leadership development program designed to identify and develop future leaders. In addition, we materially increased our investments in learning and development, through our global in-house technical training program, TechVarsity, which trains and mentors graduate hires in India and is used to reskill and upskill our experienced engineers.
We invest in employees through training and development programs with more than 192 training interventions in Fiscal 2023 and over 805 graduates were inducted and certified through our in-house program, TechVarsity. We also aim to consistently revitalize our talent base for the future to keep pace with evolving industry trends. We hired over 4,988 employees in Fiscal 2023, including 1,430 domain specialists focused in niche-skill areas such as embedded systems, cybersecurity, electric vehicle
(" EV") electronics, AUTOSAR, artificial intelligence and machine learning.
The following table sets forth our employee headcount (including FTEs and contractors) and attrition for the periods indicated.
Six-months period ended |
Fiscal | ||||
| September 30, 2023 | September 30, 2022 |
2023 |
2022 | 2021 | |
Employee Headcount |
12,451 | 10,689 | 11,616 | 9,338 | 7,954 |
Global Attrition rate(1) |
17.20% | 24.80% | 21.70% | 25.10% | 11.50% |
(1) Total number of FTEs who left the company voluntarily during a period divided by average number of FTEs during the period.
The following table sets forth our employee benefit expenses for the periods indicated:
( in million, except for percentages)
Six-months period ended |
Fiscal |
||||
September 30, 2023 |
September 30, 2022 |
2023 |
2022 |
2021 |
|
Employee benefit expenses |
11,319.39 | 8,911.44 | 19,294.61 | 15,126.94 | 12,160.04 |
% of Revenue from Operations |
44.80% |
47.20% |
43.71% |
42.86% |
51.07% |
Our employee benefits expense consists of salaries and wages paid to employees, contributions to provident and other funds, share based payments expenses and staff welfare expenses. Our ability to manage our employee benefit expenses is heavily impacted by our onshore and offshore resource mix, overall resource utilization and management of our resource pyramid. Higher offshore mix and better utilization on a fixed bid project lowers the employee cost. Further, in the case of the resource pyramid, a higher base and higher ratio between various levels of the pyramid results in lower cost. We have onboarded over 1,530 campus hires between Fiscal 2022 and September 2023 in order to improve our resource pyramid. In addition, we endeavor to reduce employee costs per engagement through managing the resource pyramid and an optimized onshore-offshore mix. We strategically analyze workstreams at our current accounts and aim to move select workstreams to our offshore talent (in India and Romania) and generally increase our offshore workforce. We also use contractors and third-party service providers to meet capacity and capability requirements from time to time, which also helps us to effectively manage our utilization and costs.
Our Education Business
As part of our growth strategy, we have recently expanded our proposition in the learning area beyond subscriptions to the iGetIT platform, where we provide upskilling and reskilling in relation to the latest engineering and manufacturing technologies to public sector institutions and private sector enterprises through curriculum development and competency center offerings.
Our academic partnerships in India have extended beyond our iGetIT offering to the development of an entire "phygital"
(physical and digital) proposition. Additionally, we believe our relationships within the public sector will allow us to invest and further improve the course content on our iGetIT offering, which we believe will further reinforce our private sector enterprise proposition. Leveraging our manufacturing domain knowledge and the iGetIT offering has allowed us to expand into the enterprise market segment. As the global manufacturing sector is being disrupted by technology, there is a large engineering upskilling requirement globally, and particularly in India, in the manufacturing sector. According to an analysis by NASSCOM and Draup, India will need nearly 1.4 million to 1.9 million engineers in order to meet demand in 2026 (Source: Zinnov Report).
With respect to the Education business, our ability to complete our obligations to our customers under the contract in a timely manner is dependent on several factors including identification and development of relevant content at optimal costs and managing of commercial and other terms with our partners and vendors. We have a high dependency on third parties for quality, delivery and commercial outcomes of projects which presents a risk to the reputation we have endeavored to establish in the markets where we operate. For further details, see "Risk Factors 34. If our third-party service providers and key vendors are not able to or do not fulfil their service obligations, our operations could be disrupted and our operating results could be harmed." on page 58.
Historically, our Education business has had lower margins compared to our other businesses and has also been particularly exposed to fluctuations in revenue for the particular periods due to the nature and frequency of the projects and the costs involved in the contracts. Further, given that our projects in the Education business are with various State Governments and public universities, we are required to liaise with multiple parties at various levels of the government to demonstrate our capabilities and the strength of our proposition in order to be selected as the vendor for the particular project. Such projects may also be subject to changes in policy of the government and may require us to renegotiate our contract or our pricing for the particular project. Additionally, although we try to receive all or at least a substantial portion of our fees upfront, we may not succeed in securing the desired payment terms and may be exposed to a counterparty default risk with government institutions.
For further details, see "Our Business Lines of Business Technology Solutions Education" and "Risk Factors 20. We have recently expanded our offerings in the education business and if we are unable to achieve the anticipated returns in such new growth areas, it could have a material adverse effect on our business, results of operations and financial condition." on pages 192 and 49, respectively.
Exchange rate fluctuations
Our results of operations may be affected by both the transaction effects and translation effects of foreign currency exchange rate fluctuations. We report our financial results in Indian rupees ("INR"), but a portion of our revenue is denominated in the U.S. dollar ("USD"), the pound sterling ("GBP"), the Euro, Swedish Krona and Chinese Yuan ("CNY"). The following table sets out our revenues denominated in foreign currencies and their percentage in comparison with revenue from operations for the six-months period ended September 30, 2023 and September 30, 2022 and Fiscals 2023, 2022 and 2021:
Revenues |
Six-months period ended |
Fiscal |
|||
September 30, 2023 |
September 30, 2022 |
2023 |
2022 |
2021 |
|
Revenues in Foreign Currencies |
16,359.36 |
14,240.99 |
30,996.18 |
23,775.83 |
16,844.68 |
Percentage of Revenues from Operations |
64.75% |
75.43% |
70.22% |
67.36% |
70.75% |
Revenue from Operations |
25,267.02 | 18,879.06 | 44,141.77 | 35,295.80 | 23,809.11 |
While currently our foreign exchange transaction risk is generally limited due to the natural hedge provided by onshore revenue and expenses, our revenue and profit are affected by volatility in the currencies in which we earn our revenues. Our results of operations will be impacted by the relative value of the rupee compared to other currencies. Unfavorable fluctuations in foreign currency exchange rates have had an adverse effect and could in the future have a material adverse effect, on our results of operations. To manage our foreign exchange risk, we use foreign exchange and other derivative instruments primarily to hedge foreign exchange exposure. For further details, see "Risk Factors 12. Exchange rate fluctuations in various currencies in which we do business could materially and adversely impact our business, financial condition and results of operations." and
"Restated Consolidated Financial Statements - Annexure V: Summary of Significant Accounting Policies Foreign Currency Transaction and Translation" on pages 42 and 288, respectively.
Impact of Income Tax Expense
We have historically benefited from the direct and indirect tax benefits given by the tax laws on certain SEZ operations. As a result, a portion of our profits in India is exempt from income tax leading to a lower overall effective tax rate than that which we would otherwise incur/pay if we were doing business outside SEZs, and we expect to continue to enjoy these benefits in the near future as we increase our offshore business, subject to extant tax laws and ability to offshore. Our consolidated tax costs are also impacted by changes in tax rates in the various geographies in which we operate, especially UK and North America. Our effective tax rate was 21.62%, 25.54% and 24.14% respectively in Fiscals 2023, Fiscal 2022 and Fiscal 2021. In addition, as we foray into new jurisdictions, this could have various implications on our tax rate which could affect our results of operations.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with Ind AS. The notes to the financial statements contain a summary of our significant accounting policies. Set forth below is a summary of our most significant critical accounting policies under Ind AS.
Revenue Recognition
We earn revenue primarily from providing engineering services including product development and digital solutions to original equipment manufacturers ("OEMs") and their tier 1 suppliers and Technology Solutions comprising of education and products offerings. Revenue is recognized upon transfer of control of promised products or services to clients in an amount that reflects the consideration which we expect to receive in exchange for those products or services.
Revenue from time and material contracts is recognized and measured by units delivered and efforts expended. Revenue related to fixed-price maintenance and support services contracts where we are ready to provide services is recognized based on time elapsed mode and revenue is straight lined over the period of performance. In respect of other fixed-price contracts, including any bundled service in our education business, revenue is recognized using the percentage-of-completion method ("POC method") of accounting with contract cost incurred determining the degree of completion of the performance obligation.
Revenue from the sale of third-party software and internally developed products is recognized upfront at the point in time when the software is delivered to the client. Revenue for supply of such third-party products are recorded at gross or net basis depending on whether we are acting as the principal or as an agent of the client. We recognize revenue in the gross amount of consideration when we are acting as a principal and at the net amount of consideration when we are acting as an agent. In cases where implementation or customization services rendered significantly modifies or customizes the software, these services and software are accounted for as a single performance obligation and revenue is recognized over time on a POC method. Revenue from the discrete sale of third-party manufactured products and hardware is recognized at the point in time when control is transferred to the client.
Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, service level credits, performance bonuses, price concessions and incentives, if any, as specified in the contract with the client. Revenue also excludes taxes collected from clients.
Contract assets are recognized when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled receivables (only act of invoicing is pending) when there is the unconditional right to receive cash and only passage of time is required, as per contractual terms. Unearned and deferred revenue ("contract liability") is recognized when there are billings in excess of revenues. In accordance with Ind AS 37, we recognize an onerous contract provision when the unavoidable costs of meeting the obligations under a contract exceed the economic benefits to be received and are mitigated.
Contracts are subject to modification to account for changes in contract specification and requirements. We review modifications to contract in conjunction with the original contract, the basis which the transaction price could be allocated to a new performance obligation or the transaction price of an existing obligation could undergo a change. In the event transaction price is revised for an existing obligation a cumulative adjustment is accounted for.
Use of significant judgements in revenue recognition
Our contracts with clients could include promises to transfer multiple products and services to a client. We assess the products and services promised in a contract and identify distinct performance obligations in the contract. Identification of distinct performance obligation involves judgement to determine the deliverables and the ability of the client to benefit independently from such deliverables.
Judgement is also required to determine the transaction price for the contract. The transaction price could be either a fixed amount of client consideration or variable consideration with elements such as volume discounts, service level credits, performance bonuses, price concessions and incentives. The transaction price is also adjusted for the effects of the time value of money if the contract includes a significant financing component. Any consideration payable to the client is adjusted to the transaction price, unless it is a payment for a distinct product or service from the client. The estimated amount of variable consideration is adjusted in the transaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur and is reassessed at the end of each reporting period. We allocate the elements of variable considerations to all the performance obligations of the contract unless there is observable evidence that they pertain to one or more distinct performance obligations.
We use judgement to determine an appropriate standalone selling price for a performance obligation. We allocate the transaction price to each performance obligation on the basis of the relative stand-alone selling price of each distinct product or service promised in the contract. Where standalone selling price is not observable, we use the expected cost-plus margin approach to allocate the transaction price to each distinct performance obligation.
We exercise judgement in determining whether the performance obligation is satisfied at a point in time or over a period of time. We consider indicators such as how a client consumes benefits as services are rendered or who controls the asset as it is being created or the existence of enforceable right to payment for performance to date and alternate use of such product or service, transfer of significant risks and rewards to the client and acceptance of delivery by the client.
Contract fulfilment costs are generally expensed as incurred except where they meet the criteria for capitalization. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recovered.
Property, Plant and Equipment
Recognition and measurement
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment, if any. Cost includes expenditures directly attributable to the acquisition of the asset. General and specific borrowing costs directly attributable to the construction of a qualifying asset are capitalized as part of the cost. Costs directly attributable to acquisition are capitalized until the property, plant and equipment are ready for use, as intended by management.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Subsequent expenditure relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to our Company and the cost of the item can be measured reliably.
The carrying amount of any component accounted for as a separate asset is derecognized when discarded or scrapped. All other repairs and maintenance costs are charged to profit and loss in the reporting period in which they occur.
Deposits and advances paid towards the acquisition of property, plant and equipment outstanding as of each reporting date and the cost of property, plant and equipment not available for use before such date are disclosed under other assets.
As assets carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its estimated recoverable amount.
Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.
Depreciation
Our Company depreciates property, plant and equipment over their estimated useful lives using the straight-line method considering the nature, estimated usage, operating conditions, past history of replacement and anticipated technological changes. Taking into account these factors, our Company has decided to retain the useful life hitherto adopted for various categories of property, plant and equipment, which are different from those prescribed in Schedule II of the Act.
The estimated useful lives of assets are as follows:
Type of Asset |
Useful life |
| Lease hold improvements | Lower of Lease period or estimated useful life |
| Buildings | 15 to 25 years |
| Plant and machinery | 1 to 21 years |
| Computer equipment | 1 to 4 years |
| Vehicles | 3 to 11 years |
| Furniture & fixtures | 1 to 21 years |
| Software | 1 to 4 years |
Depreciation methods, useful lives and residual values are reviewed periodically, including at each financial year end with the effect of any changes in the estimate accounted for on a prospective basis.
Intangible Assets
Intangible assets are stated at cost less accumulated amortization and impairment, if any. Intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, from the date that they are available for use. Amortization methods and useful lives are reviewed periodically including at each financial year end.
Internally generated intangible assets arising from development activity is recognized at cost on demonstration of its technical feasibility, the intention and ability of our Company to complete, use or sell it, only if, it is probable that the asset would generate future economic benefit and the expenditure attributable to such assets during its development can be measured reliably.
Software not exceeding 25,000 is charged off to the statement of profit and loss.
Research and development cost
Research costs are expensed as incurred. Development expenditure incurred on an individual project is recognized as an intangible asset when our Company can demonstrate:
technical feasibility of completing the intangible asset so that it will be available for use or sale; its intention to complete the asset; its ability to use or sell the asset; how the asset will generate probable future economic benefits; and the availability of adequate resources to complete the development.
Business Combination
Our Company accounts for its business combinations under the acquisition method of accounting under the provisions of IND
AS 103, Business Combinations. Acquisition related costs are recognized in profit or loss as incurred. The acquirees identifiable assets, liabilities and contingent liabilities that meet the condition for recognition are recognized at their fair values at the acquisition date.
Purchase consideration paid in excess of the fair value of net assets acquired is recognized as goodwill. Where the fair value of identifiable assets and liabilities exceed the cost of acquisition, after reassessing the fair values of the net assets and contingent liabilities, the excess is recognized as capital reserve.
The interest of non-controlling shareholders (if any) is initially measured either at fair value or at the non-controlling interests proportionate share of the acquirees identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests share of subsequent changes in equity of subsidiaries.
Goodwill represents the cost of acquired business as established at the date of acquisition of the business in excess of the acquirers interest in the net fair value of the identifiable assets, liabilities and contingent liabilities less accumulated impairment losses, if any. Goodwill is tested for impairment annually or when events or circumstances indicate that the implied fair value of goodwill is less than its carrying amount.
Business combinations between entities under common control is accounted for at carrying value.
Transaction costs that we incur in connection with a business combination such as finders fees, legal fees, due diligence fees, and other professional and consulting fees are expensed as incurred.
Financial instruments
Financial assets
Classification
Our Company classifies its financial assets in the following measurement categories:
those to be measured subsequently at fair value (either through other comprehensive income, or through profit and loss), and those measured at amortized cost. The classification depends on the entitys business model for managing the financial assets and the contractual cash flow characteristics.
For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.
A financial asset which is not classified in any of the above categories is subsequently fair valued through profit or loss.
Initial recognition
All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
Measurement
Subsequent to initial recognition, non-derivative financial instruments are measured as described below:
Cash and cash equivalents:
Our cash and cash equivalents consist of cash on hand and in banks and demand deposits with banks (three months or less from the date of acquisition). For the purposes of the cash flow statement, cash and cash equivalents include cash on hand, in banks and demand deposits with banks (three months or less from the date of acquisition), net of outstanding bank overdrafts that are repayable on demand and are considered part of our Companys cash management system. In the balance sheet, bank overdrafts are presented under borrowings within current liabilities.
Financial assets carried at amortized cost:
A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at fair value through other comprehensive income ("FVOCI"):
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Further, in cases where our Company has made an irrevocable election based on its business model, for its investments which are classified as equity instruments, the subsequent changes in fair value are recognized in other comprehensive income.
Financial assets at fair value through profit or loss ("FVTPL"):
A financial asset which is not classified in any of the above categories is subsequently fair valued through profit or loss.
Impairment of financial assets
We assess at each date of balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. In determining the allowances for doubtful trade receivables, we have used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and is adjusted for forward looking information. The expected credit loss allowance is based on the ageing of the receivables that are due and rates used in the provision matrix. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month expected credit losses or at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
Derecognition of financial assets:
Our Company derecognizes a financial asset when
the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109 or
it retains contractual rights to receive the cash flows of the financial asset but assumes a contractual obligation to pay the cash flows to one or more recipients.
When the entity has neither transferred a financial asset nor retained substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognized if our Company has not retained control of the financial asset. Where our Company retains control of the financial asset, the asset continues to be recognized to extent of continuing involvement in the financial asset.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
Subsequent measurement
The subsequent measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at amortized cost:
Borrowings, trade and other payables are initially recognized at fair value, and subsequently carried at amortized cost using the effective interest method. For these financial instruments, the carrying amounts approximate fair value due to the short-term maturity of these instruments.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of profit or loss.
Derivative financial instruments
We are exposed to foreign currency fluctuations on foreign currency assets, liabilities, net investment in foreign operations and forecasted cash flows denominated in foreign currency.
We limit the effect of foreign exchange rate fluctuations by following established risk management policies including the use of natural hedge and derivatives. We enter into derivative financial instruments where the counterparty is primarily a bank.
Although we believe that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under Ind AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per Ind AS 109, is categorized as a financial asset or financial liability, at fair value through profit or loss.
Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in net profit in the statement of profit and loss when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are included in other income. Assets or liabilities in this category are presented as current assets or current liabilities if they are either held for trading or are expected to be realized within 12 months after the balance sheet date.
Impairment- non financial assets
Intangible assets, property, plant and equipment and right to use assets
At each balance sheet date, our Company assesses whether there is any indication that any property, plant and equipment, intangible assets with finite lives and right to use assets may be impaired. If any such impairment exists the recoverable amount of an asset is estimated to determine the extent of impairment, if any. Where it is not possible to estimate the recoverable amount of an individual asset, our Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually at each balance sheet date, or earlier, if there is an indication that the asset may be impaired.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cashflows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the income statement.
As at September 30, 2023, none of our Companys property, plant and equipment and intangible assets and right to use assets were considered impaired.
Provisions and contingent liabilities
A provision is recognized when our Company has a present obligation (legal or constructive) as a result of past event and it is probable than an outflow of resources will be required to settle the obligation, in respect of which the reliable estimate can be made.
Provisions (excluding retirement benefits and compensated absences) are determined at present value based on the best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Provisions for onerous contracts are recognized when the expected benefits to be derived by our Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. Provisions for onerous contracts are measured at the present value of the lower of the expected net cost of fulfilling the contract and the expected cost of terminating the contract.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of our Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made. Contingent assets are neither recognized nor disclosed in the restated financial statements.
Earnings per equity share
Basic earnings per share is computed using the weighted average number of equity shares outstanding during the year adjusted for treasury shares held. Diluted earnings per share is computed using the weighted average number of shares during the year adjusted for treasury shares held and dilutive potential shares, except where the result would be anti-dilutive.
Taxation
Income tax comprises current and deferred taxes. Income tax expense is recognized in the income statement except when they relate to items that are recognized outside profit or loss (whether in other comprehensive income or directly in equity), in which case tax is also recognized outside profit or loss, or where they arise from the initial accounting for business combination.
Current income tax
Current income tax for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities based on the taxable income for the period. The tax rates and tax laws used to compute the current tax amount are those that are enacted or substantively enacted as at the reporting date and applicable for the year. Our Company offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and liability simultaneously.
Deferred income tax
Deferred income tax is recognized using the balance sheet approach. Deferred income tax assets and liabilities are recognized for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount in restated financial statements, except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profits or loss at the time of the transaction.
Deferred income tax assets are recognized to the extent it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized. Deferred income tax liabilities are recognized for all taxable temporary differences except in respect of taxable temporary differences associated with investments in subsidiaries, associates and foreign branches where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Our Company offsets deferred income tax assets and liabilities, where it has a legally enforceable right to offset current tax assets against current tax liabilities, and they relate to taxes levied by the same taxation authority on either the same taxable entity, or on different taxable entities where there is an intention to settle the current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
Minimum Alternate Tax ("MAT")
Minimum Alternate Tax paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as a deferred tax asset if there is convincing evidence that our Company will pay normal income tax in the future.
Employee Benefits
Post-employment benefit plans
Our Company participates in various employee benefit plans. Pensions and other post-employment benefits are classified as either defined contribution plans or defined benefit plans. Under a defined contribution plan, our Companys only obligation is to pay a fixed amount with no obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits. The related actuarial and investment risks fall on the employee. The expenditure for defined contribution plans is recognized as an expense during the period when the employee provides service. Under a defined benefit plan, it is our Companys obligation to provide agreed benefits to the employees. The related actuarial and investment risks fall on our Company. The present value of the defined benefit obligations is calculated by an independent actuary using the projected unit credit method.
Our Company has the following employee benefit plans:
Provident fund
In accordance with Indian law, eligible employees of our Company receive benefits from a provident fund, which is a defined contribution plan. Both, the eligible employee and our Company make monthly contributions to the provident fund plan in an amount equal to a specified percentage of the covered employees salary. Our Company has no further obligations under this scheme beyond its periodic contributions.
Superannuation
Our Company has two superannuation plans, a defined benefit plan and a defined contribution plan. An eligible employee on April 1, 1996 could elect to be a member of either plan. Employees who are members of the defined benefit superannuation plan are entitled to benefits depending on their years of service and salary drawn. The monthly pension benefits after retirement range from 0.75% to 2% of the annual basic salary for each year of service. Our Company account for superannuation benefits payable in the future under the plan is based on an estimated basis for the period end and on an independent actuarial valuation as on the balance sheet date.
Remeasurements, comprising of actuarial gains and losses, the effect of changes to the asset ceiling (if applicable) and the return on plan assets (excluding net interest), is recognized in other comprehensive income in the period in which they occur. Remeasurements recognized in other comprehensive income is reflected immediately in retained earnings and is not reclassified to profit or loss. Past service cost is recognized in the statement of profit or loss in the period of plan amendment.
With effect from April 1, 2003, this plan was amended and benefits earned by covered employees have been protected as at March 31, 2003. Employees covered by this plan are prospectively entitled to benefits computed on a basis that ensures that the annual cost of providing the pension benefits would not exceed 15% of salary. Separate irrevocable trusts are maintained for employees covered and entitled to benefits. Our Company contributes up to 15% of the eligible employees basic salary to the trust every year. Such contributions are recognized as an expense when incurred. Our Company has no further obligation beyond this contribution.
Gratuity
Our Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The plan provides for a lump-sum payment to be vested to employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 to 30 days salary payable for each completed year of service. Vesting occurs upon completion of five years of service. Our Company makes annual contributions to gratuity funds established as trusts. Our Company account for the liability for gratuity benefits payable in the future is based on an estimated basis for the period end and on an independent actuarial valuation under the projected unit cost method as on the balance sheet date.
Remeasurements, comprising of actuarial gains and losses, the effect of changes to asset ceiling (if applicable) and the return on plan assets (excluding net interest), is recognized in other comprehensive income in the period in which they occur.
Remeasurements recognized in other comprehensive income is reflected immediately in retained earnings and is not reclassified to profit or loss. Past service cost is recognized in the statement of profit or loss in the period of plan amendment.
Costs, comprising of service cost (including current and past service cost and gains and losses on curtailments and settlements) and net interest expense or income, is recognized in profit or loss.
The obligation recognized in the balance sheet represents the actual deficit or surplus in our Companys defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
Bhavishya Kalyan Yojana ("BKY")
Bhavishya Kalyan Yojana is an unfunded defined benefit plan for employees of our Company. The benefits of the plan include pension in certain cases, payable up to the date of normal superannuation had the employee been in service, to an eligible employee at the time of death or permanent disablement, while in service, either as a result of an injury or as certified by the appropriate authority. The monthly payment to dependents of the deceased / disabled employee under the plan equals 50% of the basic salary drawn at the time of death or accident or a specified amount, whichever is greater. Our Company account for the liability for BKY benefits payable in the future is based on an estimated basis for the period end and on an independent actuarial valuation under projected unit cost method as on the balance sheet date.
Remeasurements, comprising of actuarial gains and losses, the effect of changes to the asset ceiling (if applicable) and the return on plan assets (excluding net interest), is recognized in other comprehensive income in the period in which they occur. Remeasurements recognized in other comprehensive income is reflected immediately in retained earnings and is not reclassified to profit or loss. Past service cost is recognized in the statement of profit or loss in the period of plan amendment.
Costs, comprising of service cost (including current and past service cost and gains and losses on curtailments and settlements) and net interest expense or income, is recognized in profit or loss.
The obligation recognized in the balance sheet represents the actual deficit or surplus in our Companys defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
Our Company replaced its employee benefit scheme BKY with Group Term Life Insurance (GTL) policy with effect from November 2019. Accordingly, with effect from December 2019, our Company has continued to carry obligation under this scheme based on actuarial valuation for those beneficiaries having claims under this scheme before the date of discontinuation.
Post-retirement medicare scheme
Under this unfunded scheme, employees of our Company receive medical benefits subject to certain limits on amounts of benefits, periods after retirement and types of benefits, depending on their grade and location at the time of retirement. Employees separated from our Company as part of an early separation scheme, on medical grounds or due to permanent disablement are also covered under the scheme. Our Company account for the liability for postretirement medical scheme is based on an estimated basis for the period end and on an independent actuarial valuation under the projected unit cost method at the year end.
Remeasurements, comprising of actuarial gains and losses, the effect of changes to the asset ceiling (if applicable) and the return on plan assets (excluding net interest), is recognized in other comprehensive income in the period in which they occur. Remeasurements recognized in other comprehensive income is reflected immediately in retained earnings and is not reclassified to profit or loss. Past service cost is recognized in the statement of profit or loss in the period of plan amendment.
Costs, comprising of service cost (including current and past service cost and gains and losses on curtailments and settlements) and net interest expense or income, is recognized in profit or loss.
The obligation recognized in the balance sheet represents the actual deficit or surplus in our Companys defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
During the year ended March 31, 2021, our Company curtailed its post-retirement medicare scheme, which is an unfunded defined benefit plan to exclude all employees who will retire after December 31, 2020. Accordingly, with effect from January 2021, the carrying value of liability has been recognized based on an independent actuarial valuation under projected unit cost method for those beneficiaries having claims under this scheme before the date of discontinuation.
Compensated absences
Our Company provides for the encashment of leave or leave with pay subject to certain rules. Employees are entitled to accumulate leave, subject to certain limits, for future encashment. The liability is provided based on the number of days of days of unutilized leave at each balance sheet date based on an estimated basis for the period end and on an independent actuarial valuation under the projected unit cost method at the year end.
Share based payments
Equity-settled transactions
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model. That cost is recognized, together with a corresponding increase in share-based payment (SBP) reserves in equity, over the period in which the performance and/or service conditions are fulfilled in employee benefits expense. The cumulative expense for equity-settled transactions recognized at each reporting date until the vesting date reflects the extent to which the vesting period has expired and our best estimate of the number of equity instruments that will ultimately vest. The expense or credit for a period represents the movement in cumulative expense recognized as at the beginning and end of that period and is recognized as employee benefits expense in the statement of profit and loss.
Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of our best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.
No expense is recognized for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
Cash-settled transactions
The cost of cash-settled transactions is measured initially at fair value at the grant date. This fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The liability is remeasured to fair value at each reporting date up to, and including the settlement date, with changes in fair value recognized in employee benefits expense.
Dividends
Dividends on shares are recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by our Companys Board of Directors as per Ind AS 10.
Government grants and incentives
Government grants and incentives are recognized when there is a reasonable assurance that we will comply with the relevant conditions and the incentive will be received. Incentives are recorded at fair value where applicable. Incentives are recognized in the statement of profit and loss, either on a systematic basis when the company recognizes, as expenses, the related costs that the incentives are intended to compensate or, immediately if the costs have already been incurred. Incentives related to income are presented as an offset against the related expenditure, and government grants that are awarded as incentives with no ongoing performance obligations to us are recognized as income in the period in which the grant is received.
Leases
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. We account for each lease component within the contract as a lease separately from non-lease components of the contract and allocate the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.
Group as a lessee
We recognize right-of-use asset representing its right to use the underlying asset for the lease term at the lease commencement date. The cost of the right-of-use asset measured at inception shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date less any lease incentives received, plus any initial direct costs incurred and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset or restoring the underlying asset or site on which it is located. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. The right-of-use assets is depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use asset. The estimated useful lives of right-of use assets are determined on the same basis as those of property, plant and equipment. Right-of-use assets are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss, if any, is recognized in the statement of profit and loss.
We measure the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, we use the incremental borrowing rate. For leases with reasonably similar characteristics, we, on a lease by lease basis, may adopt either the incremental borrowing rate specific to the lease or the incremental borrowing rate for the portfolio as a whole. The lease payments shall include fixed payments, variable lease payments, residual value guarantees, exercise price of a purchase option where we are reasonably certain to exercise that option and payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in-substance fixed lease payments. We recognize the amount of the remeasurement of lease liability due to modification as an adjustment to the right-of-use asset and statement of profit and loss depending upon the nature of modification. Where the carrying amount of the right-of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability, we recognize any remaining amount of the re-measurement in statement of profit and loss.
We have elected not to apply the requirements of Ind AS 116 Leases to short-term leases of all assets that have a lease term of 12 months or less and leases for which the underlying asset is of low value. The lease payments associated with these leases are recognized as an expense on a straight-line basis over the lease term.
Group as a lessor
At the inception of the lease we classify each of our leases as either an operating lease or a finance lease. We recognize lease payments received under operating leases as income on a straight-line basis over the lease term. In case of a finance lease, finance income is recognized over the lease term based on a pattern reflecting a constant periodic rate of return on the lessors net investment in the lease. When we are an intermediate lessor we account for our interests in the head lease and the sub-lease separately. We assess the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short term lease to which we apply the exemption described above, then we classify the sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, we apply Ind AS 115 Revenue from contracts with clients to allocate the consideration in the contract.
Sub-lease
At the inception of the sub-lease contract, we classify the sub-lease as a finance lease or an operating lease based on criteria in Ind AS 116 Lease. In the case of a sub-lease which is classified as an operating lease, the lease liability and right to use of the head lease is not derecognized. The lease income which would be received from the sub-lease over the lease term is recognized as other income in the statement of profit or loss account.
In the case of a sub-lease which is classified as a finance lease, the lease liability of the head lease is not derecognized; instead the right to use asset of the head lease is derecognized and net investment in sub-lease is recognized. The interest income received on the net investment in sub-lease is recognized in statement of profit or loss account over the lease term.
Cost recognition
Costs and expenses are recognized when incurred and have been classified according to their nature.
Exceptional items
We consider exceptional items to be those which derive from events or transactions which are significant for separate disclosure by virtue of their size or incidence in order for the user to obtain a proper understanding of our financial performance. These items include, but are not limited to, acquisition costs, impairment charges, restructuring costs and profits and losses on disposal of subsidiaries, contingent consideration and other one off items which meet this definition. To provide a better understanding of the underlying results of the period, exceptional items are reported separately in the Statement of Profit and Loss.
Recent Indian Accounting Standards (Ind AS) and Pronouncements
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards under Companies
(Indian Accounting Standards) Rules as issued from time to time. There are no such recently issued standards or amendments to the existing standards for which the impact on the Restated Consolidated Financial Information is required to be disclosed.
Overview of Profit and Loss Statement
The following descriptions set forth information with respect to the key components of our restated profit and loss statements.
Income
Our revenue comprises revenue from operations and other income.
Revenue from operations
We generate revenue from our operations through the sale of services and technology solutions and other operating revenues, such as commission income. For further details, please see the " Overview - Factors Affecting Our Results of Operations -
Our pricing models and employee utilization" above on page 394.
Other income
Our other income primarily consists of (i) interest income earned on financial assets that are not designated as at FVTPL such as interest income on debentures net investments in sub leases and intercorporate deposits and bank deposits, (ii) other gains and losses such as the change in fair value of investments measured at FVTPL, (iii) dividend income and (iv) other non-operating income such as lease income, research and development expenditure credit, foreign currency gains and (losses) (net) and profit and (losses) (net) on the sale of investments measured at FVTPL.
Expenses
Our expenses attributable to operations include (i) employee benefit expenses, (ii) purchase of technology solutions, (iii) outsourcing and consultancy charges, (iv) finance costs, (v) depreciation and amortization and (vi) other expenses.
Purchase of Technology Solutions
Purchase of technology solutions includes the purchase of IT and other goods in connection with our offerings in the education business and third-party software licenses for our products business.
Outsourcing and consultancy charges
Our outsourcing and consultancy charges are made up of the costs incurred in utilizing outside consultants and third-party service providers outsourcing certain services.
Employee Benefit Expenses
Our employee benefit expenses consist of (i) salaries and wages paid to employees, (ii) contributions to social security expenses like Provident and other funds, (iii) share based payments to employees and (iv) staff welfare expenses.
Finance Cost
Finance costs currently comprise interest mainly on account of the unwinding of advances received from clients as per Ind AS 115, revenue from contracts with clients and interest paid on Micro, Small and Medium Enterprises (MSME) creditors and interest paid on lease liabilities as per Ind AS 116.
Depreciation and amortization
Our depreciation and amortization expense comprises of (i) depreciation of property, plant and equipment, (ii) amortization of other intangible assets and (iii) depreciation of right-of-use assets. Our tangible and intangible assets are depreciated and amortized over periods corresponding to their estimated useful lives. Please see " Critical Accounting Policies" above on page
398.
Other expenses
Our other expenses primarily comprise of (i) software and Annual Maintenance Charges ("AMC"), (ii) travelling and conveyance, (iii) office expenses and (iv) professional fees.
The following table sets forth a breakdown of our other expenses for the periods indicated:
( in million)
Six-months period ended |
Fiscal |
||||
September 30, 2023 |
September 30, 2022 |
2023 |
2022 |
2021 |
|
| Rent | 41.64 | 45.23 | 77.03 | 78.88 | 44.99 |
| Repairs and maintenance | 88.37 | 68.94 | 157.77 | 128.33 | 127.38 |
| Office expenses | 278.07 | 187.06 | 402.91 | 341.63 | 233.47 |
| Travelling and conveyance | 396.07 | 335.29 | 772.73 | 292.13 | 170.71 |
Power, fuel and water charges Auditors remuneration |
61.52 |
51.75 |
111.71 |
73.94 |
72.40 |
Remunerations paid to the auditors of holding company |
8.75 |
6.52 |
16.64 |
12.22 |
12.54 |
| Remunerations paid to other auditors | 9.65 | 7.40 | 18.18 | 14.95 | 14.91 |
Staff recruitment , training and seminar expenses |
116.18 |
164.69 |
271.46 |
169.85 |
80.79 |
| Software and AMC charges | 831.68 | 806.93 | 1,602.88 | 1,099.84 | 715.63 |
| Professional fees | 92.82 | 120.04 | 364.17 | 203.60 | 237.13 |
| Communication expenses | 80.05 | 71.71 | 153.30 | 149.16 | 115.70 |
| Bad debts written off | - | 112.73 | 112.73 | - | - |
Allowances for expected credit loss (net) |
10.96 |
(74.30) |
(138.37) |
(33.15) |
40.48 |
Corporate social responsibility expenses |
34.55 |
26.89 |
55.54 |
54.81 |
58.31 |
| Miscellaneous expenses | 110.04 | 59.85 | 137.78 | 242.62 | 70.21 |
Total |
2,160.35 | 1,990.73 | 4,116.46 | 2,828.81 | 1,994.65 |
Exceptional items
Our exceptional items consist of (i) loss on liquidations of subsidiaries and (ii) expenses towards business restructuring. There are no exceptional items which have been charged to our restated profit and loss statements after March 31, 2021.
Tax expenses
Our income tax expense comprises of current tax and deferred tax. The following table sets forth a breakdown of our tax expenses for the periods indicated:
( in million)
Six-months period ended |
Fiscal |
||||
September 30, 2023 |
September 30, 2022 |
2023 |
2022 |
2021 |
|
| Income tax expense | |||||
Current tax on profits for the period/year |
1,446.72 |
808.83 |
2,611.57 |
1,586.74 |
877.87 |
Total current tax expense Deferred tax |
1,446.72 |
808.83 |
2,611.57 |
1,586.74 |
877.87 |
Decrease / (increase) in deferred tax assets in deferred tax |
(319.34) |
(10.94) |
(1,019.59) |
(121.09) |
(207.12) |
(Decrease) / increase in deferred tax liabilities in deferred tax |
16.15 |
24.45 |
129.16 |
33.00 |
90.17 |
| Total deferred tax expense / (benefit) | (303.19) | 13.51 | (890.43) | (88.09) | (116.95) |
| Income tax expense | 1,143.53 | 822.34 | 1,721.14 | 1,498.65 | 760.92 |
For more information see "Restated Consolidated Financial Information - Notes forming part of the Restated Consolidated Financial Information Note 31: Income tax expense" on page 331.
Results of Operations
The following table sets forth certain profit and loss data in Rupees and as a percentage of total income for the six-months period ended September 30, 2023 and September 30, 2022 and Fiscals 2023, 2022 and 2021:
( in million, and as a percentage of total income)
Six-months period ended |
Fiscal |
|||||||||
September 30, 2023 |
September 30, 2022 |
2023 |
2022 |
2021 |
||||||
Income |
||||||||||
| Revenue from | 25,267.0 | 97.65% | 18,879.0 | 98.82% | 44,141.77 | 98.05% | 35,295.80 | 98.64% | 23,809.11 | 98.15% |
| Operations | 2 | 6 | ||||||||
| Other Income (net) | 607.22 | 2.35% | 224.84 | 1.18% | 877.52 | 1.95% | 488.02 | 1.36% | 448.27 | 1.85% |
Total Income |
25,874.2 4 |
100.00% |
19,103.9 0 |
100.00% |
45,019.29 |
100.00% |
35,783.82 |
100.00% |
24,257.38 |
100.00% |
Expenses |
||||||||||
Purchases of technology solutions |
4,235.18 |
16.37% |
1,773.39 |
9.28% |
6,824.80 |
15.16% |
6,885.40 |
19.24% |
3,382.98 |
13.95% |
Outsourcing and consultancy charges |
2,904.60 |
11.23% |
2,478.31 |
12.97% |
5,696.56 |
12.65% |
3,998.03 |
11.17% |
2,414.35 |
9.95% |
Employee benefits expense |
11,319.3 9 |
43.75% |
8,911.44 |
46.65% |
19,294.61 |
42.86% |
15,126.94 |
42.27% |
12,160.04 |
50.13% |
| Finance costs | 94.77 | 0.37% | 80.95 | 0.42% | 179.81 | 0.40% | 218.98 | 0.61% | 176.56 | 0.73% |
Depreciation and amortisation expense |
497.41 |
1.92% |
456.13 |
2.39% |
945.54 |
2.10% |
857.10 |
2.40% |
922.00 |
3.80% |
| Other expenses | 2,160.35 | 8.35% | 1,990.73 | 10.42% | 4,116.46 | 9.14% | 2,828.81 | 7.91% | 1,994.65 | 8.22% |
Total Expenses |
21,211.7 0 |
81.98% |
15,690.9 5 |
82.13% |
37,057.78 |
82.32% |
29,915.26 |
83.60% |
21,050.58 |
86.78% |
Profit before |
4,662.54 |
18.02% |
3,412.95 |
17.87% |
7,961.51 |
17.68% |
5,868.56 |
16.40% |
3,206.80 |
13.22% |
Exceptional items and tax |
||||||||||
Exceptional items (net) |
- |
- |
- |
- |
54.15 |
0.22% |
||||
Profit before tax |
4,662.54 |
18.02% |
3,412.95 |
17.87% |
7,961.51 |
17.68% |
5,868.56 |
16.40% |
3,152.65 |
13.00% |
Tax expense |
1,143.53 |
4.42% |
822.34 |
4.30% |
1,721.14 |
3.82% |
1,498.65 |
4.19% |
760.92 |
3.14% |
| Current tax | 1,446.72 | 5.59% | 808.83 | 4.23% | 2,611.57 | 5.80% | 1,586.74 | 4.43% | 877.87 | 3.62% |
| Deferred tax | (303.19) | (1.17%) | 13.51 | 0.07% | (890.43) | (1.98%) | (88.09) | (0.25%) | (116.95) | (0.48%) |
Profit for the period/year |
3,519.01 |
13.60% |
2,590.61 |
13.56% |
6,240.37 |
13.86% |
4,369.91 |
12.21% |
2,391.73 |
9.86% |
Segmental Reporting
Our segmental reporting reflects our business segmentation.
We report our continuing business operations in two business segments: Services and Technology Solutions. See "Our Business" beginning on page 180 for further information on our lines of business.
The following table sets forth a breakdown of our revenue from operations by our business segments for the periods indicated:
Six-months period ended |
Fiscal |
||||
September 30, 2023 |
September 30, 2022 |
2023 |
2022 |
2021 |
|
| Services Segment | 19,863.90 | 16,408.80 | 35,311.55 | 26,513.51 | 19,143.71 |
| Technology Solutions Segment(1) | 5,403.12 | 2,470.26 | 8,830.22 | 8,782.29 | 4,665.40 |
| Revenue from Operations | 25,267.02 |
18,879.06 |
44,141.77 |
35,295.80 |
23,809.11 |
(1) Technology solution segment includes revenue from services pertaining to product business amounting to 20.15 million for the period/year ended September 30, 2023 (September 30, 2022: 20.30 million, March 31, 2023: 40.63 million, March 31, 2022: 34.90 million and March 31, 2021: 33.70 million).
The following table sets forth a breakdown of our revenue from operations by geography for the periods indicated:
( in million)
Six-months period ended |
Fiscal |
||||
September 30, 2023 |
September 30, 2022 |
2023 |
2022 |
2021 |
|
| India | 8,877.84 | 4,623.65 | 13,138.31 | 11,435.44 | 6,900.23 |
| North America | 4,866.61 | 4,231.76 | 9,465.35 | 7,921.63 | 7,585.89 |
| Europe | 6,795.74 | 4,628.07 | 10,076.24 | 8,590.19 | 7,371.39 |
| Rest of World | 4,726.83 | 5,395.58 | 11,461.87 | 7,348.54 | 1,951.60 |
Revenue from Operations |
25,267.02 |
18,879.06 |
44,141.77 |
35,295.80 |
23,809.11 |
Six-months Period Ended September 30, 2023 Compared to Six-months Period Ended September 30, 2022
Income
Our total income comprising of revenue from operations and other income increased by 35.44% to 25,874.24 million for the six-months period ended September 30, 2023 from 19,103.90 million for the six-months period ended September 30, 2022, primarily due to an increase in our revenue from operations across India and Europe led by our Anchor Clients and Technology Solutions business.
Revenue from Operations
Our revenue from operations increased by 33.84% to 25,267.02 million for the six-months period ended September 30, 2023, from 18,879.06 million for the six-months period ended September 30, 2022, primarily due to the reasons set forth below.
Services Segment:
Our revenue attributable to the Services segment increased by 21.06% to 19,863.90 million for the six-months period ended September 30, 2023, from 16,408.80 million for the six-months period ended September 30, 2022, primarily due to accelerated engineering outsourcing work from our Anchor Clients, TML and JLR, and our clients in the automotive vertical.
Technology Solutions Segment:
Our revenue attributable to the Technology Solutions segment increased by 118.73% to 5,403.12 million for the six-months period ended September 30, 2023, from 2,470.26 million for the six-months period ended September 30, 2022. The increase was primarily due to the execution of new education projects during the period and growth in the products business.
Geographical Revenue:
Our revenue from operations in Europe increased by 46.84% to 6,795.74 million for the six-months period ended September 30, 2023, from 4,628.07 million for the six-months period ended September 30, 2022, primarily due to an increase in revenue from our Anchor Clients. Our revenue from operations in North America increased by 15.00% to 4,866.61 million for the six-months period ended September 30, 2023, from 4,231.76 million for the six-months period ended September 30, 2022, primarily as a result of an increase in revenue from our automotive clients. Our revenue from operations in the rest of the world decreased by 12.39% to 4,726.83 million for the six-months period ended September 30, 2023, from 5,395.58 million for the six-months period ended September 30, 2022 primarily due to the near completion of the large full vehicle development projects in Vietnam. Our revenue from operations in India increased by 92.01% to 8,877.84 million for the six-months period ended September 30, 2023 from 4,623.65 million for the six-months period ended September 30, 2022 primarily as a result of an increase in the revenue in our Services business from our Anchor Clients and an increase in the Technology Solutions business due to new education projects.
Other Income
Our other income increased by 170.07% to 607.22 million for the six-months period ended September 30, 2023 from 224.84 million for the six-months period ended September 30, 2022, primarily due to an increase in research and development credit on account of higher business growth and higher interest income on surplus cash investments.
Expenses
Our expenses increased by 35.18% to 21,211.70 million for the six-months period ended September 30, 2023 from 15,690.95 million for the six-months period ended September 30, 2022, primarily due to increases in purchases of technology solutions, outsourcing and consultancy charges, employee benefits expense, depreciation and amortization expense and other expenses.
Purchase of Technology Solutions
Our purchase of technology solutions expenses increased by 138.82% to 4,235.18 million for the six-months period ended September 30, 2023 from 1,773.39 million for the six-months period ended September 30, 2022. The increase was primarily due to an increase in revenue attributable to the Technology Solutions segment from various new education projects executed in India and an increase the Products business.
Outsourcing and consultancy charges
Our outsourcing and consultancy charges increased by 17.20% to 2,904.60 million for the six-months period ended September 30, 2023 from 2,478.31 million for the six-months period ended September 30, 2022, primarily due to an increase in the work outsourced to third-party service providers to support growth in our Services business.
Employee Benefit Expenses
Our employee benefit expenses increased by 27.02% to 11,319.39 million for the six-months period ended September 30, 2023 from 8,911.44 million for the six-months period ended September 30, 2022, primarily due to an increase in full time employee headcount to 11,608 for the six-months period ended September 30, 2023 from 9,804 for the six-months period ended September 30, 2022 together with the annual wage increase effective July 1, 2023 resulting in an increase in salaries and annual wage increases.
Finance Cost
Our finance cost increased by 17.07% to 94.77 million for the six-months period ended September 30, 2023 from 80.95 million for the six-months period ended September 30, 2022, primarily due to an increase in notional interest cost attributed to advances received from clients and to leased assets as per Ind AS. As we did not have any borrowings during the period, no finance costs were incurred relating to the servicing of debt.
Depreciation and amortization
Our depreciation and amortization charge increased by 9.05% to 497.41 million for the six-months period ended September 30, 2023 from 456.13 million for the six-months period ended September 30, 2022, primarily due to an increase in depreciation on tangible assets from the procurement of capital assets to support our business growth.
Other expenses
Our other expenses increased by 8.52% to 2,160.35 million for the six-months period ended September 30, 2023 from
1,990.73 million for the six-months period ended September 30, 2022. This increase was primarily as a result of an 18.13% increase in travel expenses which increased to 396.07 million for the six-months period ended September 30, 2023 from 335.29 million for the six-months period ended September 30, 2022,an increase of 48.65% in office expenses to 278.07 million for the six-months period ended September 30, 2023 from 187.06 million for the six-months period ended September 30, 2022 and an increase of 3.07% in software and AMC charges to 831.68 million for the six-months period ended September 30, 2023 from 806.93 million for the six-months period ended September 30, 2022. These expenses were incurred to support business growth requirements.
Profit before taxes
As a result of the factors explained above, our profit before taxes increased by 36.61% to 4662.54 million for the six-months period ended September 30, 2023 from 3,412.95 million for the six-months period ended September 30, 2022.
Tax expenses
Our tax expenses increased by 39.06% to 1,143.53 million for the six-months period ended September 30, 2023 from 822.34 million for the six-months period ended September 30, 2022, primarily due to an increase in profit before tax. The effective tax rates have marginally increased by 0.43% due to the change in our geographic profit mix.
Profit for the period/year
Due to the factors discussed above, our profit for the period/year increased by 35.84% to 3,519.01 million for the six-months period ended September 30, 2023 from 2,590.61 million for the six-months period ended September 30, 2022
Fiscal 2023 Compared to Fiscal 2022
Income
Our total income comprising of revenue from operations and other income increased by 25.81% to 45,019.29 million for Fiscal 2023 from 35,783.82 million for Fiscal 2022, due to an increase in our revenue from operations across all geographies but primarily in the rest of the world geography, led by our Services business.
Revenue from Operations
Our revenue from operations increased by 25.06% to 44,141.77 million for Fiscal 2023 from 35,295.80 million for Fiscal
2022, primarily due to the reasons set forth below.
Services Segment:
Our revenue attributable to the Services segment increased by 33.18% to 35,311.55 million for Fiscal 2023, from 26,513.51 million for Fiscal 2022, due to accelerated engineering outsourcing work from our Anchor Clients, TML and JLR, and our clients in the automotive vertical, including substantial automotive revenue from VinFast for the continued execution of full vehicle program contracts retained in Fiscal 2022.
Technology Solutions Segment:
Our revenue attributable to the Technology Solutions segment increased by 0.55% to 8,830.22 million for Fiscal 2023, from 8,782.29 million for Fiscal 2022 primarily due to the completion of a substantial portion of a large fixed price education project in Fiscal 2022. Some of the new projects that we began in Fiscal 2022 and Fiscal 2023 are at their early execution stages and we generated pro-rata revenue from these projects during the year ended March 31, 2023.
Geographical Revenue:
Our revenue from operations in India increased by 14.89% to 13,138.31 million for Fiscal 2023 from 11,435.44 million for Fiscal 2022 primarily due to an increase in revenue from our Anchor Client TML. Our revenue from operations in Europe increased by 17.30% to 10,076.24 million for Fiscal 2023 from 8,590.19 million for Fiscal 2022 primarily due to an increase in revenue from our Anchor Client JLR. Our revenue from operations in North America increased by 19.49% to 9,465.35 million for Fiscal 2023, from 7,921.63 million for Fiscal 2022, primarily as a result of an increase in revenue from our automotive accounts. Our revenue from operations in the rest of the world increased by 55.97% to 11,461.87 million for Fiscal 2023, from 7,348.54 million for Fiscal 2022, primarily as a result of new project engagements in Vietnam.
Other Income
Our other income increased by 79.81% to 877.52 million for Fiscal 2023 from 488.02 million for Fiscal 2022, primarily due to an increase in research and development expenditure credit, supported by revenue growth, which was partially offset by a decrease in change in fair value of investments and derivatives measured at fair value through profit or loss.
Expenses
Our expenses increased by 23.88% to 37,057.78 million for Fiscal 2023 from 29,915.26 million for Fiscal 2022, primarily due to increases in outsourcing and consultancy charges, employee benefits expenses, depreciation and amortization expenses and other expenses, partially offset by decreases in purchases of technology solutions and finance costs.
Purchase of Technology Solutions
Our purchase of technology solutions expenses decreased marginally by 0.88% to 6,824.80 million for Fiscal 2023 from 6,885.40 million for Fiscal 2022. This was primarily as a result of a change in the segment mix between services and technology solutions.
Outsourcing and consultancy charges
Our outsourcing and consultancy charges increased by 42.48% to 5,696.56 million for Fiscal 2023 from 3,998.03 million for Fiscal 2022, due to an increase in contractors engaged and an increase in the work outsourced to third-party service providers to support our Services business, which experienced revenue growth of 33.18% for Fiscal 2023 from Fiscal 2022.
Employee Benefit Expenses
Our employee benefit expenses increased by 27.55% to 19,294.61 million for Fiscal 2023 from 15,126.94 million for Fiscal
2022, primarily due to an increase in full time employee headcount to 10,676 employees for Fiscal 2023 from 8,423 employees for Fiscal 2022 and an increase in wages (mainly in niche skill areas) due to continued high employee attrition during the period.
Finance Cost
Our finance cost decreased by 17.89% to 179.81 million for Fiscal 2023 from 218.98 million for Fiscal 2022, primarily due to the reduction in notional interest cost attributed to advances received from clients and to lease liabilities as per Ind AS. We did not incur any finance costs relating to servicing debt as we did not have any borrowings during the period.
Depreciation and amortization
Our depreciation and amortization charge increased by 10.32% to 945.54 million for Fiscal 2023 from 857.10 million for Fiscal 2022. This was primarily due to an increase in depreciation on tangible assets on account of procurement of capital assets to support our business growth.
Other expenses
Our other expenses increased by 45.52% to 4,116.46 million for Fiscal 2023 from 2,828.81 million for Fiscal 2022. This was primarily as a result of a 164.52% increase in travel expenses which increased to 772.73 million for Fiscal 2023 from 292.13 million for Fiscal 2022 as travel restrictions continued to ease and a 45.74% increase in software and AMC expenses which increased to 1,602.88 million for Fiscal 2023 from 1,099.84 million for Fiscal 2022 to support business growth.
Profit before taxes
As a result of the factors explained above, our profit before taxes increased by 35.66% to 7,961.51 million for Fiscal 2023 from 5,868.56 million for Fiscal 2022.
Tax expenses
Our tax expenses increased by 14.85% to 1,721.14 million for Fiscal 2023 from 1,498.65 million for Fiscal 2022, primarily due to increases in profits in various jurisdictions. The effective tax rate (ETR) reduced from 25.5% to 21.6%, mainly due to changes in income tax regulations in the US (the current tax liability has increased as compared to the Base Erosion and Anti-Abuse Tax (BEAT), resulting in the creation of a large deferred tax asset and thereby tax credit to the profit and loss account in Fiscal 2023) and the change in the mix of profitability across different tax jurisdictions.
Profit for the period/year
Due to the factors discussed above, our profit for the period/year increased by 42.80% to 6,240.37 million for Fiscal 2023 from 4,369.91 million for Fiscal 2022.
Fiscal 2022 Compared to Fiscal 2021
Income
Our total income comprising of revenue from operations and other income increased by 47.52% to 35,783.82 million for Fiscal 2022 from 24,257.38 million for Fiscal 2021, primarily due to an increase in our revenue from operations across all geographical locations led by our Services business.
Revenue from Operations
Our revenue from operations increased by 48.24% to 35,295.80 million for Fiscal 2022 from 23,809.11 million for Fiscal
2021, primarily due to the reasons set forth below.
Services Segment:
Our revenue attributable to the Services segment increased by 38.50% to 26,513.51 million for Fiscal 2022, from 19,143.71 million for Fiscal 2021, as business activities improved across Anchor and major non-anchor clients enabled by relaxation in the Covid-19 related regulatory and health guidelines. During Fiscal 2022, we started the execution of multiple full vehicle and turnkey projects for non-anchor automotive client, which also contributed to an increase in our revenue attributable to the Services segment for Fiscal 2022.
Technology Solutions Segment:
Our revenue attributable to the Technology Solutions segment increased by 88.24% to 8,782.29 million for Fiscal 2022, from 4,665.40 million for Fiscal 2021 primarily driven by the increase in revenue from the Education business. A substantial portion of the deliverables related to a large project at the time (awarded by a State Government) was executed in Fiscal 2022, resulting in significant revenue growth during the year.
Geographical Revenue:
Our revenue from operations in India increased by 65.73% to 11,435.44 million for Fiscal 2022 from 6,900.23 million for
Fiscal 2021 primarily due to an increase in revenue attributable to the Technology Solutions segment in India resulting from an increase in the number of new projects onboarded. Our revenue from operations in Europe increased by 16.53% to 8,590.19 million for Fiscal 2022, from 7,371.39 million for Fiscal 2021, primarily as a result of an increase in revenue from our anchor client. Our revenue from operations in North America increased by 4.43% to 7,921.63 million for Fiscal 2022, from 7,585.89 million for Fiscal 2021, primarily as a result of an increase in our automotive accounts. Our revenue from operations in the rest of the world increased by 276.54% to 7,348.54 million for Fiscal 2022, from 1,951.60 million for Fiscal 2021 primarily as a result of an increase in new multi-million dollar projects in Vietnam.
Other Income
Our other income increased by 8.87% to 488.02 million for Fiscal 2022 from 448.27 million for Fiscal 2021, primarily due to an increase in interest income, partially offset by decreases in foreign currency loss and other non-operating income.
Expenses
Our expenses increased by 42.11% to 29,915.26 million for Fiscal 2022 from 21,050.58 million for Fiscal 2021, primarily due to increases in purchases of technology solutions, outsourcing and consultancy charges, employee benefits expense, finance costs and other expenses, partially offset by a decrease in depreciation and amortization expense.
Purchase of Technology Solutions
Our purchase of technology solutions expenses increased by 103.53% to 6,885.40 million for Fiscal 2022 from 3,382.98 million for Fiscal 2021. This was primarily as a result of the increase in revenue attributable to the Technology Solutions segment from a major education project executed in India.
Outsourcing and consultancy charges
Our outsourcing and consultancy charges increased by 65.59% to 3,998.03 million for Fiscal 2022 from 2,414.35 million for
Fiscal 2021, due to an increase in contractors engaged and an increase in the work outsourced to third-party service providers to support growth in our Services business.
Employee Benefit Expenses
Our employee benefit expenses increased by 24.40% to 15,126.94 million for Fiscal 2022 from 12,160.04 million for Fiscal
2021, primarily due to an increase in full time employee headcount to 8,423 employees for Fiscal 2022 from 7,241 employees for Fiscal 2021 resulting in an increase in salaries and the higher cost of back filling certain critical and niche positions due to continued high employee attrition during the period.
Finance Cost
Our finance cost increased by 24.03% to 218.98 million for Fiscal 2022 from 176.56 million for Fiscal 2021, primarily due to the performance bank guarantee charges. We did not have any borrowings during Fiscal 2022 and as such, no interest servicing costs on debt were incurred.
Depreciation and amortization
Our depreciation and amortization charge decreased by 7.04% to 857.10 million for Fiscal 2022 from 922.00 million for
Fiscal 2021. This was primarily due to the completion of accounting life of few intangible assets and a marginal reduction in depreciation on tangible assets.
Other expenses
Our other expenses increased by 41.82% to 2,828.81 million for Fiscal 2022 from 1,994.65 million for Fiscal 2021.
This was primarily as a result of a 71.13% increase in travel expenses which increased to 292.13 million for Fiscal 2022 from
170.71 million for Fiscal 2021 as businesses experienced a relaxation in travel rules by various authorities in connection with Covid-19 and a 53.69% increase in software and AMC expenses which increased to 1,099.84 million for Fiscal 2022 from 715.63 million for Fiscal 2021 to support revenue growth.
Profit before taxes
As a result of the factors explained above, our profit before taxes increased by 86.15% to 5,868.56 million for Fiscal 2022 from 3,152.65 million for Fiscal 2021.
Tax expenses
Our tax expenses increased by 96.95% to 1,498.65 million for Fiscal 2022 from 760.92 million for Fiscal 2021, primarily due to the increase in profit during the year. The effective tax rate increased by 1.40% due to the reduction in deferred tax assets and the increase in tax expenses in certain entities.
Profit for the period/year
Due to the factors discussed above, our profit for the period/year increased by 82.71% to 4,369.91 million for Fiscal 2022 from 2,391.73 million for Fiscal 2021.
Liquidity and Capital Resources
Liquidity
We meet our working capital and other capital expenditure requirements primarily from cash generated by operating activities and have not had any borrowings between Fiscal 2021 and September 30, 2023. We believe that we have adequate working capital for our present requirements and that our net cash generated from operating activities, together with cash and cash equivalents, will provide sufficient funds to satisfy our working capital requirements and anticipated capital expenditures for the next 12 months following the date of this Red Herring Prospectus. We may, however, incur indebtedness to finance all or a portion of our capital expenditures, working capital or for any other purposes depending on our capital requirements, market conditions and other factors.
As of September 30, 2023, we had 4,285.54 million in cash and cash equivalents, 3,859.54 million in other bank balances (other than cash and cash equivalents), 1,160.00 million in intercorporate deposits, 112.17 million in bill of exchange and
12,247.22 million in trade receivables. As of September 30, 2023 our company is debt free and our total current liabilities amounted to 20,465.56 million.
As of September 30, 2023, our billed days sales outstanding (DSO) were 73 days and unbilled were 19 days. We focus on credit terms, timely invoicing and collection from our customers to keep our DSO under control.
Cash Flow
The table below summarizes our cash flow for the six-months period ended September 30, 2023 and September 30, 2022 and Fiscals 2023, 2022 and 2021.
( in million)
Six-months period ended |
Fiscal |
||||
September 30, 2023 |
September 30, 2022 |
2023 |
2022 |
2021 |
|
| Net cash flow (used in)/generated from operating activities | (78.21) |
1,684.41 |
4,013.79 |
(386.79) |
11,128.90 |
| Net cash flow generated/(used in) from investing activities | 5,803.21 |
1,153.43 |
(4,874.20) |
742.05 |
(6,735.74) |
| Net cash flow (used in) financing activities | (5,265.12) | (3,204.22) | (3,468.68) | (444.11) | (440.71) |
| Net (decrease)/increase in cash and cash equivalents | 459.88 | (366.38) | (4,329.09) | (88.85) | 3,952.45 |
| Cash & cash equivalents at the close of the period/year | 4,285.54 | 7,132.69 | 3,828.21 | 7,682.57 | 7,813.23 |
| Cash & cash equivalents at the beginning of the period/year | 3,828.21 |
7,682.57 |
7,682.57 |
7,813.23 |
3,760.68 |
Net cash flow (used in)/generated from operating activities
Six-months period ended September 30, 2023
Net cash flow used in our operating activities was 78.21 million for the six-months period ended September 30, 2023. Our operating profit before working capital changes was 4,996.14 million in the six-months period ended September 30, 2023, which was the result of profit for the period/year of 3,519.01 million primarily adjusted by depreciation and amortization of
497.41 million, the provision of income tax of 1,446.72 million and provision of deferred tax of 303.19 million. Our net investment of working capital was 4,247.49 million. Our movements in working capital primarily consisted of an increase in other liabilities of 1,729.11 million, an increase in other current assets of 2,404.98 million and a decrease in trade payables of 1,771.19 million.
Six-months period ended September 30, 2022
Net cash flow generated from our operating activities was 1,684.41 million for the six-months period ended September 30, 2022. Our operating profit before working capital changes was 3,799.10 million in the six-months period ended September 30, 2022, which was the result of profit for the period/year of 2,590.61 million primarily adjusted by depreciation and amortization of 456.13 million, the provision of income tax of 808.83 million and interest income of 105.94 million. Our net investment of working capital was 1,199.61 million. Our movements in working capital primarily consisted of an increase in billed trade receivables of 1,116.26 million, an increase in other current assets of 1,209.25 million and a decrease in other liabilities of 560.80 million.
Fiscal 2023
Net cash flow generated from our operating activities was 4,013.79 million for Fiscal 2023. Our operating profit before working capital changes was 8,634.56 million in Fiscal 2023, which was the result of profit for the period/year of 6,240.37 million primarily increased by depreciation and amortization of 945.54 million and the provision of income tax of 2,611.57 million and primarily reduced by the provision of deferred tax of 890.43 million and interest income of 414.77 million. Our net investment of working capital was 2,191.54 million. Our movements in working capital primarily consisted of an increase in billed trade receivables of 2,739.82 million, an increase in other current assets of 3,375.15 million, an increase in trade payables of 3,025.26 million and an increase in other liabilities of 2,013.76 million.
Fiscal 2022
Net cash flow used in our operating activities was 386.79 million for Fiscal 2022. Our operating profit before working capital changes was 6,693.31 million in Fiscal 2022, which was the result of profit for the period/year of 4,369.91 million primarily adjusted by depreciation and amortization of 857.10 million, export incentive written-offs of 133.25 million, the provision of income tax of 1,586.74 million and interest income of 397.42 million. Our net investment of working capital was 5,801.92 million. Our movements in working capital primarily consisted of an increase in other current assets of 5,234.61 million
(mainly due to increase in contract assets representing the execution of the education contract with a State Government wherein costs were incurred in Fiscal 2022 against the advance received from the customer in March of Fiscal 2021), an increase in billed trade receivables of 2,090.45 million, an increase in trade payables of 1,102.44 million and an increase in other liabilities of 489.94 million. The negative operating cashflow for Fiscal 2022 was mainly due to the costs incurred in Fiscal 2022 against the advance received from clients towards the end of Fiscal 2021.
Fiscal 2021
Net cash flow generated from our operating activities was 11,128.90 million for Fiscal 2021. Our operating profit before working capital changes was 4,174.01 million in Fiscal 2021, which was the result of profit for the period/year of 2,391.73 million adjusted by depreciation and amortization of 922.00 million, the provision of income tax of 877.87 million and finance costs of 176.56 million. Our net investment of working capital was 8,057.33 million. Our movements in working capital primarily consisted of an increase in other liabilities of 7,967.19 million, a decrease in billed trade receivables of 1,764.66 million and an increase in other current assets of 920.19 million. As on March 31, 2021, we had received an advance from customers amounting to 6,788.69 million primarily from a State Government and the other State Government with which we signed a contract towards large education contracts entered into in Fiscal 2021. The advance increased our working capital inflow by 8,057.33 million, thereby increasing the reported operating cashflow significantly for Fiscal 2021.
Net cash flow generated from/(used in) investing activities
Six-months period ended September 30, 2023
Net cash flow generated from investing activities was 5,803.21 million for the six-months period ended September 30, 2023, which was primarily attributable to the inter corporate deposits refunded of 12,610.00 million and proceeds from redemption of the deposits of 9,915.18 million which was partially offset by deposits/restricted deposits with banks of 7,024.44 million and inter corporate deposits placed of 8,922.50 million.
Six-months period ended September 30, 2022
Net cash flow generated from investing activities was 1,153.43 million for the six-months period ended September 30, 2022, which was primarily attributable to the proceeds from sale of mutual funds of 5,282.80 million which was partially offset by deposits/restricted deposits with banks of 1,139.25 million, inter corporate deposits placed of 10,035.00 million and inter corporate deposits refunded of 6,287.50 million.
Fiscal 2023
Net cash flow (used in) investing activities was 4,874.20 million for Fiscal 2023, which was primarily attributable to deposits/restricted deposits with banks of 6,223.20 million, inter corporate deposits placed of 18,395.00 million and the purchase of mutual funds of 982.45 million which was partially offset by the proceeds from the sale of mutual funds of 5,968.20 million, inter corporate deposits refunded of 13,972.50 million and proceeds from redemption of the deposits of
1,086.18 million.
Fiscal 2022
Net cash flow generated from investing activities was 742.05 million for Fiscal 2022, which was primarily attributable to the proceeds from the sale of mutual funds of 5,326.18 million, inter corporate deposits refunded of 16,885.00 million along with interest of 324.66 million which was partially offset by the payment for purchase of property, plant and equipment and intangible assets of 633.80 million, deposits/restricted deposits with banks of 990.60 million, inter corporate deposits placed of 14,810.00 million and the purchase of mutual funds of 5,674.72 million.
Fiscal 2021
Net cash flow used in investing activities was 6,735.74 million for Fiscal 2021, which was primarily attributable to the purchase of mutual funds of 4,919.75 million, the payment for purchase of property, plant and equipment and intangible assets of 147.30 million and inter corporate deposits placed of 11,245.00 million, partially offset by inter corporate deposits refunded of 9,010.00 million.
Net cash flow (used in) financing activities
Six-months period ended September 30, 2023
Net cash used in financing activities was 5,265.12 million for the six-months period ended September 30, 2023, mainly consisting of dividends paid of 4,989.72 million and the repayment of lease liabilities of 274.66 million.
Six-months period ended September 30, 2022
Net cash flow used in financing activities was 3,204.22 million for the six-months period ended September 30, 2022, mainly consisting of the payment of purchase of shares including premium of 2,959.03 million and the repayment of lease liabilities of 244.95 million.
Fiscal 2023
Net cash flow used in financing activities was 3,468.68 million for Fiscal 2023, mainly consisting of the payment of purchase of shares including premium of 2,959.03 million and the repayment of lease liabilities of 508.90 million.
Fiscal 2022
Net cash flow used in financing activities was 444.11 million for Fiscal 2022, mainly consisting of the payment of interest of
3.93 million, expenditure of buyback shares of 1.26 million and the repayment of lease liabilities of 438.92 million.
Fiscal 2021
Net cash flow used in financing activities was 440.71 million for Fiscal 2021, mainly consisting of the payment of interest of
24.60 million, the proceeds from issue of shares including securities premium of 2.40 million and the repayment of lease liabilities of 418.51 million.
Borrowings
While we have no borrowings, our Company has certain loans sanctioned in the ordinary course of its business for the purposes of meeting working capital requirements and capital expenditure requirements. Our Board is empowered to borrow monies as may be required for the purpose of the business of our Company, in accordance with Section 179, Section 180 of the Companies Act and our Articles of Association.
The following table sets forth details of the aggregate outstanding borrowings of our Company, on a consolidated basis, as on September 30, 2023.
( in million)
Category of borrowing |
Sanctioned amount as on September 30, 2023 (in million) |
Outstanding amount as on September 30, 2023 (in million)* |
| Fund based limits | ||
| Overdrafts(a) | 1,000.00 | - |
| Short term loan | 30.00 | |
| Cash credit | 10.00 | |
| Export packing credit* | 1,000.00 | - |
Total fund based (A) |
2,040.00 |
- |
| Non-fund based limits | ||
| Bank guarantee** | 7,290.00 | 980.27 |
| Letter of credit** | 250.00 | - |
Total non-fund based limits (B) |
7,540.00 |
980.27 |
Total (A) + (B) |
9,580.00 |
# As certified by Manian and Rao, Chartered Accountants pursuant to their certificate dated November 13, 2023. (a) Includes a sublimit facility of export credit of 1,000 million.
* Includes sublimit facilities of (i) Packing credit foreign currency, (ii) Foreign usance bills discounted/ foreign bills purchase / post shipment in foreign currency, (iii) Overdraft and (iv) Working capital demand loan of 1,000 million each.
** Bank guarantee of 750 million and letter of credit of 250 million are a sublimit of export packing credit.
Contractual Obligations
The table below sets forth our contractual obligations with definitive payment terms as of September 30, 2023:
( in million)
Due in 1st Year |
Due in 2nd Year |
Due in 3rd to 5th Year |
Due after 5th Year |
Total contractual cash flows |
|
| Trade payables | 4,795.57 | - | - | - | 4,795.57 |
| Lease liabilities | 577.77 | 549.93 | 1,119.25 | 797.16 | 3,044.11 |
| Other financial liabilities | 36.99 | 7.28 | - | - | 44.27 |
Total |
5,410.33 |
557.21 |
1,119.25 |
797.16 |
7,883.95 |
Contingent Liabilities
The following table sets forth our contingent liabilities as of September 30, 2023 and September 30, 2022 and Fiscals 2023, 2022 and 2021:
( in million)
Six-months period ended |
Fiscal |
||||
September 30, 2023 |
September 30, 2022 |
2023 |
2022 |
2021 |
|
| Bonus related to retrospective period | 78.20 | 78.20 | 78.20 | 78.20 | 78.20 |
| Income Tax demands disputed in appeals | 34.55 | 45.89 | 34.55 | 45.89 | 47.66 |
| Sales Tax demands disputed in appeals | - | - | - | 0.19 | 0.15 |
| Service Tax demands disputed in appeals | 180.38 | 172.65 | 176.50 | 235.51 | 225.54 |
Claims against the company not acknowledged as debts |
- |
- |
- |
- |
37.19 |
For more information, see "Restated Consolidated Financial Information Notes forming part of the Restated Consolidated Financial Information - Note 33: Contingent Liabilities" on page 333.
Capital Expenditure
Our capital expenditures include expenditures on property, plant and equipment and intangible assets. Property, plant and equipment include buildings, computers, furniture and fixtures, plant and machinery, vehicles and leasehold improvements.
Intangible assets include goodwill, client relationships and software licenses. The following table sets out the capital expenditures for the periods indicated:
Six-months period ended |
Fiscal | ||||
September 30, 2023 |
September 30, 2022 |
2023 | 2022 | 2021 | |
Property, plant and equipment |
|||||
| Buildings | 3.47 | 0.70 | - | - | - |
| Plant and machinery and equipment | 2.31 | 26.41 | 44.25 | 8.50 | 2.59 |
| Computers | 299.95 | 174.35 | 377 | 536.91 | 93.30 |
| Furniture and fixtures | 24.30 | 4.99 | 13.70 | 10.99 | 6.53 |
| Vehicles | - | - | - | 13.32 | - |
| Leasehold improvements | 0.74 | - | - | - | 17.66 |
Intangible assets |
|||||
| Software licenses | 169.70 | 61.17 | 145.85 | 132.49 | 20.87 |
Total |
500.47 |
267.62 |
580.8 | 702.21 | 140.95 |
We expect our future capital expenditures to consist of various investments into our tangible and intangible assets in the ordinary course of our business. We plan to fund these investments through funds generated from our operations in a manner that is generally consistent with our past practice in relation thereto. We may, however, evaluate other sources of financing as well, depending on our capital requirements, market conditions and other factors.
Off-Balance Sheet Commitments and Arrangements
We do not have any off-balance sheet arrangements, derivative instruments, swap transactions or relationships with affiliates or other unconsolidated entities or financial partnerships that would have been established for the purpose of facilitating off-balance sheet arrangements.
Inter-corporate deposits
As of September 30, 2023 and as of March 31, 2023, we have placed inter-corporate deposits ("ICDs") to the extent of
1,160.00 million and 4,847.50 million, respectively, with our Promoter. The main terms and conditions of such inter-corporate deposit are as follows:
Tenor: The ICDs are subject to lock-in period of 2 days and thereafter the ICDs would continue until redeemed.
Interest settlement: (a) Interest on the ICDs are required to be paid along with principal repayment after adjustment of tax at source by our Promoter and (b) interest accrued is required to be settled by our Promoter at the end of each quarter of the financial year after adjustment of tax at source.
Repayment of ICDs: Any request for redemption of the ICDs by our Company, should be sent to authorized officials of our Promoter on a T-1 basis and our Promoter is required to process such redemption within the 2nd working day of receiving such request from our Company.
Interest rate: The interest rates are decided by our Promoter depending on market conditions and as communicated to our Company. The rate of interest of the ICDs is in the range of 5% to 6.65% as on September 30, 2023 (5.00% to 5.75% as on September 30, 2022, 5.00% to 7.05% as on March 31, 2023, 5.00% as on March 31, 2022 and 6.00% to 7.75% as on March 31, 2021).
We enter into ICDs with TML as the interest rates on our investments in ICDs with TML have typically been better than comparable options available in the market, for instance, through liquid or overnight mutual funds. Our Promoter may also be interested to this extent. For further details, see "Restated Consolidated Financial Information Notes forming part of the Restated Consolidated Financial Information - Note 39: Related Party Disclosures" on page 353.
Related Party Transactions
We have engaged in the past, and may engage in the future, in transactions with related parties. For details of our related party transactions, see "Summary of the Offer Document Summary of Related Party Transactions" on page 20.
Seasonality
Our business is not seasonal in nature.
Quantitative and Qualitative Disclosures About Market Risks
Financial Risk
In the course of our business, we are exposed primarily to fluctuations in foreign currency exchange rates, interest rates, liquidity and credit risk, which may adversely impact the fair value of our financial instruments. We have a risk management policy which not only covers the foreign exchange risks but also other risks associated with the financial assets and liabilities such as interest rate risks and credit risks. Our risk management policy is approved by the board of directors. Our risk management framework aims to create a stable business planning environment by reducing the impact of currency and interest rate fluctuations on our business plan and achieve greater predictability to earnings by determining the financial value of the expected earnings in advance.
Market Risk
Market risk is the risk of any loss in future earnings, in realizable fair values or in future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, equity price fluctuations, liquidity and other market changes. Future specific market movements cannot be normally predicted with reasonable accuracy.
Foreign Currency Risk
The fluctuation in foreign currency exchange rates may potentially affect our sales, results, equity and cash flows where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the respective consolidated entities. Considering the countries and economic environment in which we operate, our operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in U.S. dollar, Great Britain Pounds, Euro and Swedish Krona, against the respective functional currencies of our Company and its subsidiaries. As per our risk management policy, we use foreign exchange and other derivative instruments primarily to hedge foreign exchange and interest rate exposure. We evaluate the impact of foreign exchange rate fluctuations by assessing our exposure to exchange rate risks. We hedge a part of these risks by using derivative financial instruments in accordance with our risk management policies. For further details with respect to Foreign Currency Risk (other than risk arising from derivatives) refer to the below details. Furthermore, any movement in the functional currencies of the various operations of the Group against major foreign currencies may impact our revenues from its international operations. Any weakening of the functional currency may impact our cost of imports and cost of borrowings and consequently may increase the cost of financing our capital expenditures.
(Amount in million)
Particulars |
Currency |
As at September 30, 2023 |
As at September 30, 2022 |
As at March 31, 2023 | As at March 31, 2022 | As at March 31, 2021 | |||||
Amount in Foreign Currenc y |
Equivale nt amount in |
Amount in Foreign Currenc y |
Equivale nt amount in |
Amount in Foreign Currenc y |
Equivale nt amount in |
Amount in Foreign Currenc y |
Equivale nt amount in |
Amount in Foreign Currenc y |
Equivale nt amount in |
||
| Financial Assets: | |||||||||||
Trade Receivables and unbilled revenue* |
EUR |
4.75 |
418.56 |
3.04 |
242.54 |
4.00 |
358.03 |
3.78 |
318.31 |
3.34 |
286.75 |
| GBP | 18.21 | 1,853.86 | 7.24 | 656.75 | 11.83 | 1,202.93 | 8.34 | 829.57 | 3.75 | 378.32 | |
| USD | 14.41 | 1,196.59 | 13.52 | 1,099.60 | 14.89 | 1,223.70 | 12.78 | 970.43 | 7.13 | 521.45 | |
| SGD | 0.39 | 23.92 | 0.42 | 23.92 | 0.44 | 26.91 | 0.32 | 18.14 | 0.76 | 41.59 | |
| CAD | 0.12 | 7.32 | 0.08 | 4.91 | 0.08 | 5.14 | 0.11 | 7.01 | 0.11 | 6.67 | |
| CNY | 0.33 | 3.76 | 8.16 | 93.37 | 7.23 | 86.44 | 8.21 | 98.09 | 5.96 | 66.58 | |
| JPY | 5.54 | 3.08 | - | - | - | - | 0.12 | 0.78 | 16.20 | 10.71 | |
| THB | 57.75 | 131.31 | 41.64 | 89.62 | 52.71 | 127.14 | 33.69 | 76.71 | 20.15 | 47.17 | |
| INR | 29.67 | 29.67 | 0.48 | 0.48 | 1.58 | 1.58 | 0.01 | 0.01 | - | - | |
| CHF | 0.11 | 9.75 | - | - | 0.09 | 7.77 | 0.01 | 0.82 | - | - | |
| ZAR | 0.32 | 1.38 | 0.29 | 1.30 | 0.19 | 0.89 | - | - | - | - | |
| SEK | 61.28 | 466.77 | 39.47 | 287.85 | 47.82 | 379.42 | 38.90 | 316.12 | 46.28 | 387.96 | |
| VND | 486.58 | 1.66 | 486.58 | 1.66 | 486.58 | 1.70 | 486.58 | 1.61 | - | - | |
| Current account with | USD | 9.24 | 767.43 | 9.59 | 780.10 | 10.79 | 887.15 | 7.23 | 547.89 | 4.58 | 335.16 |
Bank (including cheques in hand/money in transit and deposits held in foreign currency) |
|||||||||||
| EUR | 1.20 | 106.00 | 2.00 | 159.19 | 1.56 | 139.35 | 2.62 | 220.74 | 2.45 | 210.25 | |
| GBP | 0.47 | 47.93 | 0.59 | 53.98 | 0.62 | 63.09 | 0.09 | 9.21 | 1.08 | 108.71 | |
| SGD | 0.48 | 29.49 | 0.71 | 40.02 | 0.62 | 38.15 | 1.21 | 67.68 | 0.62 | 33.74 | |
| CAD | - | 0.20 | 0.01 | 0.34 | - | 0.26 | 0.01 | 0.43 | 0.01 | 0.55 | |
| CNY | 4.92 | 56.08 | 2.79 | 31.95 | 2.79 | 33.40 | 2.32 | 27.70 | 1.65 | 18.44 | |
| ZAR | - | - | - | - | - | - | - | - | - | - | |
| KRW | - | - | - | - | - | - | - | - | 347.74 | 22.46 | |
| JPY | - | - | - | - | - | - | - | - | 60.54 | 40.01 | |
| Total | 5,154.76 | 3,567.58 | 4,583.05 | 3,511.25 | 2,516.52 | ||||||
| Financial Liabilities: | |||||||||||
| Trade Payables* | EUR | 3.26 | 287.21 | 4.56 | 363.81 | 5.56 | 497.69 | 4.53 | 381.71 | 1.95 | 167.47 |
| SGD | 0.42 | 25.45 | 0.47 | 26.44 | 0.49 | 29.99 | 0.14 | 7.97 | 0.38 | 20.91 | |
| INR | 5.52 | 5.52 | 19.21 | 19.21 | 26.57 | 26.57 | 13.52 | 13.52 | 0.52 | 0.52 | |
| USD | 2.24 | 186.38 | 1.68 | 136.63 | 3.03 | 249.16 | 1.33 | 101.00 | 0.69 | 50.80 | |
| SEK | 0.21 | 1.60 | 0.10 | 0.72 | 0.42 | 3.32 | 0.09 | 0.73 | 0.66 | 5.56 | |
| GBP | 0.16 | 16.47 | 0.01 | 0.89 | 0.28 | 28.60 | 0.02 | 2.15 | 0.08 | 7.83 | |
| THB | - | - | - | - | - | - | - | - | - | - | |
| CAD | 0.01 | 0.58 | - | - | - | 0.02 | 0.01 | 0.11 | - | - | |
| AED | - | - | - | - | - | - | - | - | - | - | |
| CNY | 0.39 | 4.48 | 0.39 | 4.50 | 0.39 | 4.70 | - | - | 0.02 | 0.20 | |
| JPY | - | - | - | - | - | - | - | - | 2.62 | 1.73 | |
| VND | 21,354.2 | 72.95 | 15,891.7 | 54.18 | 17,792.1 | 62.29 | 26,850.5 | 89.12 | 1,398.68 | 4.44 | |
| 5 | 8 | 7 | 2 | ||||||||
| CHF | - | - | - | - | - | - | - | - | - | - | |
| AUD | - | - | - | 0.15 | - | - | - | - | - | - | |
| Total | 600.64 | 606.53 | 902.34 | 596.31 | 259.46 | ||||||
* The above balances are before considering intra-company balances elimination on consolidation. 10% appreciation/depreciation of the respective foreign currencies with respect to functional currency of the Group would result in increase/decrease in the Groups net income before tax by approximately 515.48 million as at September 30, 2023 (September 30, 2022: 356.76 million, March 31, 2023: 458.31 million, March 31, 2022: 351.13 million and March 31, 2021: 251.65 million), and 60.06 million as at September 30, 2023 (September 30, 2022: 60.65 million, March 31, 2023: 90.23 million, March 31, 2022: 59.63 million and March 31, 2021: 25.95 million) for financial assets and financial liabilities respectively.
Interest Rate Risk
Our investments are primarily in fixed rate interest bearing deposits/debentures and long term growth mutual funds. As such, we are not significantly exposed to interest rate risk. However, we may be exposed to interest rate risk in the future should we invest in variable interest financial instruments.
Credit Risk
Credit risk is the risk of financial loss arising from counterparty failure to repay or service debt according to the contractual terms or obligations. Credit risk encompasses both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. Credit risk is controlled by analyzing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit. Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, loans, investments, cash and cash equivalents, bank deposits and other financial assets. Out of the total trade receivables (including unbilled), two major clients who are also related parties, account for more than 20% of the balance, see "Risk Factors 32. We derive a material portion of our revenues from our Anchor Clients, who are related parties. Any deterioration in our relationship with our Anchor Clients may adversely affect our business, financial condition and results of operations." on page 56. The remaining balance of trade receivables consist of a large number of clients, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable.
Liquidity Risk
Liquidity risk refers to the risk that we cannot meet our financial obligations. Our objective in liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. We have obtained fund and non-fund based working capital lines from various banks. We invest our surplus funds in bank fixed deposit and liquid and liquid plus schemes of mutual funds, which carry no/low mark to market risks. We also constantly monitor funding options available in the debt and capital markets with a view to maintaining financial flexibility.
Significant Economic Changes
Other than as described above, including disclosure regarding the impact of Covid-19 and general macro economic trends on our operations, to the knowledge of our management, there are no other significant economic changes that materially affect or are likely to affect income from continuing operations.
Unusual or Infrequent Events or Transactions
Except as described in this Red Herring Prospectus, to our knowledge, there have been no unusual or infrequent events or transactions that have in the past or may in the future affect our business operations or future financial performance.
Known Trends or Uncertainties
Our business has been subject, and we expect it to continue to be subject, to significant economic changes arising from the trends identified above in " Factors Affecting Our Results of Operations" and the uncertainties described in "Risk Factors", beginning on pages 393 and 34, respectively. Except as disclosed in this Red Herring Prospectus, there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on revenues or income of our Company from continuing operations.
Future Relationship between Cost and Revenue
Other than as described above and in "Risk Factors" and "Our Business" beginning on pages 34 and 180, respectively, to our knowledge, there are no known factors that may adversely affect our business prospects, results of operations and financial condition.
New Products or Business Segments
There are no new products or business segments that have or are expected to have a material impact on our business prospects, results of operations or financial condition.
Supplier or Client Concentration
We do not have any material dependence on a single or few suppliers. While we have a wide client base, we derive a substantial portion of our revenue from our promoter Tata Motors Limited and its subsidiaries, including Jaguar Land Rover and from VinFast., see "Risk Factors 2. We continue to derive a material portion of our revenues from our top 5 clients by revenue generated in each of the six-months period ended September 30, 2023 and September 30, 2022 and for Fiscals 2023, 2022 and
2021 ("Top 5 Clients") which include Tata Motors Limited (our Promoter) and certain of its subsidiaries (other than Jaguar Land Rover Limited) (collectively, "Tata Motors") and Jaguar Land Rover Limited (and certain other subsidiaries of Jaguar Land Rover Automotive PLC) (collectively, "JLR", and together with Tata Motors, the "Anchor Clients"). If any or all of our
Top 5 Clients were to suffer a deterioration of their business, cease doing business with us or substantially reduce their dealings with us, our revenues could decline, which may have a material adverse effect on our business, results of operations, cash flows and financial condition." and "Risk Factors 32. We derive a material portion of our revenues from our Anchor Clients, who are related parties. Any deterioration in our relationship with our Anchor Clients may adversely affect our business, financial condition and results of operations." on pages 34 and 56, respectively.
Competitive Conditions
For information on our competitive conditions and our competitors, see "Risk Factors", "Industry Overview" and "Our Business" beginning on pages 34, 156 and 180, respectively.
Significant Developments Subsequent to September 30, 2023
Except as set out elsewhere in this Red Herring Prospectus, no developments have come to our attention since the date of the Restated Consolidated Financial Information as disclosed in this Red Herring Prospectus which materially and adversely affect or are likely to materially and adversely affect our operations or profitability, or the value of our assets or our ability to pay our material liabilities within the next twelve months.
2024, IIFL Securities Ltd. All Rights Reserved
Follow us on
ATTENTION INVESTORS
- Prevent Unauthorized Transactions in your demat / trading account Update your Mobile Number/ email Id with your stock broker / Depository Participant. Receive information of your transactions directly from Exchanges on your mobile / email at the end of day and alerts on your registered mobile for all debits and other important transactions in your demat account directly from NSDL/ CDSL on the same day." - Issued in the interest of investors.
- KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
- No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."
www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.
Risk Disclosure on Derivatives
- 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
- On an average, loss makers registered net trading loss close to Rs. 50,000.
- Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
- Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.
Copyright © IIFL Securities Ltd. All rights Reserved.
Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213, IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
We are ISO 27001:2013 Certified.
This certificate demonstrates that IIFL as an organization has defined and put in place best-practice information security processes.
IIFL Securities Support Whatsapp Number
+91-9892691696
+91-9892691696Download The App Now
MARKET
MUTUAL FUNDS
TRADING DOCUMENTATION
CALCULATOR
2024, IIFL Securities Ltd. All Rights Reserved
Follow us on
ATTENTION INVESTORS
- Prevent Unauthorized Transactions in your demat / trading account Update your Mobile Number/ email Id with your stock broker / Depository Participant. Receive information of your transactions directly from Exchanges on your mobile / email at the end of day and alerts on your registered mobile for all debits and other important transactions in your demat account directly from NSDL/ CDSL on the same day." - Issued in the interest of investors.
- KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
- No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."
www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.
Risk Disclosure on Derivatives
- 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
- On an average, loss makers registered net trading loss close to Rs. 50,000.
- Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
- Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.
Copyright © IIFL Securities Ltd. All rights Reserved.
Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213, IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
We are ISO 27001:2013 Certified.
This certificate demonstrates that IIFL as an organization has defined and put in place best-practice information security processes.