| our expectations as to future revenue, margins, expenses and capital requirements; | |
| our expectations regarding the outcome of on-going legal proceedings and disputes with Indian tax authorities and the impact of such proceedings and disputes on our liquidity, results of operations, financial condition and cash flows; | |
| our exposure to market risks, including the effect of foreign currency exchange rates and interest rates on our financial results; | |
| the future impact of our acquisitions; | |
| projections that our cash and cash equivalents along with cash generated from operations will be sufficient to meet certain of our obligations; and | |
| the effect of future tax laws on our business. |
2
3
As of June 30, | As of March 31, | |||||||||||||||
Notes | 2009 | 2009 | 2009 | |||||||||||||
Convenience | ||||||||||||||||
Translation into | ||||||||||||||||
US $ | ||||||||||||||||
ASSETS |
||||||||||||||||
Goodwill |
5 | 54,242 | 1,136 | 56,143 | ||||||||||||
Intangible assets |
5 | 3,340 | 70 | 3,493 | ||||||||||||
Property, plant and equipment |
4 | 49,492 | 1,037 | 49,794 | ||||||||||||
Investment in equity accounted investees |
16 | 1,751 | 37 | 1,670 | ||||||||||||
Net deferred tax assets |
18 | 3,069 | 64 | 3,895 | ||||||||||||
Other non-current assets |
11 | 7,196 | 150 | 7,323 | ||||||||||||
Total non-current assets |
119,090 | 2,494 | 122,318 | |||||||||||||
Inventories |
9 | 6,791 | 142 | 7,586 | ||||||||||||
Trade receivables |
8 | 42,724 | 895 | 48,612 | ||||||||||||
Other current assets |
11 | 13,128 | 275 | 16,027 | ||||||||||||
Unbilled revenues |
15,797 | 331 | 14,108 | |||||||||||||
Available for sale investments |
7 | 38,842 | 814 | 16,543 | ||||||||||||
Current tax assets |
11,139 | 233 | 9,825 | |||||||||||||
Cash and cash equivalents |
10 | 36,512 | 765 | 49,117 | ||||||||||||
Total current assets |
164,933 | 3,455 | 161,818 | |||||||||||||
TOTAL ASSETS |
284,023 | 5,949 | 284,136 | |||||||||||||
EQUITY |
||||||||||||||||
Share capital |
2,931 | 61 | 2,930 | |||||||||||||
Share premium |
27,687 | 580 | 27,280 | |||||||||||||
Retained earnings |
136,750 | 2,864 | 126,646 | |||||||||||||
Share based payment reserve |
3,697 | 77 | 3,745 | |||||||||||||
Other components of equity |
(10,322 | ) | (216 | ) | (12,915 | ) | ||||||||||
Shares held by controlled trust |
(542 | ) | (11 | ) | (542 | ) | ||||||||||
Equity attributable to the equity holders of the Company |
160,201 | 3,356 | 147,144 | |||||||||||||
Minority interest |
266 | 6 | 237 | |||||||||||||
Total equity |
160,467 | 3,361 | 147,381 | |||||||||||||
LIABILITIES |
||||||||||||||||
Loans and borrowings |
12 | 19,133 | 401 | 19,681 | ||||||||||||
Employee benefit obligations |
22 | 3,182 | 67 | 3,111 | ||||||||||||
Derivative liabilities |
15 | 6,592 | 138 | 8,767 | ||||||||||||
Other non-current liabilities |
14 | 1,533 | 32 | 1,668 | ||||||||||||
Total non-current liabilities |
30,440 | 638 | 33,227 | |||||||||||||
Loans and borrowings and bank overdrafts |
12 | 28,853 | 604 | 37,211 | ||||||||||||
Trade payables and accrued expenses |
13 | 34,595 | 725 | 35,768 | ||||||||||||
Unearned revenues |
5,199 | 109 | 6,734 | |||||||||||||
Current tax liabilities |
7,118 | 149 | 6,492 | |||||||||||||
Derivative liabilities |
15 | 2,724 | 57 | 3,255 | ||||||||||||
Other current liabilities |
14 | 14,627 | 306 | 14,068 | ||||||||||||
Total current liabilities |
93,116 | 1,950 | 103,528 | |||||||||||||
TOTAL LIABILITIES |
123,556 | 2,588 | 136,755 | |||||||||||||
TOTAL EQUITY AND LIABILITIES |
284,023 | 5,949 | 284,136 | |||||||||||||
5
Three months ended June 30, | ||||||||||||||||
Notes | 2009 | 2009 | 2008 | |||||||||||||
Convenience | ||||||||||||||||
Translation into | ||||||||||||||||
US $ | ||||||||||||||||
Revenues |
63,868 | 1,337 | 60,416 | |||||||||||||
Cost of revenues |
(43,247 | ) | (906 | ) | (42,301 | ) | ||||||||||
Gross profit |
20,621 | 432 | 18,115 | |||||||||||||
Selling and marketing expenses |
(4,239 | ) | (89 | ) | (4,210 | ) | ||||||||||
General and administrative expenses |
(3,552 | ) | (74 | ) | (3,228 | ) | ||||||||||
Foreign exchange gains/(losses), net |
(1,406 | ) | (29 | ) | (697 | ) | ||||||||||
Results from operating activities |
11,424 | 239 | 9,980 | |||||||||||||
Finance and
other income/(expense), net |
19 | 355 | 7 | 316 | ||||||||||||
Share of profits of equity accounted investees |
16 | 114 | 2 | 107 | ||||||||||||
Profit before tax |
11,893 | 249 | 10,403 | |||||||||||||
Income tax expense |
18 | (1,740 | ) | (36 | ) | (1,443 | ) | |||||||||
Profit for the period |
10,153 | 213 | 8,960 | |||||||||||||
Attributable to: |
||||||||||||||||
Equity holders of the Company |
10,104 | 212 | 8,948 | |||||||||||||
Minority interest |
49 | 1 | 12 | |||||||||||||
Profit for the period |
10,153 | 213 | 8,960 | |||||||||||||
Earnings per equity share: |
20 | |||||||||||||||
Basic |
6.94 | 0.15 | 6.16 | |||||||||||||
Diluted |
6.89 | 0.14 | 6.11 | |||||||||||||
Weighted average number of equity shares used in
computing earnings per equity share |
||||||||||||||||
Basic |
1,456,161,032 | 1,456,161,032 | 1,452,636,163 | |||||||||||||
Diluted |
1,466,002,776 | 1,466,002,776 | 1,463,804,903 |
6
Three months ended June 30, | ||||||||||||||||
Notes | 2009 | 2009 | 2008 | |||||||||||||
Convenience | ||||||||||||||||
Translation into | ||||||||||||||||
US $ | ||||||||||||||||
Profit for the period |
10,153 | 213 | 8,960 | |||||||||||||
Other comprehensive income, net of taxes: |
||||||||||||||||
Foreign currency translation differences |
17 | (169 | ) | (4 | ) | 186 | ||||||||||
Effective portion of changes in fair value of cash flow hedges |
15 | 2,538 | 53 | (7,219 | ) | |||||||||||
Net changes in fair value of available for sale investments |
7 | 204 | 4 | 11 | ||||||||||||
Total other comprehensive income, net of taxes |
2,573 | 54 | (7,022 | ) | ||||||||||||
Total comprehensive income |
12,726 | 267 | 1,938 | |||||||||||||
Attributable to: |
||||||||||||||||
Equity holders of the Company |
12,697 | 266 | 1,922 | |||||||||||||
Minority interest |
29 | 1 | 16 | |||||||||||||
12,726 | 267 | 1,938 | ||||||||||||||
7
Attributable to equity holders of the Company | ||||||||||||||||||||||||||||||||||||||||||||||||
Other components of equity | Equity | |||||||||||||||||||||||||||||||||||||||||||||||
Share | Foreign | Share held | attributable | |||||||||||||||||||||||||||||||||||||||||||||
based | currency | Cash flow | by | to the equity | ||||||||||||||||||||||||||||||||||||||||||||
Share | Share | Retained | payment | translation | hedging | Other | controlled | holders of the | Minority | Total | ||||||||||||||||||||||||||||||||||||||
No. of shares | capital | premium | earnings | reserve | reserve | reserve | reserve | Trust | Company | interest | equity | |||||||||||||||||||||||||||||||||||||
As at April 1, 2008 |
1,461,453,320 | 2,923 | 25,373 | 94,728 | 3,148 | (10 | ) | (1,097 | ) | 404 | | 125,469 | 116 | 125,585 | ||||||||||||||||||||||||||||||||||
Issue of equity shares on exercise of options |
555,182 | 1 | 258 | (192 | ) | 67 | | 67 | ||||||||||||||||||||||||||||||||||||||||
Profit for the period |
8,948 | 8,948 | 12 | 8,960 | ||||||||||||||||||||||||||||||||||||||||||||
Other Comprehensive Income |
182 | (7,219 | ) | 11 | (7,026 | ) | 4 | (7,022 | ) | |||||||||||||||||||||||||||||||||||||||
Compensation
cost related to employee share based payment |
588 | 588 | | 588 | ||||||||||||||||||||||||||||||||||||||||||||
As at June 30, 2008 |
1,462,008,502 | 2,924 | 25,631 | 103,676 | 3,544 | 172 | (8,316 | ) | 415 | | 128,046 | 132 | 128,178 | |||||||||||||||||||||||||||||||||||
As at April 1, 2009 |
1,464,980,746 | 2,930 | 27,280 | 126,646 | 3,745 | 797 | (13,797 | ) | 85 | (542 | ) | 147,144 | 237 | 147,381 | ||||||||||||||||||||||||||||||||||
Issue of equity shares on exercise of options |
677,140 | 1 | 407 | (407 | ) | 1 | | 1 | ||||||||||||||||||||||||||||||||||||||||
Profit for the period |
10,104 | 10,104 | 49 | 10,153 | ||||||||||||||||||||||||||||||||||||||||||||
Other Comprehensive Income |
(149 | ) | 2,538 | 204 | 2,593 | (20 | ) | 2,573 | ||||||||||||||||||||||||||||||||||||||||
Compensation
cost related to employee share based payment |
359 | 359 | | 359 | ||||||||||||||||||||||||||||||||||||||||||||
As at June 30, 2009 |
1,465,657,886 | 2,931 | 27,687 | 136,750 | 3,697 | 648 | (11,259 | ) | 289 | (542 | ) | 160,201 | 266 | 160,467 | ||||||||||||||||||||||||||||||||||
Convenience translation into US $ |
61 | 580 | 2,864 | 77 | 14 | (236 | ) | 6 | (11 | ) | 3,356 | 6 | 3,361 |
8
Three month ended June 30, | ||||||||||||
2009 | 2009 | 2008 | ||||||||||
Convenience | ||||||||||||
translation into | ||||||||||||
US$ | ||||||||||||
Cash flows from operating activities: |
||||||||||||
Profit for the period |
10,104 | 212 | 8,948 | |||||||||
Adjustments to reconcile profit for the period to net cash provided by
operating activities: |
||||||||||||
Gain on sale of property, plant and equipment |
(6 | ) | | (5 | ) | |||||||
Depreciation and amortization |
1,868 | 39 | 1,569 | |||||||||
Unrealized exchange (gain) / loss |
(542 | ) | (11 | ) | 1,149 | |||||||
Deferred cancellation (gain) / loss relating to roll-over hedging |
325 | 7 | (452 | ) | ||||||||
Realized losses transferred from cash flow hedging reserve |
663 | 14 | | |||||||||
Loss / (gain) on sale of available for sale financial investments |
6 | | (142 | ) | ||||||||
Share based compensation |
359 | 8 | 588 | |||||||||
Income tax expense |
1,740 | 36 | 1,443 | |||||||||
Share of profits of equity accounted investees |
(114 | ) | (2 | ) | (107 | ) | ||||||
Minority interest |
49 | 1 | 12 | |||||||||
Finance (income)/expenses, net |
(439 | ) | (9 | ) | (174 | ) | ||||||
Changes in operating assets and liabilities: |
||||||||||||
Trade and other receivable |
5,166 | 108 | (2,004 | ) | ||||||||
Unbilled revenues |
(1,689 | ) | (35 | ) | (3,379 | ) | ||||||
Inventories |
795 | 17 | (1,096 | ) | ||||||||
Other assets |
1,697 | 36 | (2,030 | ) | ||||||||
Trade payables and accrued expenses |
(408 | ) | (9 | ) | 3,681 | |||||||
Unearned revenues |
(1,535 | ) | (32 | ) | 440 | |||||||
Other liabilities |
756 | 16 | 33 | |||||||||
Cash provided by operating activities before taxes |
18,795 | 394 | 8,474 | |||||||||
Income taxes (paid) / refund, net |
(2,201 | ) | (46 | ) | 1,358 | |||||||
Net cash generated by operating activities |
16,594 | 348 | 9,832 | |||||||||
Cash flows from investing activities: |
||||||||||||
Expenditure on property, plant and equipment and intangible assets |
(2,522 | ) | (53 | ) | (4,208 | ) | ||||||
Proceeds from sale of property, plant and equipment |
64 | 1 | 91 | |||||||||
Purchase of available for sale investments |
(93,943 | ) | (1,968 | ) | (131,096 | ) | ||||||
Proceeds from sale of available for sale investments |
71,878 | 1,506 | 99,912 | |||||||||
(Investment in) / refund of inter-corporate deposits, net |
2,250 | 47 | (250 | ) | ||||||||
Payment for business acquisitions, net of cash acquired |
| | (81 | ) | ||||||||
Interest received |
445 | 9 | 344 | |||||||||
Dividend received |
260 | 5 | 574 | |||||||||
Net cash used in investing activities |
(21,568 | ) | (452 | ) | (34,714 | ) | ||||||
Cash flows from financing activities: |
||||||||||||
Proceeds from issuance of equity shares |
1 | | 27 | |||||||||
Share application money pending allotment |
| | 23 | |||||||||
Proceeds from / (repayment of) short-term loans and borrowings, net |
(6,491 | ) | (136 | ) | 4,238 | |||||||
Repayment of long-term loans and borrowings |
(153 | ) | (3 | ) | (123 | ) | ||||||
Proceeds from long-term loans and borrowings |
124 | 3 | 170 | |||||||||
Interest paid on loans and borrowings |
(397 | ) | (8 | ) | (775 | ) | ||||||
Net cash provided by / (used in) financing activities |
(6,916 | ) | (145 | ) | 3,560 | |||||||
Net decrease in cash and cash equivalents during the period |
(11,890 | ) | (249 | ) | (21,322 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents |
(118 | ) | (2 | ) | 405 | |||||||
Cash and cash equivalents at the beginning of the period |
48,232 | 1,010 | 38,912 | |||||||||
Cash and cash equivalents at the end of the period (Note 10) |
36,224 | 759 | 17.995 | |||||||||
9
1. | The Company overview: | |
Wipro Limited (Wipro or the Parent Company); together with its subsidiaries and equity accounted investees (collectively, the Company or the Group) is a leading India based provider of IT Services, including Business Process Outsourcing (BPO) services, globally. Further, Wipro has other businesses such as IT Products, Consumer Care and Lighting and Infrastructure engineering. | ||
Wipro is a public limited company incorporated and domiciled in India. The address of its registered office is Wipro Limited, Doddakannelli, Sarjapur Road, Bangalore 560 035, Karnataka, India. Wipro has its primary listing with Bombay Stock Exchange and National Stock exchange in India. The Companys American Depositary Shares representing equity shares are also listed on the New York Stock Exchange. These condensed consolidated interim financial statements were authorized for issue by Audit Committee on August 17, 2009. | ||
2. | Basis of preparation of financial statements |
(i) | Statement of compliance: | ||
The condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards and its interpretations (IFRS), as issued by the International Accounting Standards Board (IASB). | |||
(ii) | Basis of preparation | ||
These condensed consolidated interim financial statements are covered by IFRS 1, First time adoption of IFRS, as they are part of the period covered by the Companys first IFRS financial statements for the year ending March 31, 2010 and are prepared in accordance with International Accounting Standard (IAS) 34, Interim financial reporting. | |||
The condensed consolidated interim statement of financial position corresponds to the classification provisions contained in IAS 1(revised), Presentation of financial statements. For clarity, various items are aggregated in the statements of income and statements of financial position. These items are disaggregated separately in the Notes, where applicable. | |||
Until the adoption of IFRS, the financial statements included in our Annual Report on Form 20-F and Quarterly Reports on Form 6-K were prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). However, the transition to IFRS has been carried out from the accounting principles generally accepted in India (Indian GAAP) which is considered as Previous GAAP, for purposes of IFRS 1. An explanation of the effect of the transition from Previous GAAP to IFRS on the Companys equity and profit is provided in Note 3 (xviii). In addition, a reconciliation of the Companys equity and profit under Previous GAAP and U.S GAAP is provided in Note 25. | |||
The preparation of these condensed consolidated financial statements resulted in changes to the Companys accounting policies as compared to most recent annual financial statements prepared under Previous GAAP. Accounting policies have been applied consistently to all periods presented in the condensed consolidated interim financial statements. They have also been applied in preparing the IFRS opening statement of financial position as at April 1, 2008 for the purpose of the transition to IFRS and as required by IFRS 1. These accounting policies have been applied consistently by all entities within the Group. | |||
(iii) | Basis of measurement | ||
The condensed consolidated interim financial statements have been prepared on a historical cost convention and on an accrual basis, except for certain financial instruments that have been measured at fair value as required by relevant IFRS. | |||
(iv) | Convenience translation | ||
The accompanying condensed consolidated interim financial statements have been prepared and reported in Indian rupees, the national currency of India. Solely for the convenience of the readers, the condensed consolidated financial statements as of and for the quarter ended June 30, 2009, have been translated into United States dollars at the certified foreign exchange rate of $ 1 = Rs. 47.74, as published by Federal Reserve |
10
Board of New York on June 30, 2009. No representation is made that the Indian rupee amounts have been, could have been or could be converted into United States dollars at such a rate or any other rate. | |||
(v) | Use of estimates and judgment | ||
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from those estimates. | |||
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future period affected. In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amount recognized in the condensed consolidated financial statements is included in the following notes: |
a) | Revenue recognition: The Company uses the input (cost expended) method to measure progress towards completion. Percentage of completion method accounting relies on estimates of total expected contract revenue and costs. This method is followed when reasonably dependable estimates of the revenues and costs applicable to various elements of the contract can be made. Key factors that are reviewed in estimating the future costs to complete include estimates of future labor costs and productivity efficiencies. Because the financial reporting of these contracts depends on estimates that are assessed continually during the term of these contracts, recognized revenue and profit are subject to revisions as the contract progresses to completion. When estimates indicate that a loss will be incurred, the loss is provided for in the period in which the loss becomes evident. To date, the Company has not incurred a material loss on any fixed-price and fixed-timeframe contract. | ||
b) | Goodwill: Goodwill is tested for impairment at least annually and when events occur or changes in circumstances indicate that the recoverable amount of the cash generating unit is less than its carrying value. The recoverable amount of cash generating units has been determined based on the value-in-use calculations. The calculation involves use of significant estimates and assumptions which includes revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rate, future economic and market conditions. | ||
c) | Income taxes: The major tax jurisdictions for the Company are India and the U.S. Significant judgments are involved in determining the provision for income taxes including judgment on whether tax positions are probable of being sustained in tax assessments. A tax assessment can involve complex issues, which can only be resolved over extended time periods. Though the Company considers all these issues in estimating income taxes, there could be an unfavorable resolution of such issues. | ||
d) | Other estimates: The preparation of financial statements involves estimates and assumptions that affect the reported amount of assets, liabilities, disclosure of contingent liabilities at the date of financial statements and the reported amount of revenues and expenses for the reporting period. Specifically, the Company estimates the uncollectability of accounts receivable by analyzing historical payment patterns, customer concentrations, customer credit-worthiness and current economic trends. If the financial condition of a customer deteriorates, additional allowances may be required. | ||
Similarly, the Company provides for inventory obsolescence, excess inventory and inventories with carrying values in excess of net realizable value based on assessment of the future demands, market conditions and specific inventory management initiatives. If market conditions and actual demands are less favorable than our estimates, additional inventory write-downs may be required. In all cases inventory is carried at the lower of historical cost and net realizable value. The company estimates stock option forfeitures while accounting for amortization of stock compensation expense. |
3. | SIGNIFICANT ACCOUNTING POLICIES: |
(i) | Basis of consolidation: | ||
Subsidiaries | |||
The condensed consolidated interim financial statements incorporate the financial statements of the Parent Company and entities controlled by the Parent Company (its subsidiaries). Control is achieved where a company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that currently are exercisable are taken into account. |
11
All intra-company balances, transactions, income and expenses including unrealized income or expenses are eliminated in full on consolidation. | |||
Equity accounted investees | |||
Equity accounted investees are entities in respect of which the Company has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Company holds between 20 and 50 percent of the voting power of another entity. Investments in such entities are accounted for using the equity method (equity accounted investees) and are initially recognized at cost. | |||
(ii) | Functional and presentation currency: | ||
Items included in the condensed consolidated financial statements of each of the Companys subsidiaries and equity accounted investees are measured using the currency of the primary economic environment in which those entities operate (the functional currency). The condensed consolidated financial statements are presented in Indian Rupee, the national currency of India, which is the functional currency of Wipro Limited and its domestic subsidiaries and equity accounted investees. | |||
(iii) | Foreign currency transactions and translation: |
a) | Transactions in foreign currency | ||
Transactions in foreign currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the exchange rates prevailing at reporting date of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of income. Gains/losses relating to translation or settlement of debt denominated in foreign currency is reported in finance income / (expense), net. | |||
b) | Foreign operations | ||
For the purpose of presenting condensed consolidated financial statements, the assets and liabilities of the Companys foreign operations that have local functional currency are translated into Indian Rupee using exchange rates prevailing at the reporting date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are recorded in equity as part of the Companys foreign currency translation reserve (FCTR). Such exchange differences are recognized in statement of income in the period in which such foreign operation is disposed. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the exchange rate prevailing at the reporting date. | |||
c) | Others | ||
Foreign currency differences arising on the translation or settlement of a financial liability designated and effective as a hedge of a net investment in a foreign operation is recognized directly in equity in the FCTR. The amount recognized in equity is transferred to the statement of income, as an adjustment to the profit or loss upon disposal of the related foreign operation. Foreign currency differences arising from translation of intercompany receivables or payables relating to foreign operations, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of net investment in foreign operation and are recognized directly in equity in the FCTR. |
(iv) | Financial Instruments |
a) | Non-derivative financial instruments | ||
Non derivative financial instruments consist of: |
| financial assets, which include cash and cash equivalents, trade receivables, unbilled revenues, finance lease receivables, employee and other advances, investments in equity and debt securities and other current and non-current assets; | ||
| financial liabilities, which include long and short-term loans and borrowings, bank overdrafts, trade payable, other current liabilities and non-current liabilities. |
Non derivative financial instruments are recognized initially at fair value including any directly attributable transaction costs. Financial assets are derecognized when all of the risks and rewards of ownership have been transferred. |
12
Subsequent to initial recognition, non derivative financial instruments are measured as described below: |
b) | Derivative financial instruments |
(v) | Equity and share capital |
a) | Share capital and share premium | ||
The Company has only one class of equity shares. The authorized share capital of the Company is 1,650,000,000 equity shares, par value Rs. 2 per share. Par value of the equity shares is recorded as share capital and the amount received in excess of par value is classified as share premium. Every holder of equity shares, as reflected in the records of the Company as on the date of the shareholder meeting shall have one vote in respect of each share held for all matters submitted to vote in the shareholder meeting. |
13
b) | Shares held by controlled trust (Treasury shares): | ||
The Companys equity shares held by the controlled trust is classified as Treasury Shares, and deducted from shareholders equity. The Company has 8,930,563 treasury shares as of June 30, 2009 and 7,961,760 treasury shares of June 30, 2008. Treasury shares are recorded at acquisition cost. | |||
c) | Retained Earnings | ||
Retained earnings comprises the Companys undistributed profit after taxes. A portion of this balance amounting to Rs. 1,144 is not freely available for distribution. | |||
d) | Share based payment reserve | ||
The share based payment reserve is used to record the value of equity-settled share based payments provided to employees. The amounts recorded in share based payment reserve are transferred to share premium upon exercise of stock options by employees. | |||
e) | Cash flow hedging reserve | ||
Changes in fair value of derivative hedging instruments designated and effective as cash flow hedges are recognized in equity (net of taxes) in the cash flow hedging reserve. | |||
f) | Foreign currency translation reserve | ||
The exchange difference arising from the translation of financial statements of foreign subsidiaries and changes in fair value of hedging instruments designated and effective as hedge of net investment in foreign operations (net of taxes) is recognized in equity in the FCTR. | |||
g) | Other reserve | ||
The Company records the changes in the fair value of available for sale financial assets in other reserves (net of taxes). |
(vi) | Property, plant and equipment: |
a) | Recognition and measurement | ||
Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses, if any. Cost includes expenditures directly attributable to the acquisition of the asset. Borrowing costs directly attributable to the construction or production of a qualifying asset are capitalized as part of the cost. | |||
b) | Depreciation | ||
The Company depreciates property, plant and equipment over the estimated useful life on a straight-line basis from the date the assets are available for use. Assets acquired under finance lease and leasehold improvements are amortized over the shorter of estimated useful life or the related lease term. The estimated useful lives of assets are as follows: |
Category | Useful life | ||
Buildings
|
30 to 60 | years | |
Plant and machinery
|
2 to 21 | years | |
Computer equipment and software
|
2 to 6 | years | |
Furniture, fixtures and equipment
|
3 to 10 | years | |
Vehicles
|
4 | years |
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. | |||
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 capital work- in-progress. |
(vii) | Business combination, Goodwill and Intangible assets: | ||
Business combinations post Transition date are accounted for using the purchase method. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at fair values at the date of acquisition. Contingent consideration is recorded when it is probable that such consideration would be paid and can be measured reliably. |
a) | Goodwill |
14
The excess of the cost of acquisition over the Companys share in the fair value of the acquirees identifiable assets, liabilities and contingent liabilities is recognized as goodwill. If the cost of acquisition is less than the fair value of the acquirees identifiable assets, liabilities and contingent liabilities, the difference is recognized immediately in the statement of income. | |||
b) | Intangible assets | ||
Intangible assets acquired separately are measured at cost of acquisition. Intangible assets acquired in a business combination are measured at fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and impairment losses, if any. | |||
The amortization of an intangible asset with a finite useful life reflects the manner in which the economic benefit is expected to be generated and consumed. | |||
The estimated useful lives of the amortizable intangibles assets are as follows: |
Category | Useful life | |
Customer-related intangibles
|
2 - 5 years | |
Marketing related intangibles
|
20 to 30 years |
(viii) | Leases |
a) | Arrangements where the Company is the lessee | ||
Leases of property, plant and equipment, where the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the lower of the fair value of the leased property and the present value of the minimum lease payments. | |||
Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. Payments made under operating leases are recognized in statement of income on a straight-line basis over the lease term. | |||
b) | Arrangements where the Company is the lessor | ||
In certain arrangements the Company recognizes revenue from sale of equipment given under finance leases. The Company records gross finance receivables, unearned income and the estimated residual value of the leased equipment on consummation of such lease. Unearned income represents the excess of the gross finance lease receivable plus the estimated residual value over the sales price of the equipment. The Company recognises unearned income as financing revenue over the lease term using effective interest method. |
(ix) | Inventories | ||
Inventories are valued at lower of cost and net realizable value, including necessary provision for obsolescence. Cost is determined using the weighted average method. | |||
(x) | Impairment |
a) | Financial assets: | ||
The Company assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. If any such indication exists, the Company estimates the amount of impairment loss. |
b) | Non financial assets |
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The Company assesses long-lived assets, such as property, plant, equipment and acquired intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. At each reporting date the Company determines whether there are any indicators of impairment. If any such indication exists, the Company estimates the recoverable amount of the asset. If the recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of income. If at the reporting date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the impairment losses previously recognized are reversed such that the asset is recognized at its recoverable amount but not exceeding written down value which would have been reported if the impairment losses had not been recognized initially. | |||
c) | Goodwill | ||
Goodwill is tested for impairment at least annually at the same time when events occur or changes in circumstances indicate that the recoverable amount of the cash generating unit is less than its carrying value. The goodwill impairment test is performed at the level of cash-generating unit or groups of cash-generating units which represent the lowest level at which goodwill is monitored for internal management purposes. |
(xi) | Employee Benefit |
a) | Post-employment and pension plans | ||
The Group 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, the 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 expenditures for defined contribution plans are recognized as expenses during the period when the employee provides service. Under a defined benefit plan, it is the Companys obligation to provide agreed benefits to the employees. The related actuarial and investment risks fall on the Company. The present value of the defined benefit obligations is calculated using the projected unit credit method. | |||
The company has the following employee benefit plans: |
b) | Termination benefits | ||
Termination benefits are recognized as an expense when the Company is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to terminate employment before the normal retirement date, or to provide termination benefit as a result of an offer made to encourage voluntary redundency. | |||
c) | Short-term benefits |
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Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. | |||
d) | Compensated absences | ||
The employees of the Company are entitled to compensated absences. The employees can carry forward a portion of the unutilised accumulating compensated absences and utilise it in future periods or receive cash at retirement or termination of employment. The Company records an obligation for compensated absences in the period in which the employee renders the services that increases this entitlement. The Company measures the expected cost of compensated absences as the additional amount that the Company expects to pay as a result of the unused entitlement that has accumulated at the end of the reporting period. The Company recognizes accumulated compensated absences based on actuarial valuation. | |||
Non-accumulating compensated absences are recognized in the period in which the absences occur. |
(xii) | Share based payment transaction: | ||
Employees of the Company receive remuneration in the form of equity instruments, for rendering services over a defined vesting period. Equity instruments granted is measured by reference to the fair value of the instrument at the date of grant. In cases, where equity instruments are granted at a nominal exercise price, the intrinsic value on the date of grant approximates the fair value. The expense is recorded by a corresponding increase to the share based payment reserve, a component of equity. | |||
The equity instruments generally vest in a graded manner over the vesting period. The fair value determined at the grant date is expensed over the vesting period of the respective tranches of such grants (accelerated amortization). The stock compensation expense is determined based on the Companys estimate of equity instruments that will eventually vest. | |||
(xiii) | Provisions | ||
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. | |||
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. | |||
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. | |||
(xiv) | Revenue: | ||
The Company derives revenue primarily from software development and related services, BPO services, sale of IT and other products. |
a) | Services: |
17
b) | Products | ||
Revenue from products are recognized when the significant risks and rewards of ownership have transferred to the buyer, continuing managerial involvement usually associated with ownership and effective control have ceased, the amount of revenue can be measured reliably, it is probable that economic benefits associated with the transaction will flow to the Company and the costs incurred or to be incurred in respect of the transaction can be measured reliably. | |||
c) | Multiple element arrangements | ||
Revenue from contracts with multiple-element arrangements are recognized using the guidance in IAS 18, Revenue. The Company allocates the arrangement consideration to separately identifiable components based on the relative fair values. | |||
d) | Others | ||
The Company accounts for volume discounts and pricing incentives to customers by reducing the amount of discount from the amount of revenue recognized at the time of sale. | |||
Revenues are shown net of sales tax, value added tax, service tax and applicable discounts and allowances. Revenue includes excise duty and shipping and handling costs. | |||
The Company accrues the estimated cost of warranties at the time when the revenue is recognized. The accruals are based on the Companys historical experience of material usage and service delivery costs. |
(xv) | Finance income/(expense), net: |
a) | Finance income | ||
Finance income comprises interest income on deposits, dividend income, and gains on the disposal of available-for-sale financial assets. Interest income is recognized using the effective interest method. Dividend income is recognized when the right to receive payment is established. | |||
b) | Finance expense | ||
Finance expense comprise interest expense on borrowings, unwinding of discount of provisions, impairment losses recognized on financial assets and changes in fair value and gain / losses on settlement of derivatives relating to borrowings. | |||
Borrowing costs are recognized in the statement of income using the effective interest method. |
(xvi) | Income tax: | ||
Income tax comprises current and deferred tax. Income tax expense is recognized in statements of income except to the extent it relates to items directly recognized in equity, in which case it is recognized in equity. |
a) | 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 amount are those that are enacted or substantively enacted by the reporting date and applicable for the period. The 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. | |||
b) | Deferred income tax |
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Deferred income tax is recognized using the balance sheet approach. Deferred income tax assets and liabilities are recognized for all deductible temporary differences arising between the tax bases of assets and liabilities and their carrying amount in 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 transaction. | |||
Deferred income tax asset in respect of carry forward of unused tax credits and unused tax losses are recognized to the extent that 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. | |||
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. |
(xvii) | Earnings per share | ||
Basic earnings per share is computed using the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed using the weighted-average number of equity and dilutive equivalent shares outstanding during the period, using the treasury share method for options and warrants, except where the results would be anti-dilutive. | |||
(xviii) | Transition to IFRS: | ||
As stated in Note 2 (ii), the Companys consolidated financial statements for the year ending March 31, 2010 will be the first annual consolidated financial statements prepared in compliance with IFRS. All interim financial statements during the year ending March 31, 2010 will also be prepared in compliance with IFRS. | |||
The adoption of IFRS was carried out in accordance with IFRS 1, using April 1, 2008 as the transition date (the Transition Date). IFRS 1requires that all IFRS standards and interpretations that are effective for the first IFRS Consolidated Financial Statements for the year ended March 31, 2010, be applied consistently and retrospectively for all fiscal years presented. | |||
Until the adoption of IFRS, the financial statements included in the Annual Reports on Form 20-F and Quarterly Reports on Form 6-K were prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) under the historical cost convention on the accrual basis. However, for the purposes of the transition, such transition was carried out from Indian GAAP, which has been considered as the Previous GAAP. | |||
All applicable IFRS have been applied consistently and retrospectively wherever required. The resulting difference between the carrying amounts of the assets and liabilities in the consolidated financial statements under both IFRS and Previous GAAP as of the Transition Date are recognized directly in equity at the Transition Date. | |||
In preparing these consolidated financial statements, the Company has availed itself of certain exemptions and exceptions in accordance with IFRS 1 as explained below: |
a) | Exemptions from retrospective application: |
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b) | Exceptions from full retrospective application |
The following reconciliations provide a quantification of the effect of the transition to IFRS from Previous GAAP in accordance with IFRS 1: |
| equity as at April 1, 2008; | ||
| equity as at June 30, 2008; | ||
| equity as at March 31, 2009; | ||
| profit for the three months ended June 30, 2008; | ||
| profit for the year ended March 31, 2009; and | ||
| explanation of material adjustments to cash flow statements. |
20
Amount as per | Effect of | |||||||||||||||
Previous | Transition to | Amount as per | Relevant Notes | |||||||||||||
Particulars | GAAP | IFRS | IFRS | for adjustments | ||||||||||||
Goodwill |
Rs. | 42,209 | Rs. | 426 | Rs. | 42,635 | 8 | |||||||||
Property, plant and equipment and intangible assets |
41,583 | (239 | ) | 41,344 | 1,2 | |||||||||||
Available for sale investments |
14,679 | 568 | 15,247 | 3 | ||||||||||||
Investment in equity accounted investees |
1,343 | | 1,343 | |||||||||||||
Inventories |
6,664 | | 6,664 | |||||||||||||
Trade receivables |
40,453 | (100 | ) | 40,353 | 4 | |||||||||||
Unbilled revenues |
8,514 | | 8,514 | |||||||||||||
Cash and cash equivalents |
39,270 | | 39,270 | |||||||||||||
Net tax assets (including deferred taxes) |
3,632 | 854 | 4,486 | 5 | ||||||||||||
Other assets |
13,980 | 1,399 | 15,379 | 2(a),4,9,10 | ||||||||||||
TOTAL ASSETS |
Rs. | 212,327 | Rs. | 2,908 | Rs. | 215,235 | ||||||||||
Share capital and share premium |
Rs. | 28,296 | Rs. | | Rs. | 28,296 | ||||||||||
Retained earnings |
87,908 | 6,820 | 94,728 | |||||||||||||
Cash flow hedging reserve |
(1,097 | ) | | (1,097 | ) | |||||||||||
Other reserves |
1,807 | 1,851 | 3,658 | 3,7,11 | ||||||||||||
Total equity (A) |
116,914 | 8,671 | 125,585 | |||||||||||||
Minority interest |
116 | (116 | ) | | 11 | |||||||||||
Loans and borrowings |
44,850 | | 44,850 | |||||||||||||
Trade
payables, accrued expenses and liabilities |
28,675 | | 28,675 | |||||||||||||
Unearned revenues |
4,269 | | 4,269 | |||||||||||||
Employee benefit obligations |
2,737 | | 2,737 | |||||||||||||
Other liabilities |
14,766 | (5,647 | ) | 9,119 | 6,8,10 | |||||||||||
Total liabilities (B) |
95,413 | (5,763 | ) | 89,650 | ||||||||||||
TOTAL LIABILITIES AND EQUITY (A)+(B) |
Rs. | 212,327 | Rs. | 2,908 | Rs. | 215,235 | ||||||||||
Notes: | ||
1) | Under IFRS, the amortization charge in respect of finite life intangible assets is recorded in proportion of economic benefits consumed during the period to the expected total economic benefits from the intangible asset. Under Previous GAAP, finite life intangible assets are amortized usually on a straight line basis over their useful life. As a result the accumulated amortization under IFRS is lower by Rs 101 as of April 1, 2008. | |
2) | Listed below are the key differences in property, plant and equipment between IFRS and Previous GAAP: | |
a) | Under IFRS, leases of land are classified as operating leases unless the title to the leasehold land is expected to be transferred to the Company at the end of the lease term. Lease rentals paid in advance and lease deposits are recognized as other assets. Under Previous GAAP, the lease rentals paid in advance and lease deposits are recognized in property, plant and equipment. Under IFRS, Rs. 645 of such payments towards lease of land has been reclassified from property, plant and equipment to other assets. This adjustment has no impact on equity. | |
b) | Difference in the basis of interest capitalization between Previous GAAP and IFRS resulted in higher interest capitalization by Rs 305 under IFRS, net of related depreciation impact. |
21
3) | Under IFRS, available for sale investments are measured at fair value at each reporting date. The changes in fair value of such investments, net of taxes, are recognized directly in equity. Under Previous GAAP, short-term investments are measured at lower of cost or fair value. Consequently, carrying value of the available for sale investments under IFRS is higher by Rs. 568 (tax effect Rs. 165). | |
4) | Under IFRS an entity is required to allocate revenue to separately identifiable components of a multiple deliverable customer arrangement. The revenue relating to these components are recognized when the appropriate revenue recognition criteria is met. Under IFRS, the Company has deferred revenues primarily relating to installation services. Under Previous GAAP, installation services are considered to be incidental / perfunctory to product delivery. Entire revenue is recognized, when the products are delivered in accordance with the contractual terms, and expected cost of installation services is also recognized. | |
Consequently, under IFRS the Company has deferred revenue of Rs. 100 and reversed Rs. 78 of cost accrued for installation services. The deferred revenues are recognized when the related installation services is performed. | ||
5) | Under IFRS, tax benefits from carry forward tax losses is recognized if it is probable that sufficient taxable profits would be available in the future to realize the tax benefits. Under Previous GAAP, deferred tax asset in respect of carry forward tax losses is recognized if it is virtually certain that sufficient future taxable income would be available in the future to realize the tax benefits. | |
Further, Previous GAAP requires an entity to follow the income statement approach for recognizing deferred taxes, while IFRS mandates the balance sheet approach in recognizing deferred taxes. As a result, net deferred tax assets under IFRS are higher by Rs. 854. | ||
6) | Under Previous GAAP, liability is recognized in respect of proposed dividend, even-though the dividend is expected to be approved by the shareholders subsequent to the reporting date. Under IFRS, liability for dividend is recognized only when it is approved by shareholders. Accordingly, provisions under IFRS is lower by Rs. 6,839. | |
7) | The Company grants share options to its employees. These share options vest in a graded manner over the vesting period. Under IFRS, each tranche of vesting is treated as a separate award and the stock compensation expense relating to that tranche is amortized over the vesting period of the underlying tranche. This results in accelerated amortization of stock compensation expense in the initial years following the grant of share options. | |
Previous GAAP permits an entity to recognize the stock compensation expense, relating to share options which vest in a graded manner, on a straight-line basis over the requisite vesting period for the entire award. However, the amount of compensation cost recognized at any date must at least equal the portion of the grant-date value of the award that is vested at that date. | ||
Accordingly, the stock compensation expense recognized under IFRS is higher by Rs. 1,332 as at April 1, 2008 in respect of the unvested awards. | ||
8) | Under IFRS, contingent consideration relating to acquisitions is recognized if it is probable that such consideration would be paid and can be measured reliably. Under Previous GAAP, contingent consideration is recognized only after the contingency is resolved and additional consideration becomes payable. As a result, under IFRS, the Company has recognized Rs 426 of contingent consideration as additional goodwill and liability. | |
9) | Under IFRS, loans and receivables are recognized at amortized cost. As a result, the carrying value of such loans and receivables under IFRS is lower by Rs. 154. | |
10) | Indian tax laws, levies Fringe benefit Tax (FBT) on all stock options exercised on or after April 1, 2007. The Company has modified share options plan to recover FBT from the employees. Under IFRS 2, Share based payment, the FBT paid to the tax authorities is recorded as a liability over the period that the employee renders services. Recovery of the FBT from the employee is accounted as a reimbursement right under IAS 37, Provisions, contingent liabilities and contingent assets, as it is virtually certain that the Company will recover the FBT from the employee. Accordingly, under IFRS, the Company has recognized the reimbursement right as a separate asset, not to exceed the FBT liability recognized at each reporting period. | |
Under Previous GAAP, FBT liability and the related FBT recovery from the employee is recorded at the time of exercise of stock option by the employee. Accordingly, under IFRS the Company has recognized Rs. 766 as |
22
provision and reimbursement right in respect of outstanding stock options. This adjustment has no impact on equity. | ||
11) | Under IFRS, minority interest is reported as a separate item within equity whereas Previous GAAP requires minority interest to be presented separately from equity. This presentation difference between IFRS and Previous GAAP has resulted in an increase in equity under IFRS by Rs. 116 as of April 1, 2008. |
23
Amount as per | Effect of | |||||||||||||||
Previous | Transition to | Amount as per | Relevant Notes | |||||||||||||
Particulars | GAAP | IFRS | IFRS | for adjustments | ||||||||||||
Goodwill |
Rs. | 44,847 | Rs. | 426 | Rs. | 45,273 | 9 | |||||||||
Property, plant and equipment and intangible assets |
44,884 | (599 | ) | 44,285 | 1,2 | |||||||||||
Available for sale investments |
46,005 | 587 | 46,592 | 3 | ||||||||||||
Investment in equity accounted investees |
1,451 | | 1,451 | |||||||||||||
Inventories |
7,760 | | 7,760 | |||||||||||||
Trade receivables |
43,042 | (144 | ) | 42,898 | 4 | |||||||||||
Unbilled revenues |
11,892 | | 11,892 | |||||||||||||
Cash and cash equivalents |
18,348 | | 18,348 | |||||||||||||
Net tax assets (including deferred taxes) |
560 | 1,859 | 2,419 | 5 | ||||||||||||
Other assets |
16,488 | 2,063 | 18,551 | 2(a),4, 10 | ||||||||||||
TOTAL ASSETS |
Rs. | 235,277 | Rs. | 4,192 | Rs. | 239,469 | ||||||||||
Share capital and share premium |
Rs. | 28,555 | Rs. | - | Rs. | 28,555 | ||||||||||
Retained earnings |
96,895 | 6,781 | 103,676 | |||||||||||||
Cash flow hedging reserve |
(9,344 | ) | 1,028 | (8,316 | ) | 7 | ||||||||||
Other reserves |
2,233 | 2,030 | 4,263 | 3,8,11 | ||||||||||||
Total equity (A) |
118,339 | 9,839 | 128,178 | |||||||||||||
Minority interest |
132 | (132 | ) | | 11 | |||||||||||
Loans and borrowings |
50,693 | | 50,693 | |||||||||||||
Trade payables, accrued expenses and liabilities |
32,987 | | 32,987 | |||||||||||||
Unearned revenues |
4,709 | | 4,709 | |||||||||||||
Employee benefit obligations |
2,629 | | 2,629 | |||||||||||||
Other liabilities |
25,788 | (5,515 | ) | 20,273 | 6,9,10 | |||||||||||
Total liabilities (B) |
116,938 | (5,647 | ) | 111,291 | ||||||||||||
TOTAL LIABILITIES AND EQUITY (A)+(B) |
Rs. | 235,277 | Rs. | 4,192 | Rs. | 239,469 | ||||||||||
Notes: | ||
1) | Under IFRS, the amortization charge in respect of finite life intangible assets is recorded in the proportion of economic benefits consumed during the period to the expected total economic benefits from the intangible asset. Under Previous GAAP, finite life intangible assets are amortized usually on a straight line basis over their useful life. As a result the accumulated amortization under IFRS is lower by Rs. 115 as of June 30, 2008. | |
2) | Listed below are the key differences in property, plant and equipment between IFRS and Previous GAAP: | |
a) | Under IFRS, leases of land are classified as operating leases unless the title to the leasehold land is expected to be transferred to the Company at the end of the lease term. Lease rentals paid in advance and lease deposits are recognized as other assets. Under Previous GAAP, the lease rentals paid in advance and lease deposits are recognized in property, plant and equipment. Under IFRS, Rs. 1,044 of such payments towards lease of land has been reclassified from property, plant and equipment to other assets. This adjustment has no impact on equity. | |
b) | Difference in the basis of interest capitalization between Previous GAAP and IFRS resulted in higher interest capitalization by Rs. 330 under IFRS, net of related depreciation impact. |
24
3) | Under IFRS, available for sale investments are measured at fair value at each reporting date. The changes in fair value of such investments, net of taxes, are recognized directly in equity. Under Previous GAAP, short-term investments are measured at lower of cost or fair value. Consequently, carrying value of the available for sale investments under IFRS is higher by Rs. 587 (tax effect Rs. 172). | |
4) | Under IFRS, an entity is required to allocate revenue to separately identifiable components of a multiple deliverable customer arrangement. The revenue relating to these components are recognized when the appropriate revenue recognition criteria is met. Under IFRS, the Company has deferred revenues relating to installation services. Under Previous GAAP, installation services are considered to be incidental / perfunctory to product delivery. Entire revenue is recognized, when the products are delivered in accordance with the contractual terms, and expected cost of installation services is also recognized. | |
Consequently, under IFRS the Company has deferred revenue of Rs. 144 and reversed Rs. 127 of cost accrued for installation services. The deferred revenues are recognized when the related installation services is performed. | ||
5) | Under IFRS, tax benefits from carry forward tax losses are recognized if it is probable that sufficient taxable profits would be available in the future to realize the tax benefits. Under Previous GAAP, deferred tax in respect of carry forward tax losses is recognized if it is virtually certain that sufficient future taxable income would be available in the future to realize the tax benefits. | |
Further, Previous GAAP requires an entity to follow the income statement approach for recognizing deferred taxes, while IFRS mandates balance sheet approach in recognizing deferred taxes. As a result, net deferred tax assets under IFRS are higher by Rs. 1,859. | ||
6) | Under Previous GAAP, liability is recognized in respect of proposed dividends, even though the dividends are expected to be approved by the shareholders subsequent to the reporting date. Under IFRS, liability for dividends is recognized only when is the dividends are approved by shareholders. Accordingly, provisions under IFRS are lower by Rs. 6,839. | |
7) | Previous GAAP requires an entity to follow the income statement approach for recognizing deferred taxes, while IFRS mandates balance sheet approach in recognizing deferred taxes. Consequently, the Company has recognized deferred tax asset of Rs. 1,028 under IFRS. | |
8) | The Company grants share options to its employees. These share options vest in a graded manner over the vesting period. Under IFRS, each tranche of vesting is treated as a separate award and the stock compensation expense relating to that tranche is amortized over the vesting period of the underlying tranche. This results in accelerated amortization of stock compensation expense in the initial years following the grant of share options. | |
Previous GAAP permits an entity to recognize the stock compensation expense, relating to share options which vest in a graded manner, on a straight-line basis over the requisite vesting period for the entire award. However, the amount of compensation cost recognized at any date must at least equal the portion of the grant-date value of the award that is vested at that date. | ||
Accordingly, the stock compensation expense recognized under IFRS is higher by Rs. 1,487 as at June 30, 2008, in respect of unvested awards. | ||
9) | Under IFRS, contingent consideration relating to acquisitions is recognized if it is probable that such consideration would be paid and can be measured reliably. Under Previous GAAP, contingent consideration is recognized only after the contingency is resolved and additional consideration becomes payable. As a result, under IFRS, the Company has recognized Rs. 426 of contingent consideration as additional goodwill and liability. | |
10) | Indian tax laws levy Fringe Benefit Tax (FBT) on all stock options exercised on or after April 1, 2007. The Company has modified share options plan to recover FBT from the employees. Under IFRS 2, Share based payment, the FBT paid to the tax authorities is recorded as a liability over the period that the employee renders services. Recovery of the FBT from the employee is accounted as a reimbursement right under IAS 37, Provisions, contingent liabilities and contingent assets, as it is virtually certain that the Company will recover the FBT from the employee. Accordingly, under IFRS, the Company has recognized the reimbursement right as a separate asset, not to exceed the FBT liability recognized at each reporting period. | |
Under Previous GAAP, FBT liability and the related FBT recovery from the employee is recorded at the time of exercise of stock option by the employee. Accordingly, under IFRS, the Company has recognized Rs. 892 |
25
as provision and reimbursement right in respect of outstanding stock options. This adjustment has no impact on equity. | ||
11) | Under IFRS, minority interest is reported as a separate item within equity, where as Previous GAAP requires minority interest to be presented separately from equity. This presentation difference between IFRS and Previous GAAP has resulted in an increase in equity under IFRS by Rs. 132 as of June 30, 2008. |
26
Amount as | Effect of | Relevant | ||||||||||||||
per Previous | Transition | Amount as | Notes for | |||||||||||||
Particulars | GAAP | to IFRS | per IFRS | adjustments | ||||||||||||
Goodwill |
Rs. | 56,521 | Rs. | (378 | ) | Rs. | 56,143 | 1,11 | ||||||||
Property, plant and equipment and intangible assets |
52,563 | 724 | 53,287 | 1,2,3 | ||||||||||||
Available for sale investments |
16,426 | 117 | 16,543 | 4 | ||||||||||||
Investment in equity accounted investees |
1,670 | | 1,670 | |||||||||||||
Inventories |
7,586 | | 7,586 | |||||||||||||
Trade receivables |
48,859 | (247 | ) | 48,612 | 5 | |||||||||||
Unbilled revenues |
14,108 | | 14,108 | |||||||||||||
Cash and cash equivalents |
49,117 | | 49,117 | |||||||||||||
Net tax assets (including deferred taxes) |
4,143 | 3,085 | 7,228 | 6 | ||||||||||||
Other assets |
21,380 | 1,969 | 23,349 | 3(a),5, 10 | ||||||||||||
TOTAL ASSETS |
Rs. | 272,373 | Rs. | 5,270 | Rs. | 277,643 | ||||||||||
Share capital and share premium (net of shares held
by controlled trust) |
Rs. | 29,668 | Rs. | | Rs. | 29,668 | ||||||||||
Retained earnings |
119,957 | 6,689 | 126,646 | |||||||||||||
Cash flow hedging reserve |
(16,150 | ) | 2,353 | (13,797 | ) | 8 | ||||||||||
Other reserves |
2,809 | 2,055 | 4,864 | 4,9,12 | ||||||||||||
Total equity (A) |
136,284 | 11,097 | 147,381 | |||||||||||||
Minority interest |
237 | (237 | ) | | 12 | |||||||||||
Loans and borrowings |
56,892 | | 56,892 | |||||||||||||
Trade payables, accrued expenses and liabilities |
42,779 | | 42,779 | |||||||||||||
Unearned revenues |
6,734 | | 6,734 | |||||||||||||
Employee benefit obligations |
3,111 | | 3,111 | |||||||||||||
Other liabilities |
26,336 | (5,590 | ) | 20,746 | 7,10,11 | |||||||||||
Total liabilities (B) |
136,089 | (5,827 | ) | 130,262 | ||||||||||||
TOTAL LIABILITIES AND EQUITY (A)+(B) |
Rs. | 272,373 | Rs. | 5,271 | Rs. | 277,643 | ||||||||||
Notes: | ||
1) | Under IFRS, all the assets and liabilities arising from a business combination are identified and recorded at fair value. Accordingly, a portion of purchase price was allocated towards customer related intangible in respect of business combination consummated subsequent to the Transition date. Under Previous GAAP, assets and liabilities arising from a business combination are recognized at carrying value in the books of the acquired entity. Internally generated intangible assets would not have been recognized by the acquired entity and therefore customer related intangible arising from the business combination is not recognized under Previous GAAP. Accordingly, goodwill under IFRS is lower by Rs. 1,139 (net of deferred taxes) and intangible assets are higher by Rs 1,535 (net of amortization of Rs 91). |
27
2) | Under IFRS, the amortization charge in respect of finite life intangible assets is recorded in the proportion of economic benefits consumed during the period to the expected total economic benefits from the intangible asset. Under Previous GAAP, finite life intangible assets are amortized usually on a straight line basis over their useful life. As a result the accumulated amortization under IFRS is lower by Rs. 149 as of March 31, 2009. | |
3) | Listed below are the key differences in property, plant and equipment between IFRS and Previous GAAP: |
a) | Under IFRS, leases of land are classified as operating leases unless the title to the leasehold land is expected to be transferred to the Company at the end of the lease term. Lease rentals paid in advance and lease deposits are recognized as other assets. Under Previous GAAP, the lease rentals paid in advance and lease deposits are recognized in property, plant and equipment. Under IFRS, Rs. 1,293 of such payments towards lease of land has been reclassified from property, plant and equipment to other assets. This adjustment has no impact on equity. | ||
b) | Difference in the basis of interest capitalization between Previous GAAP and IFRS resulted in higher interest capitalization by Rs. 331 under IFRS. |
4) | Under IFRS, available for sale investments are measured at fair value at each reporting date. The changes in fair value of such investments net of taxes, are recognized directly in equity. Under Previous GAAP, short-term investments are measured at lower of cost or fair value. Consequently, available for sale investments under IFRS is higher by Rs. 117 (tax effect Rs. 33). | |
5) | Under IFRS, an entity is required to allocate revenue to separately identifiable components of a multiple deliverable customer arrangement. The revenue relating to these components are recognized when the appropriate revenue recognition criteria is met. Under IFRS, the Company has deferred revenues primarily relating to installation services. Under Previous GAAP, installation services are considered to be incidental / perfunctory to product delivery. Entire revenue is recognized, when the products are delivered in accordance with the contractual terms, and expected cost of installation services is also recognized. | |
Consequently, under IFRS the Company has deferred revenue of Rs. 247 and reversed Rs. 195 of cost accrued for installation services. The deferred revenues are recognized when the related installation services is performed. | ||
6) | Under IFRS, tax benefits from carry forward tax losses is recognized if it is probable that sufficient taxable profits would be available in the future to realize the tax benefits. Under Previous GAAP, deferred tax asset in respect of carry forward tax losses is recognized if it is virtually certain that sufficient future taxable income would be available in the future to realize the tax benefits. | |
Further, Previous GAAP requires an entity to follow the income statement approach for recognizing deferred taxes, while IFRS mandates balance sheet approach in recognizing deferred taxes. As a result, net deferred tax assets under IFRS are higher by Rs. 3,085, including impact of foreign currency translation adjustment where necessary. | ||
7) | Under Previous GAAP, liability is recognized in respect of proposed dividends, even though the dividend is expected to be approved by the shareholders subsequent to the reporting date. Under IFRS, liability for dividends is recognized only when is the dividends are approved by shareholders. Accordingly, provisions under IFRS are lower by Rs. 6,856. | |
8) | Previous GAAP requires an entity to follow the income statement approach for recognizing deferred taxes, while IFRS mandates balance sheet approach in recognizing deferred taxes. Consequently, the Company has recognized deferred tax asset of Rs. 2,353 under IFRS. | |
9) | The Company grants share options to its employees. These share options vest in a graded manner over the vesting period. Under IFRS, each tranche of vesting is treated as a separate award and the stock compensation expense relating to that tranche is amortized over the vesting period of the underlying tranche. This results in accelerated amortization of stock compensation expense in the initial years following grant of share options. | |
Previous GAAP permits an entity to recognize the stock compensation expense, relating to share options which vest in a graded manner, on a straight-line basis over the requisite vesting period for the entire award. However, the amount of compensation cost recognized at any date must at least equal the portion of the grant-date value of the award that is vested at that date. | ||
Accordingly, the stock compensation expense recognized under IFRS is higher by Rs. 1,432 as at March 31, 2009, in respect of unvested awards. |
28
10) | Indian tax laws levy Fringe Benefit Tax (FBT) on all stock options exercised on or after April 1, 2007. The Company has modified share options plan to recover FBT from the employees. Under IFRS 2, Share based payment, the FBT paid to the tax authorities is recorded as a liability over the period that the employee renders services. Recovery of the FBT from the employee is accounted as a reimbursement right under IAS 37, Provisions, contingent liabilities and contingent assets, as it virtually certain that the Company will recover the FBT from the employee. Accordingly, under IFRS, the Company has recognized the reimbursement right as a separate asset, not to exceed the FBT liability recognized at each reporting period. | |
Under Previous GAAP, FBT liability and the related FBT recovery from the employee is recorded at the time of exercise of stock option by the employee. Accordingly, under IFRS, the Company has recognized Rs. 741 as provision and reimbursement right in respect of outstanding stock options. This adjustment has no impact on equity. | ||
11) | Under IFRS, contingent consideration relating to acquisitions is recognized if it is probable that such consideration will be paid and can be measured reliably. Under Previous GAAP, contingent consideration is recognized only after the contingency is resolved and additional consideration becomes payable. As a result, under IFRS, the Company has recognized Rs. 761 of contingent consideration as additional goodwill and liability. | |
12) | Under IFRS, minority interest is reported as a separate item within equity, whereas Previous GAAP requires minority interest to be presented separately from equity. This presentation difference between IFRS and Previous GAAP has resulted in an increase in equity under IFRS by Rs. 237 as of March 31, 2009. |
29
Amount as per | Relevant | |||||||||||||||
Previous | Effect of Transition | Amount as per | Notes for | |||||||||||||
Particulars | GAAP | to IFRS | IFRS | adjustments | ||||||||||||
Revenues |
Rs. | 60,365 | Rs. | 51 | Rs. | 60,416 | 1 | |||||||||
Cost of revenues |
(41,978 | ) | (323 | ) | (42,301 | ) | 1,2,5 | |||||||||
Gross profit |
18,387 | (272 | ) | 18,115 | ||||||||||||
Selling and marketing expenses |
(4,314 | ) | 104 | (4,210 | ) | 1(c ),2,3,5 | ||||||||||
General and administrative expenses |
(3,152 | ) | (76 | ) | (3,228 | ) | 2,5 | |||||||||
Foreign exchange (gains)/losses, net |
(697 | ) | | (697 | ) | |||||||||||
Results from operating activities |
10,224 | (244 | ) | 9.980 | ||||||||||||
Finance and other income/(expenses), net |
285 | 31 | 316 | 4 | ||||||||||||
Share of profits of equity accounted investees |
107 | | 107 | |||||||||||||
Profit before tax |
10,616 | (213 | ) | 10,403 | ||||||||||||
Income tax expense |
(1,526 | ) | 83 | (1,443 | ) | 5 | ||||||||||
Profit for the period |
Rs. | 9,090 | Rs. | (130 | ) | Rs. | 8,960 | |||||||||
Attributable to: |
||||||||||||||||
Equity holders of the Company |
Rs. | 9,078 | Rs. | 8,948 | ||||||||||||
Minority Interest |
12 | 12 | ||||||||||||||
Notes: | ||
1) | The following are the primary differences in revenue between IFRS and Previous GAAP: |
a) | Under Previous GAAP, revenue is reported net of excise duty charged to customers. Under IFRS, revenue includes excise duty charged to customers. As a result, revenues and cost of revenues under IFRS are higher by Rs. 332. | ||
b) | Under IFRS, revenue relating to product installation services is recognized when the installation services are performed. Under Previous GAAP, the entire revenue relating to the supply and installation of products is recognized when products are delivered in accordance with the terms of contract. Installation services are considered to be incidental / perfunctory to product delivery and the cost of installation services is recognized upon delivery of the product. Accordingly, revenue and cost of revenue under IFRS is lower by Rs. 44 and Rs. 49, respectively. | ||
c) | Under IFRS, generally cash payments to customers pursuant to sales promotional activities are considered as sales discount and reduced from revenue. Under Previous GAAP, these payments are considered as cost of revenue and selling and marketing expense. As a result, under IFRS, revenue is lower by Rs. 237 and cost of revenues and selling and marketing expenses are lower by Rs. 71 and Rs. 166, respectively. |
2) | Under IFRS, the Company amortizes stock compensation expense, relating to share options, which vests in a graded manner on an accelerated basis. Under Previous GAAP, stock compensation expense is recorded on a straight-line basis. As a result, the Company has recognized additional stock compensation expense of Rs. 62 in cost of revenue, Rs. 47 in selling and marketing expenses and Rs. 46 in general and administrative expenses, under IFRS. | |
3) | Under IFRS, the amortization charge in respect of finite life intangible assets is recorded in the proportion of economic benefits consumed during the period to the expected total economic benefits from the intangible |
30
asset. Under Previous GAAP, such finite life intangible assets are amortized on a straight-line basis over useful life of the asset. This difference resulted in lower amortization of Rs. 14 under IFRS. | ||
4) | This is primarily due to difference in the basis of capitalizing interest expense under IFRS and Previous GAAP. | |
5) | Under Indian tax laws, the Company is required to pay Fringe Benefit Tax (FBT) on certain expenses incurred by the Company. Under Previous GAAP, FBT is reported in the income statement as a separate component of income tax expense. Under IFRS, FBT does not meet the definition of income tax expense and is recognized in the related expense line items. Accordingly, the cost of revenue, selling and marketing expenses and general and administrative expenses under IFRS are higher by Rs. 40, Rs. 30 and Rs. 30, respectively. |
31
Amount as per | Effect of Transition | Amount as per | Relevant Notes | |||||||||||||
Particulars | Previous GAAP | to IFRS | IFRS | for adjustments | ||||||||||||
Revenues |
Rs. | 256,995 | Rs. | (104) | Rs. | 256,891 | 1 | |||||||||
Cost of revenues |
(179,195 | ) | (985 | ) | (180,180 | ) | 1,2,5 | |||||||||
Gross profit |
77,800 | (1,089 | ) | 76,711 | ||||||||||||
Selling and marketing expenses |
(17,853 | ) | 539 | (17,314 | ) | 1(c ),2,3,5 | ||||||||||
General and administrative expenses |
(14,390 | ) | (154 | ) | (14,544 | ) | 2,5 | |||||||||
Foreign exchange gains/(losses), net |
(1,553 | ) | | (1,553 | ) | |||||||||||
Results from operating activities |
44,004 | (704 | ) | 43,300 | ||||||||||||
Finance and other income/(expense), net |
1,192 | 41 | 1,233 | 4 | ||||||||||||
Share of profits of equity accounted investees |
362 | | 362 | |||||||||||||
Profit before tax |
45,558 | (663 | ) | 44,895 | ||||||||||||
Income tax expense |
(6,460 | ) | 425 | (6,035 | ) | 5 | ||||||||||
Profit for the period |
Rs. | 39,098 | Rs. | (238) | Rs. | 38,860 | ||||||||||
Attributable to: |
||||||||||||||||
Equity holders of the Company |
Rs. | 38,999 | Rs. | 38,761 | ||||||||||||
Minority Interest |
99 | 99 | ||||||||||||||
Notes: | ||
1) | The following are the primary differences in revenue between IFRS and Previous GAAP: |
a) | Under Previous GAAP, revenue is reported net of excise duty charged to customers. Under IFRS, revenue includes excise duty charged to customers. As a result, revenues and cost of revenues under IFRS is higher by Rs. 1,055. | ||
b) | Under IFRS, revenue relating to product installation services is recognized when the installation services are performed. Under Previous GAAP, the entire revenue relating to the supply and installation of products is recognized when products are delivered in accordance with the terms of contract. Installation services are considered to be incidental / perfunctory to product delivery and the cost of installation services is recognized upon delivery of the product. Accordingly, revenue and cost of revenue under IFRS is lower by Rs. 147 and Rs. 117, respectively. | ||
c) | Under IFRS, generally cash payments to customers pursuant to sales promotional activities are considered as sales discounts and reduced from revenue. Under Previous GAAP, they are considered as cost of revenue and selling and marketing expense. As a result, under IFRS, revenue is lower by Rs. 1,011 and cost of revenues and selling and marketing expenses are lower by Rs. 275 and Rs. 736, respectively. |
2) | Under IFRS, the Company amortizes stock compensation expense, relating to share options, which vest in a graded manner, on an accelerated basis. Under Previous GAAP, the stock compensation expense is recorded on a straight-line basis. As a result, the Company has recognized additional stock compensation expense of Rs. 40 in cost of revenue, Rs. 30 in selling and marketing expenses and Rs. 30 in general and administrative expenses, under IFRS. | |
3) | Under IFRS, the amortization charge in respect of finite life intangible assets is recorded in the proportion of economic benefits consumed during the period to the expected total economic benefits from the intangible |
32
asset. Under Previous GAAP, such finite life intangible assets are amortized on a straight-line basis over the life of the asset. | ||
Further, the Company recorded additional amortization in respect of customer related intangible arising out of business combination consummated subsequent to the Transition date. Accordingly, amortization under IFRS is higher by Rs. 43. | ||
4) | This is primarily due to difference in the basis of capitalizing interest expense under IFRS and Previous GAAP. | |
5) | Under Indian tax laws, the Company is required to pay Fringe Benefit Tax (FBT) on certain expenses incurred by the Company. Under Previous GAAP, FBT is reported in the income statement as a separate component of income tax expense. Under IFRS, FBT does not meet the definition of income tax expense and is recognized in the related expense line items. Accordingly, the cost of revenue, selling and marketing expenses and general and administrative expenses under IFRS are higher by Rs. 165, Rs. 124 and Rs. 124, respectively. |
33
Plant and | Furniture | |||||||||||||||||||||||
machinery | fixtures and | |||||||||||||||||||||||
Land | Buildings | (Including computers) | equipment | Vehicles | Total | |||||||||||||||||||
Gross carrying value: |
||||||||||||||||||||||||
As at April 1, 2008 |
Rs. | 2,091 | Rs. | 10,067 | Rs. | 31,065 | Rs. | 7,329 | Rs. | 2,566 | Rs. | 53,118 | ||||||||||||
Translation adjustment |
13 | 171 | 908 | 124 | 13 | 1,229 | ||||||||||||||||||
Additions |
| 382 | 1,202 | 458 | 168 | 2,210 | ||||||||||||||||||
Disposal / adjustments |
| (26 | ) | (275 | ) | (3 | ) | (86 | ) | (390 | ) | |||||||||||||
Acquisition through business
combination |
| | | | | | ||||||||||||||||||
As at June 30, 2008 |
Rs. | 2,104 | Rs. | 10,594 | Rs. | 32,900 | Rs. | 7,908 | Rs. | 2,661 | Rs. | 56,167 | ||||||||||||
Accumulated depreciation/impairment: |
||||||||||||||||||||||||
As at April 1, 2008 |
Rs. | | Rs. | 1,238 | Rs. | 20,930 | Rs. | 3,600 | Rs. | 1,416 | Rs. | 27,184 | ||||||||||||
Translation adjustment |
| 34 | 227 | 81 | 9 | 351 | ||||||||||||||||||
Depreciation |
| 67 | 397 | 950 | 126 | 1,540 | ||||||||||||||||||
Disposal / adjustments |
| 26 | 162 | 32 | (49 | ) | 171 | |||||||||||||||||
As at June 30, 2008 |
Rs. | | Rs. | 1,365 | Rs. | 21,716 | Rs. | 4,663 | Rs. | 1,502 | Rs. | 29,246 | ||||||||||||
Capital work-in-progress |
15,503 | |||||||||||||||||||||||
Net carrying value as at June 30,
2008 |
Rs. | 42,424 | ||||||||||||||||||||||
34
Furniture | ||||||||||||||||||||||||
Plant and | fixtures and | |||||||||||||||||||||||
Land | Buildings | machinery | equipment | Vehicles | Total | |||||||||||||||||||
Gross carrying value: |
||||||||||||||||||||||||
As at April 1, 2008 |
Rs. | 2,091 | Rs. | 10,067 | Rs. | 31,065 | Rs. | 7,329 | Rs. | 2,566 | Rs. | 53,118 | ||||||||||||
Translation adjustment |
21 | 293 | 1,459 | 309 | 32 | 2,114 | ||||||||||||||||||
Additions |
636 | 5,019 | 9,138 | 514 | 567 | 15,874 | ||||||||||||||||||
Disposal / adjustments |
(8 | ) | (82 | ) | (213 | ) | (163 | ) | (333 | ) | (799 | ) | ||||||||||||
Acquisition through business
combination |
| 87 | 174 | 124 | 21 | 406 | ||||||||||||||||||
As at March 31, 2009 |
Rs. | 2,740 | Rs. | 15,384 | Rs. | 41,623 | Rs. | 8,113 | Rs. | 2,853 | Rs. | 70,713 | ||||||||||||
Accumulated depreciation/impairment: |
||||||||||||||||||||||||
As at April 1, 2008 |
Rs. | | Rs. | 1,238 | Rs. | 20,930 | Rs. | 3,600 | Rs. | 1,416 | Rs. | 27,184 | ||||||||||||
Translation adjustment |
| 97 | 850 | 168 | 11 | 1,126 | ||||||||||||||||||
Depreciation |
| 279 | 4,619 | 736 | 520 | 6,154 | ||||||||||||||||||
Disposal / adjustments |
| 17 | 329 | 35 | (199 | ) | 182 | |||||||||||||||||
As at March 31, 2009 |
Rs. | | Rs. | 1,631 | Rs. | 26,728 | Rs. | 4,539 | Rs. | 1,748 | Rs. | 34,646 | ||||||||||||
Capital work-in-progress |
13,727 | |||||||||||||||||||||||
Net carrying value as at
March 31, 2009 |
Rs. | 49,794 | ||||||||||||||||||||||
Gross carrying value: |
||||||||||||||||||||||||
As at April 1, 2009 |
Rs. | 2,740 | Rs. | 15,384 | Rs. | 41,623 | Rs. | 8,113 | Rs. | 2,853 | Rs. | 70,713 | ||||||||||||
Translation adjustment |
(1 | ) | (48 | ) | (382 | ) | (17 | ) | (2 | ) | (450 | ) | ||||||||||||
Additions |
59 | 22 | 991 | 152 | 109 | 1,333 | ||||||||||||||||||
Disposal / adjustments |
| | (29 | ) | (45 | ) | (114 | ) | (188 | ) | ||||||||||||||
As at June 30, 2009 |
Rs. | 2,798 | Rs. | 15,358 | Rs. | 42,203 | Rs. | 8,203 | Rs. | 2,846 | Rs. | 71,408 | ||||||||||||
Accumulated depreciation/impairment: |
||||||||||||||||||||||||
As at April 1, 2009 |
Rs. | | Rs. | 1,631 | Rs. | 26,728 | Rs. | 4,539 | Rs. | 1,748 | Rs. | 34,646 | ||||||||||||
Translation adjustment |
| 9 | (256 | ) | 12 | (8 | ) | (243 | ) | |||||||||||||||
Depreciation |
| 98 | 1,256 | 268 | 141 | 1,763 | ||||||||||||||||||
Disposal / adjustments |
| | (22 | ) | (39 | ) | (69 | ) | (130 | ) | ||||||||||||||
As at June 30, 2009 |
Rs. | | Rs. | 1,738 | Rs. | 27,706 | Rs. | 4,780 | Rs. | 1,812 | Rs. | 36,036 | ||||||||||||
Capital work-in-progress |
14,120 | |||||||||||||||||||||||
Net carrying value as at June 30,
2009 |
Rs. | 49,492 | ||||||||||||||||||||||
Intangible assets | ||||||||||||||||
Customer | Marketing | |||||||||||||||
Goodwill | related | related | Total | |||||||||||||
Gross carrying value: |
||||||||||||||||
As at April 1, 2008 |
Rs. | 42,635 | Rs. | | Rs. | 2,639 | Rs. | 2,639 | ||||||||
Translation adjustment |
2,602 | | 81 | 81 | ||||||||||||
Acquisition through business combination |
36 | | | | ||||||||||||
Additions |
| | | | ||||||||||||
As at June 30, 2008 |
Rs. | 45,273 | Rs. | | Rs. | 2,720 | Rs. | 2,720 | ||||||||
As at April 1, 2008 |
Rs. | 42,635 | Rs. | | Rs. | 2,639 | Rs. | 2,639 | ||||||||
Translation adjustment |
8,071 | | 148 | 148 | ||||||||||||
Acquisition through business combination |
5,437 | 1,629 | | 1,629 | ||||||||||||
Additions |
| | 124 | 124 | ||||||||||||
As at March 31, 2009 |
Rs. | 56,143 | Rs. | 1,629 | Rs. | 2,911 | Rs. | 4,540 | ||||||||
As at April 1, 2009 |
Rs. | 56,143 | Rs. | 1,629 | Rs. | 2,911 | Rs. | 4,540 | ||||||||
Translation adjustment |
(1,901 | ) | | (69 | ) | (69 | ) | |||||||||
Acquisition through business combination |
| | | | ||||||||||||
Additions |
| | 18 | 18 | ||||||||||||
As at June 30, 2009 |
Rs. | 54,242 | Rs. | 1,629 | Rs. | 2,860 | Rs. | 4,489 | ||||||||
35
Intangible assets | ||||||||||||||||
Customer | Marketing | |||||||||||||||
Goodwill | related | related | Total | |||||||||||||
Accumulated amortization and impairment: |
||||||||||||||||
As at April 1, 2008 |
Rs. | | Rs. | | Rs. | 773 | Rs. | 773 | ||||||||
Translation adjustment |
| | 63 | 63 | ||||||||||||
Amortization |
| | 24 | 24 | ||||||||||||
As at June 30, 2008 |
Rs. | | Rs. | | Rs. | 860 | Rs. | 860 | ||||||||
As at April 1, 2008 |
Rs. | | Rs. | | Rs. | 773 | Rs. | 773 | ||||||||
Translation adjustment |
| | 101 | 101 | ||||||||||||
Amortization |
| 91 | 82 | 173 | ||||||||||||
As at March 31, 2009 |
Rs. | | Rs. | 91 | Rs. | 956 | Rs. | 1,047 | ||||||||
As at April 1, 2009 |
Rs. | | Rs. | 91 | Rs. | 956 | Rs. | 1,047 | ||||||||
Translation adjustment |
| | (3 | ) | (3 | ) | ||||||||||
Amortization |
| 70 | 35 | 105 | ||||||||||||
As at June 30, 2009 |
Rs. | | Rs. | 161 | Rs. | 988 | Rs. | 1,149 | ||||||||
Net carrying value: |
||||||||||||||||
As at June 30, 2008 |
Rs. | 45,273 | Rs. | | Rs. | 1,860 | Rs. | 1,860 | ||||||||
As at March 31, 2009 |
56,143 | 1,538 | 1,955 | 3,493 | ||||||||||||
As at June 30, 2009 |
54,242 | 1,468 | 1,872 | 3,340 |
As at | ||||||||
Segment | June 30, 2009 | March 31, 2009 | ||||||
IT Services |
Rs. | 40,089 | Rs. | 41,769 | ||||
IT Products |
511 | 544 | ||||||
Consumer Care and Lighting |
12,036 | 12,242 | ||||||
Others |
1,606 | 1,588 | ||||||
Total |
Rs. | 54,242 | Rs. | 56,143 | ||||
Purchase price | ||||
Descriptions | allocated | |||
Cash and cash equivalents |
Rs. | 1,342 | ||
Property, plant and equipment |
403 | |||
Customer related intangibles |
1,413 | |||
Other assets |
1,150 | |||
Loan and borrowings |
(23 | ) | ||
Deferred income taxes, net |
(461 | ) | ||
Other liabilities |
(1,200 | ) | ||
Total |
Rs. | 2,624 | ||
Goodwill |
3,581 | |||
Total purchase price |
Rs. | 6,205 | ||
36
As at June 30, 2009 | As at March 31, 2009 | |||||||||||||||||||||||
Gain | Gain | |||||||||||||||||||||||
recognized | recognized | |||||||||||||||||||||||
directly in | directly in | |||||||||||||||||||||||
Cost | equity | Fair value | Cost | equity | Fair value | |||||||||||||||||||
Investment in liquid and
short-term mutual funds |
Rs. | 37,466 | Rs. | 295 | Rs. | 37,761 | Rs. | 15,132 | Rs. | 80 | Rs. | 15,212 | ||||||||||||
Certificate of deposits |
708 | 10 | 718 | 947 | 21 | 968 | ||||||||||||||||||
Others |
343 | 20 | 363 | 343 | 20 | 363 | ||||||||||||||||||
Total |
Rs. | 38,517 | Rs. | 325 | Rs. | 38,842 | Rs. | 16,422 | Rs. | 121 | Rs. | 16,543 | ||||||||||||
As at | ||||||||
June 30, 2009 | March 31, 2009 | |||||||
Trade receivables |
Rs. | 44,606 | Rs. | 50,531 | ||||
Allowance for doubtful accounts receivable |
(1,882 | ) | (1,919 | ) | ||||
Rs. | 42,724 | Rs. | 48,612 | |||||
Three months | ||||||||
ended June 30, | Year ended | |||||||
2009 | March 31, 2009 | |||||||
Balance at the beginning of the period |
Rs. | 1,919 | Rs. | 1,096 | ||||
Additions during the period, net of collections |
75 | 939 | ||||||
Uncollectable receivables charged against allowance |
(112 | ) | (116 | ) | ||||
Balance at the end of the period |
Rs. | 1,882 | Rs. | 1,919 | ||||
As at | ||||||||
June 30, 2009 | March 31, 2009 | |||||||
Stores and spare parts |
Rs. | 860 | Rs. | 774 | ||||
Raw materials and components |
2,361 | 2,440 | ||||||
Work in progress |
632 | 694 | ||||||
Finished goods |
2,938 | 3,678 | ||||||
Rs. | 6,791 | Rs. | 7.586 | |||||
37
As at | ||||||||||||
June 30, 2009 | June 30, 2008 | March 31, 2009 | ||||||||||
Cash and bank balances |
Rs. | 13,920 | Rs. | 8,159 | Rs. | 22,944 | ||||||
Short-term deposits with banks(1) |
22,592 | 10,189 | 26,173 | |||||||||
Rs. | 36,512 | Rs. | 18,348 | Rs. | 49,117 | |||||||
As at | ||||||||
June 30, 2009 | June 30, 2008 | |||||||
Cash and cash equivalents (as per above) |
Rs. | 36,512 | Rs. | 18,348 | ||||
Bank overdrafts |
(288 | ) | (353 | ) | ||||
Rs. | 36,224 | Rs. | 17,995 | |||||
(1) | These deposits can be withdrawn by the Company at any time without prior notice and without any penalty on the principal. |
As at | ||||||||
June 30, 2009 | March 31, 2009 | |||||||
Current |
||||||||
Interest bearing deposits with corporate(1) |
Rs. | 2,000 | Rs. | 4,250 | ||||
Prepaid expenses including rentals for leasehold land |
3,211 | 4,068 | ||||||
Due from officers and employees |
1,294 | 1,359 | ||||||
Finance lease receivables |
718 | 967 | ||||||
Advance to suppliers |
759 | 736 | ||||||
Deferred contract costs |
741 | 562 | ||||||
Interest receivable |
836 | 540 | ||||||
Deposits |
392 | 82 | ||||||
Derivative assets |
866 | 619 | ||||||
Others |
2,311 | 2,844 | ||||||
Rs. | 13,128 | Rs. | 16,027 | |||||
Non current |
||||||||
Prepaid expenses including rentals for leasehold land |
Rs. | 1,764 | Rs. | 1,284 | ||||
Due from officers and employees |
951 | 741 | ||||||
Finance lease receivables |
2,230 | 2,638 | ||||||
Deferred contract costs |
434 | 532 | ||||||
Deposits |
1,263 | 1,544 | ||||||
Derivative assets |
491 | 543 | ||||||
Others |
63 | 41 | ||||||
Rs. | 7,196 | Rs. | 7,323 | |||||
Total |
Rs. | 20,324 | Rs. | 23,350 | ||||
(1) | Such deposits earn a fixed rate of interest and will be liquidated within 12 months. |
Present value of | ||||||||||||||||
Minimum lease payment | minimum lease payment | |||||||||||||||
As at | ||||||||||||||||
June 30, | March 31, | June 30, | March 31, | |||||||||||||
2009 | 2009 | 2009 | 2009 | |||||||||||||
Not later than one year |
Rs. | 783 | Rs. | 1,024 | Rs. | 710 | Rs. | 960 | ||||||||
Later than one year but not later than five years |
2,606 | 3,180 | 2,093 | 2,522 | ||||||||||||
Unguaranteed residual values |
177 | 172 | 145 | 123 | ||||||||||||
Gross investment in lease |
3,566 | 4,376 | | |
38
Present value of | ||||||||||||||||
Minimum lease payment | minimum lease payment | |||||||||||||||
As at | ||||||||||||||||
June 30, | March 31, | June 30, | March 31, | |||||||||||||
2009 | 2009 | 2009 | 2009 | |||||||||||||
Less: Unearned finance income |
(618 | ) | (771 | ) | | | ||||||||||
Present
value of minimum lease payment receivable |
2,948 | 3,605 | 2,948 | 3,605 | ||||||||||||
Included in the financial statements as follows: |
||||||||||||||||
Current finance lease receivables |
Rs. | 718 | Rs. | 967 | ||||||||||||
Non-current finance lease receivables |
2,230 | 2,638 | ||||||||||||||
As at June 30, 2009 | As at March 31, 2009 | |||||||||||||||||||||||
Foreign | Indian | Final | Foreign | Indian | ||||||||||||||||||||
Currency | currency | Rupee | Interest rate | maturity | currency | Rupee | ||||||||||||||||||
Unsecured external commercial borrowing |
||||||||||||||||||||||||
Japanese Yen |
35,016 | Rs. | 17,490 | 2.9 | % | 2013 | 35,016 | Rs. | 18,052 | |||||||||||||||
Unsecured term loan |
||||||||||||||||||||||||
Indian Rupee |
NA | 597 | 6.05 | % | 2014 | NA | 631 | |||||||||||||||||
Others |
91 | 0-2 | % | 2010 2017 | 87 | |||||||||||||||||||
Other secured term loans |
373 | 1.55 5.1 | % | 2009 2016 | 232 | |||||||||||||||||||
Rs. | 18,551 | Rs. | 19,002 | |||||||||||||||||||||
Obligations under finance leases |
1,282 | 1,418 | ||||||||||||||||||||||
Rs. | 19,833 | Rs. | 20,420 | |||||||||||||||||||||
Current portion of long term borrowings |
Rs. | 700 | Rs. | 739 | ||||||||||||||||||||
39
As at | ||||||||
June 30, 2009 | March 31, 2009 | |||||||
Trade payables |
Rs. | 17,222 | Rs. | 18,017 | ||||
Accrued expenses |
17,373 | 17,751 | ||||||
Rs. | 34,595 | Rs. | 35,768 | |||||
As at | ||||||||
June 30, 2009 | March 31, 2009 | |||||||
Current: |
||||||||
Statutory and other liabilities |
Rs. | 9,273 | Rs. | 9,184 | ||||
Advance from customers |
2,503 | 2,428 | ||||||
Unclaimed dividend |
17 | 17 | ||||||
Warranty provision |
613 | 541 | ||||||
Others |
2,221 | 1,898 | ||||||
Rs. | 14,627 | Rs. | 14,068 | |||||
Non-current: |
||||||||
Statutory and other liabilities |
Rs. | 951 | Rs. | 741 | ||||
Warranty provision |
313 | 448 | ||||||
Sundry deposits |
75 | 68 | ||||||
Others |
194 | 411 | ||||||
Rs. | 1,533 | Rs. | 1,668 | |||||
Total |
Rs. | 16,160 | Rs. | 15,736 | ||||
As at | ||||||||
June 30, 2009 | March 31, 2009 | |||||||
Assets: |
||||||||
Trade receivables |
Rs. | 42,724 | Rs. | 48,612 | ||||
Unbilled revenues |
15,797 | 14,108 | ||||||
Cash and cash equivalents |
36,512 | 49,117 | ||||||
Available for sale financial investments |
38,842 | 16,543 | ||||||
Derivative assets |
1,357 | 1,162 | ||||||
Other assets |
10,184 | 13,216 | ||||||
Total |
Rs. | 145,416 | Rs. | 142,758 | ||||
Liabilities: |
||||||||
Loans and borrowings |
Rs. | 47,986 | Rs. | 56,892 | ||||
Trade payables and accrued expenses |
34,595 | 35,768 | ||||||
Derivative liabilities |
9,316 | 12,022 | ||||||
Other liabilities |
7,930 | 7,887 | ||||||
Total |
Rs. | 99,827 | Rs. | 112,569 | ||||
40
As at | ||||||||
June 30, 2009 | March 31, 2009 | |||||||
Assets: |
||||||||
Loans and receivables |
Rs. | 105,217 | Rs. | 125,053 | ||||
Derivative assets |
1,357 | 1,162 | ||||||
Available for sale financial investments |
38,842 | 16,543 | ||||||
Total |
Rs. | 145,416 | Rs. | 142,758 | ||||
Liabilities: |
||||||||
Financial liabilities at amortised cost |
Rs. | 47,986 | Rs. | 56,892 | ||||
Trade and other payables |
42,525 | 43,655 | ||||||
Derivative liabilities |
9,316 | 12,022 | ||||||
Total |
Rs. | 99,827 | Rs. | 112,569 | ||||
As at | |||||||||
June 30, | March 31, | ||||||||
2009 | 2009 | ||||||||
Forward contracts |
|||||||||
Sell |
$ | 1,241 | $ | 1,374 | |||||
| 67 | | 79 | ||||||
£ | 61 | £ | 53 | ||||||
AUD | 21 | AUD | | ||||||
Buy |
$ | 360 | $ | 438 | |||||
¥ | 15,957 | ¥ | 23,170 | ||||||
Net purchased options (to sell) |
$ | 558 | $ | 562 | |||||
£ | 50 | £ | 54 | ||||||
¥ | 5,742 | ¥ | 6,130 | ||||||
Cross currency swaps |
¥ | 35,016 | ¥ | 35,016 |
41
As at | ||||||||
June 30, 2009 | June 30, 2008 | |||||||
Balance as at the beginning of the period |
Rs. | (16,150) | Rs. | (1,097) | ||||
Net (gain)/loss reclassified into statement of income on occurrence
of hedged transactions |
797 | 221 | ||||||
Deferred cancellation gains/(losses) relating to roll over hedging |
325 | (452 | ) | |||||
Changes in fair value of effective portion of outstanding derivatives |
2,279 | (8,015 | ) | |||||
Unrealized gain/ (losses) on cash flow hedging derivatives, net |
Rs. | 3,401 | Rs. | (8,246) | ||||
Balance as at the end of the period |
Rs. | (12,749) | Rs. | (9,343) | ||||
42
43
As at | ||||||||
June 30, | June 30, | |||||||
2009 | 2008 | |||||||
Balance at the beginning of the period |
Rs. | 797 | Rs. | (10) | ||||
Translation difference related to foreign operation |
(1,250 | ) | 846 | |||||
Movement in effective portion of foreign currency
borrowing and related CCIRS |
1,081 | (660 | ) | |||||
Balance at the end of the period |
Rs. | 628 | Rs | 176 | ||||
Attributable to: |
||||||||
Equity holders of the Company |
Rs. | 648 | Rs. | 172 | ||||
Minority interest |
(20 | ) | 4 |
Three months ended June 30, | ||||||||
2009 | 2008 | |||||||
Profit for the period |
Rs. | 1,740 | Rs. | 1,443 | ||||
Stockholders equity for
Unrealized gain / (loss) on cash flow
hedging derivatives and investment
securities |
868 | (1,021 | ) | |||||
Total income taxes |
Rs. | 2,608 | Rs. | 422 | ||||
Three months ended June, 30 | ||||||||
2009 | 2008 | |||||||
Current taxes |
||||||||
Domestic |
Rs. | 1,125 | Rs. | 819 | ||||
Foreign |
703 | 637 | ||||||
Rs. | 1,828 | Rs. | 1,456 | |||||
Deferred taxes |
||||||||
Domestic |
Rs. | (57) | Rs. | (13) | ||||
Foreign |
(31 | ) | | |||||
Rs. | (88) | Rs. | (13) | |||||
Total income tax expense |
Rs. | 1,740 | Rs. | 1,443 | ||||
44
As at | ||||||||
June 30, 2009 | March 31, 2009 | |||||||
Carry-forward business losses |
Rs. | 2,218 | Rs. | 2,185 | ||||
Accrued expenses and liabilities |
698 | 715 | ||||||
Allowances for doubtful accounts receivable |
262 | 260 | ||||||
Cash flow hedges |
1,489 | 2,353 | ||||||
Minimum alternate tax |
126 | 126 | ||||||
Others |
62 | 11 | ||||||
4,855 | 5,650 | |||||||
Property, plant and equipment |
Rs. | (450) | Rs. | (421) | ||||
Amortizable goodwill |
(213 | ) | (213 | ) | ||||
Intangible assets |
(773 | ) | (789 | ) | ||||
Investment in equity accounted investee |
(350 | ) | (332 | ) | ||||
(1,786 | ) | (1,755 | ) | |||||
Net deferred tax assets |
Rs. | 3,069 | Rs. | 3,895 |
Three months ended June 30, | ||||||||
2009 | 2008 | |||||||
Interest income |
Rs. | 740 | Rs. | 344 | ||||
Interest expense |
(561 | ) | (542 | ) | ||||
Exchange fluctuations on foreign exchange borrowings, net |
(78 | ) | (202 | ) | ||||
Dividend
income |
260 | 574 | ||||||
Others |
(6 | ) | 142 | |||||
Total |
Rs. | 355 | Rs. | 316 | ||||
45
Three months ended June 30, | ||||||||
2009 | 2008 | |||||||
Profit attributable to equity holders of the Company |
Rs. | 10,104 | Rs. | 8,948 | ||||
Weighted average number of equity shares outstanding |
1,456,161,032 | 1,452,636,163 | ||||||
Basic earnings per share |
Rs. | 6.94 | Rs. | 6.16 | ||||
Three months ended June 30, | ||||||||
2009 | 2008 | |||||||
Profit attributable to equity holders of the Company |
Rs. | 10,104 | Rs. | 8,948 | ||||
Weighted average number of equity shares outstanding |
1,456,161,032 | 1,452,636,163 | ||||||
Effect of dilutive equivalent share-stock option |
9,841,744 | 11,168,740 | ||||||
Weighted average number of equity shares for
diluted earnings per share |
1,466,002,776 | 1,463,804,903 | ||||||
Diluted earnings per share |
Rs. | 6.89 | Rs. | 6.11 | ||||
Three months | Year ended | |||||||
ended June 30, | March 31, | |||||||
2009 | 2009 | |||||||
Shares held at the beginning of the period |
7,961,760 | 7,961,760 | ||||||
Shares granted to employees |
| | ||||||
Grants forfeited by employees |
| | ||||||
Shares held at the end of the period |
7,961,760 | 7,961,760 | ||||||
46
Authorized | Range of | |||||||
Name of Plan | Shares | Exercise Prices | ||||||
Wipro Employee Stock Option Plan 1999 (1999 Plan) |
30,000,000 | Rs. | 171 490 | |||||
Wipro Employee Stock Option Plan 2000 (2000 Plan) |
150,000,000 | Rs. | 171 490 | |||||
Stock Option Plan (2000 ADS Plan) |
9,000,000 | $ | 3 7 | |||||
Wipro
Restricted Stock Unit Plan (WRSUP 2004 plan) |
12,000,000 | Rs. | 2 | |||||
Wipro ADS
Restricted Stock Unit Option Plan (WARSUP 2004 plan) |
12,000,000 | $ | 0.04 | |||||
Wipro
Employee Restricted Stock Unit Option Plan 2005 (WSRUP 2005 plan) |
12,000,000 | Rs. | 2 | |||||
Wipro
Employee Restricted Stock Unit Option Plan 2007 (WSRUP 2007 plan) |
10,000,000 | Rs. | 2 |
For the three month ended | For the year ended | |||||||||||||||||||||||
June 30, 2009 | March 31, 2009 | |||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Range of | Exercise | Range of | Exercise | |||||||||||||||||||||
Exercise Prices | Number | Price | Exercise Prices | Number | Price | |||||||||||||||||||
Outstanding at the
beginning of the
period |
Rs. | 229 265 | 1,140 | Rs. | 254 | Rs. | 229 265 | 1,219,926 | Rs. | 264 | ||||||||||||||
Rs. | 489 | 120,000 | Rs. | 489 | Rs. | 489 | | Rs. | | |||||||||||||||
$ | 4 6 | 1,606 | $ | 4.7 | $ | 4 6 | 8,706 | $ | 5 | |||||||||||||||
Rs. | 2 | 13,799,549 | Rs. | 2 | Rs. | 2 | 9,700,163 | Rs. | 2 | |||||||||||||||
$ | 0.04 | 2,470,641 | $ | 0.04 | $ | 0.04 | 1,885,236 | $ | 0.04 | |||||||||||||||
Granted |
Rs. | 229 265 | | Rs. | | Rs. | 229 265 | | Rs. | | ||||||||||||||
Rs. | 489 | Rs. | | Rs. | 489 | 120,000 | Rs. | 489 | ||||||||||||||||
$ | 4 6 | | $ | | $ | 4 6 | | $ | | |||||||||||||||
Rs. | 2 | 5,000 | Rs. | 2 | Rs. | 2 | 6,882,415 | Rs. | 2 | |||||||||||||||
$ | 0.04 | | $ | | $ | 0.04 | 1,484,261 | $ | 0.04 | |||||||||||||||
Exercised |
Rs. | 229 265 | | Rs. | | Rs. | 229 265 | (345,099 | ) | Rs. | 263 | |||||||||||||
Rs. | 489 | | Rs. | | Rs. | 489 | | Rs. | | |||||||||||||||
$ | 4 6 | | $ | | $ | 4 6 | (4,400 | ) | $ | 4.7 | ||||||||||||||
Rs. | 2 | (569,969 | ) | Rs. | 2 | Rs. | 2 | (1,762,283 | ) | Rs. | 2 | |||||||||||||
$ | 0.04 | (107,171 | ) | $ | 0.04 | $ | 0.04 | (446,841 | ) | $ | 0.04 | |||||||||||||
Forfeited and lapsed |
Rs. | 229 265 | (1,140 | ) | Rs. | 254 | Rs. | 229 265 | (873,687 | ) | Rs. | 264 | ||||||||||||
Rs. | 489 | | Rs. | | Rs. | 489 | | Rs. | | |||||||||||||||
$ | 4 6 | | $ | | $ | 4 6 | (2,700 | ) | $ | 5.82 | ||||||||||||||
Rs. | 2 | (304,389 | ) | Rs. | 2 | Rs. | 2 | (1,020,746 | ) | Rs. | 2 | |||||||||||||
$ | 0.04 | (109,982 | ) | $ | 0.04 | $ | 0.04 | (452,015 | ) | $ | 0.04 | |||||||||||||
Outstanding at the
end of the period |
Rs. | 229 265 | | Rs. | | Rs. | 229 265 | 1,140 | Rs. | 254 | ||||||||||||||
Rs. | 489 | 120,000 | Rs. | 489 | Rs. | 489 | 120,000 | Rs. | 489 | |||||||||||||||
$ | 4 6 | 1,606 | $ | 4.7 | $ | 4 6 | 1,606 | $ | 4.7 | |||||||||||||||
Rs. | 2 | 12,930,191 | Rs. | 2 | Rs. | 2 | 13,799,549 | Rs. | 2 | |||||||||||||||
$ | 0.04 | 2,253,488 | $ | 0.04 | $ | 0.04 | 2,470,641 | $ | 0.04 | |||||||||||||||
Exercisable at the
end of the period |
Rs. | 229 265 | | Rs. | | Rs. | 229 265 | 1,140 | Rs. | 254 | ||||||||||||||
Rs. | 489 | | Rs. | | Rs. | 489 | | Rs. | | |||||||||||||||
$ | 4 6 | 1,606 | $ | 4.7 | $ | 4 6 | 1,606 | $ | 4.7 | |||||||||||||||
Rs. | 2 | 2,434,552 | Rs. | 2 | Rs. | 2 | 2,975,987 | Rs. | 2 | |||||||||||||||
$ | 0.04 | 189,594 | $ | 0.04 | $ | 0.04 | 208,412 | $ | 0.04 |
Options outstanding | Options exercisable | |||||||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||||||
average | Weighted | average | Weighted | |||||||||||||||||||||||||
remaining | average | remaining | Average | |||||||||||||||||||||||||
Range of | life | exercise | life | Exercise | ||||||||||||||||||||||||
Exercise price | Numbers | (Months) | price | Numbers | (Months) | Price | ||||||||||||||||||||||
Rs. | 489 | 120,000 | 57 | Rs. | 489 | | | Rs. | | |||||||||||||||||||
$ | 4 6 | 1,606 | 8.9 | $ | 4.70 | 1606 | 8.9 | $ | 4.70 | |||||||||||||||||||
Rs. | 2 | 12,930,191 | 41 | Rs. | 2 | 2,434,552 | 23 | Rs. | 2 | |||||||||||||||||||
$ | 0.04 | 2,253,488 | 49 | $ | 0.04 | 189,594 | 37 | $ | 0.04 | |||||||||||||||||||
47
Three months ended, | ||||||||
June 30, 2009 | June 30, 2008 | |||||||
Salaries and bonus |
Rs. | 25,817 | Rs. | 24,062 | ||||
Employee benefit plans |
763 | 605 | ||||||
Share based compensation |
359 | 588 | ||||||
Rs. | 26,939 | Rs. | 25,255 | |||||
Three months ended June 30, | ||||||||
June 30, 2009 | June 30, 2008 | |||||||
Interest on obligation |
Rs. | 33 | Rs. | 31 | ||||
Expected return on plan assets |
(30 | ) | (20 | ) | ||||
Actuarial losses/(gains) recognized during the period |
14 | (105 | ) | |||||
Current service cost |
95 | 93 | ||||||
Net gratuity cost/(benefit) |
Rs. | 112 | Rs. | (1) | ||||
As at | ||||||||
June 30, 2009 | March 31, 2009 | |||||||
Discount rate |
6.30 | % | 6.75 | % | ||||
Expected return on plan assets |
8 | % | 8 | % | ||||
Expected rate of salary increase |
5 | % | 5 | % |
As at | ||||||||
June 30, 2009 | March 31, 2009 | |||||||
Opening defined benefit obligation |
Rs. | 1,824 | Rs. | 1,515 | ||||
Current service cost |
95 | 369 | ||||||
Interest on obligation |
33 | 135 | ||||||
Benefits paid |
(55 | ) | (118 | ) | ||||
Actuarial losses/(gains) recognized during the period |
16 | (77 | ) | |||||
Closing defined benefit obligation |
Rs. | 1,913 | Rs. | 1,824 | ||||
As at | ||||||||
June 30, 2009 | March 31, 2009 | |||||||
Fair value of plan assets at the beginning of the period |
Rs. | 1,397 | Rs. | 1,244 | ||||
Expected return on plan assets |
30 | 92 | ||||||
Employer contributions |
154 | 154 | ||||||
Benefits paid |
(55 | ) | (118 | ) |
48
As at | ||||||||
June 30, 2009 | March 31, 2009 | |||||||
Actuarial gain/(losses) |
2 | 25 | ||||||
Fair value of plan assets at the end of the period |
1,528 | 1,397 | ||||||
Present value of unfunded obligation |
Rs. | (385) | Rs. | (427) | ||||
Recognized liability |
Rs. | (385) | Rs. | (427) | ||||
As at | ||||||||
June 30, | March 31, | |||||||
2009 | 2009 | |||||||
Not later than one year |
Rs. | 1,141 | Rs. | 1,064 | ||||
Later than one year but not later than five years |
3,938 | 3,670 | ||||||
Later than five years |
2,646 | 3,168 | ||||||
Rs. | 7,725 | Rs. | 7,902 | |||||
49
Three months ended June 30, 2008 | ||||||||||||||||||||||||||||
Consumer | ||||||||||||||||||||||||||||
IT Services and Products | Care and | Reconciling | ||||||||||||||||||||||||||
IT Services | IT Products | Total | Lighting | Others | Items | Entity Total | ||||||||||||||||||||||
Revenues |
44,028 | 7,322 | 51,350 | 4,749 | 3,286 | 334 | 59,719 | |||||||||||||||||||||
Cost of revenues |
(29,528 | ) | (6,722 | ) | (36,250 | ) | (2,656 | ) | (2,919 | ) | (476 | ) | (42,301 | ) | ||||||||||||||
Selling and marketing expenses |
(2,588 | ) | (264 | ) | (2,852 | ) | (1,184 | ) | (92 | ) | (82 | ) | (4,210 | ) | ||||||||||||||
General and administrative expenses |
(2,745 | ) | (78 | ) | (2,823 | ) | (286 | ) | (36 | ) | (83 | ) | (3,228 | ) | ||||||||||||||
Operating income of segment (1) |
9,167 | 258 | 9,425 | 623 | 239 | (307 | ) | 9,980 | ||||||||||||||||||||
Average capital employed |
92,447 | 17,591 | 6,521 | 58,047 | 174,606 | |||||||||||||||||||||||
Return on capital employed |
41 | % | 14 | % | 15 | % | 23%- |
Three months ended June 30, 2009 | ||||||||||||||||||||||||||||
Consumer | ||||||||||||||||||||||||||||
IT Services and Products | Care and | Reconciling | ||||||||||||||||||||||||||
IT Services | IT Products | Total | Lighting | Others | Items | Entity Total | ||||||||||||||||||||||
Revenues |
48,266 | 7,337 | 55,603 | 5,198 | 1,485 | 176 | 62,462 | |||||||||||||||||||||
Cost of revenues |
(32,365 | ) | (6,439 | ) | (38,804 | ) | (2,598 | ) | (1,633 | ) | (212 | ) | (43,247 | ) | ||||||||||||||
Selling and marketing expenses |
(2,336 | ) | (332 | ) | (2,668 | ) | (1,473 | ) | (63 | ) | (35 | ) | (4,239 | ) | ||||||||||||||
General and administrative expenses |
(2,867 | ) | (274 | ) | (3,141 | ) | (335 | ) | (52 | ) | (24 | ) | (3,552 | ) | ||||||||||||||
50
Three months ended June 30, 2009 | ||||||||||||||||||||||||||||
Consumer | ||||||||||||||||||||||||||||
IT Services and Products | Care and | Reconciling | ||||||||||||||||||||||||||
IT Services | IT Products | Total | Lighting | Others | Items | Entity Total | ||||||||||||||||||||||
Operating income of segment (1) |
10,698 | 292 | 10,990 | 792 | (263 | ) | (95 | ) | 11,424 | |||||||||||||||||||
Average capital employed |
115,272 | 18,395 | 5,514 | 67,179 | 206,361 | |||||||||||||||||||||||
Return on capital employed |
38 | % | 17 | % | (19 | )% | 22 | %- |
(1) | Operating income of segments is after recognition of stock compensation expense arising from the grant of options: |
Three months ended June 30, | ||||||||
Segments | 2008 | 2009 | ||||||
IT Services |
Rs. | 373 | Rs. | 332 | ||||
IT Products |
28 | 25 | ||||||
Consumer Care and Lighting |
20 | 16 | ||||||
Others |
5 | 4 | ||||||
Reconciling items |
162 | (18 | ) | |||||
Total |
588 | 359 | ||||||
Three months ended June 30, | ||||||||
2008 | 2009 | |||||||
India |
Rs. | 12,853 | Rs. | 12,733 | ||||
United States |
26,167 | 26,836 | ||||||
Europe |
14,473 | 12,275 | ||||||
Rest of the world |
6,226 | 10,618 | ||||||
Rs. | 59,719 | Rs. | 62,462 | |||||
51
| equity at April 1, 2008; | ||
| equity at June 30, 2008; | ||
| equity at March 31, 2009; | ||
| profit for the three months ended June 30, 2008; and | ||
| profit for the year ended March 31, 2009. |
Amount as | Relevant | |||||||||||||||
Amount as per | Reconciliation | per US | Notes for | |||||||||||||
Particulars | Previous GAAP | adjustment | GAAP | adjustments | ||||||||||||
Goodwill |
Rs. | 42,209 | Rs. | (3,266 | ) | Rs. | 38,943 | 1 | ||||||||
Property, plant and equipment and intangible assets |
41,583 | 10,719 | 52,302 | 1(b),2 | ||||||||||||
Available for sale investments |
14,679 | 484 | 15,163 | 3 | ||||||||||||
Investment in equity accounted investees |
1,343 | | 1,343 | |||||||||||||
Inventories |
6,664 | 508 | 7,172 | 4 | ||||||||||||
Trade receivables |
40,453 | (1,545 | ) | 38,908 | 4 | |||||||||||
Unbilled revenues |
8,514 | (209 | ) | 8,305 | 4 | |||||||||||
Cash and cash equivalents |
39,270 | | 39,270 | |||||||||||||
Net tax
assets (including deferred tax assets) |
3,632 | (1,963 | ) | 1,669 | 5 | |||||||||||
Other assets |
13,980 | 1,336 | 15,316 | 2(a),4 | ||||||||||||
TOTAL ASSETS |
Rs. | 212,327 | Rs. | 6,064 | Rs. | 218,391 | ||||||||||
Share capital and share premium (net of shares
held by controlled trust) |
Rs. | 28,296 | Rs. | (810 | ) | Rs. | 27,486 | 8 | ||||||||
Retained earnings |
87,908 | 13,158 | 101,066 | |||||||||||||
Cash flow hedging reserve |
(1,097 | ) | | (1,097 | ) | | ||||||||||
Other reserves . |
1,807 | 92 | 1,899 | 3,7 | (b) | |||||||||||
Total equity (A) |
116,914 | 12,440 | 129,354 | |||||||||||||
Minority interest |
116 | | 116 | |||||||||||||
Loan and borrowings |
44,850 | (94 | ) | 44,756 | 6 | (b) | ||||||||||
Trade payables, accrued expenses and liabilities |
28,675 | | 28,675 | |||||||||||||
Unearned revenues |
4,269 | (107 | ) | 4,162 | 4 | |||||||||||
Employee benefit obligations |
2,737 | (124 | ) | 2,613 | 7 | |||||||||||
Other liabilities |
14,766 | (6,051 | ) | 8,715 | 6 | |||||||||||
Total liabilities (B) |
95,413 | (6,376 | ) | 89,037 | ||||||||||||
TOTAL LIABILITIES AND EQUITY (A)+(B) |
Rs. | 212,327 | Rs. | 6,064 | Rs. | 218,391 | ||||||||||
1) | The key differences in goodwill between U.S. GAAP and Previous GAAP are as follows: |
a) | Under Previous GAAP, prior to the Transition Date, the Company merged certain wholly owned subsidiaries and adjusted the goodwill relating to acquisition of such entities against the retained earnings, whereas this adjustment was not recorded under U.S. GAAP. | ||
b) | Under U.S. GAAP, all the assets and liabilities arising from a business combination are identified and recorded at fair values. Accordingly, in respect of all business combinations a portion of purchase price was allocated towards acquired intangibles, net of related deferred taxes. Under Previous GAAP, assets and liabilities arising from a business combination are recognized at carrying value in the books of the acquired entity. This resulted in difference between the carrying amount of goodwill, intangible assets and deferred tax liabilities between U.S.GAAP and Previous GAAP |
2) | The key differences in property, plant and equipment and intangibles between U.S. GAAP and Previous GAAP are as follows: |
52
a) | Under U.S. GAAP, lease of land is classified as an operating lease unless the title to the leasehold land is expected to be transferred to the Company at the end of the lease term. Lease rentals paid in advance and lease deposits are recognized as other assets under U.S.GAAP. Under Previous GAAP, the lease rentals paid in advance and lease deposits are recognized in property, plant and equipment. This is a presentation difference between line items within statement of financial position and has no impact on equity. | ||
b) | Difference in the basis of interest capitalization between Previous GAAP and U.S. GAAP. | ||
c) | Under U.S. GAAP, finite life intangible assets are amortized in the proportion of economic benefits consumed during the period to the expected total economic benefits. Under Previous GAAP, such intangible assets are usually amortized on a straight line basis over the estimated useful life. |
3) | Under US GAAP, available for sale investments are measured at fair value at each reporting date. The changes in fair value of such investments, net of related deferred taxes, are recognized directly in equity. Under Previous GAAP, short-term investments are measured at lower of cost or fair value. | |
4) | The key differences in revenue recognition principles between Previous GAAP and U.S. GAAP are as follows: |
a) | Under U.S. GAAP, in respect of certain multiple element arrangements, revenue recognition in respect of products/services delivered is limited to the amount of consideration that is not contingent upon delivery of additional items or meeting other specified performance conditions. Under Previous GAAP, revenue for products/services delivered is recognized in full, if the delivery of additional items or meeting other specified performance conditions is considered probable at the time of delivery. | ||
b) | Differences in revenue recognition principles between Previous GAAP and U.S. GAAP in respect of revenue arrangements involving delivery of third-party software products and related services. | ||
The above adjustments consequently impact trade receivables, unbilled revenues, inventory, other assets and unearned revenues balances. |
5) | The key difference in net tax assets between Previous GAAP and U.S. GAAP are as follows: |
a) | Under U.S. GAAP, deferred tax assets in respect of carry forward tax losses are recognized if it is more likely than not that, sufficient taxable profits would be available in the future to realize the tax benefits. Under Previous GAAP, deferred tax assets in respect of carry forward tax losses is recognized only if it is virtually certain that sufficient future taxable income would be available in the future to realize the tax benefits. | ||
b) | Previous GAAP requires an entity to follow the income statement approach for recognizing deferred taxes, while U.S. GAAP requires balance sheet approach in recognizing deferred taxes. | ||
c) | Consequential tax impact of the reconciliation items between Previous GAAP and U.S. GAAP discussed herein. |
6) | The key differences between Previous GAAP and U.S. GAAP are as follows: |
a) | Under Previous GAAP, liability is recognized in respect of proposed dividend even-though the dividend is expected to be approved by the shareholders subsequent to the reporting date. Under U.S. GAAP, liability for dividend is recognized only when it is approved by the shareholders. | ||
b) | Certain liabilities to state finance institutions are reflected as borrowings under Previous GAAP, while these amounts are classified as liabilities under U.S. GAAP. This is a presentation difference between line items within statement of financial position and has no impact on equity. |
7) | The key difference in defined employee benefit obligations between Previous GAAP and U.S. GAAP are as follows: |
a) | Under Previous GAAP, the Company considers the yield on government securities as the discounting rate in determining such employee retirement benefit obligation. Under U.S. GAAP, the Company considers yield on corporate bonds as the discount rate. | ||
b) | Under U.S. GAAP, actuarial gains and losses relating to defined employee retirement obligation is recognised in equity, which is subsequently recycled into the income statement using the corridor approach. Under Previous GAAP, the actuarial gains and losses are recognised in the statement of income in the period in which they occur. |
8) | The key differences between Previous GAAP and U.S. GAAP relates to accounting of the Companys employee stock option plan including modification of fully vested stock options in March 2007. |
53
Amount as per | Amount as | Relevant | ||||||||||||||
Previous | Reconciliation | per US | Notes for | |||||||||||||
Particulars | GAAP | adjustment | GAAP | adjustments | ||||||||||||
Goodwill |
44,847 | Rs. | (3,702) | Rs. | 41,145 | 1 | ||||||||||
Property, plant and equipment and intangible assets |
44,884 | 10,629 | 55,513 | 1(b),2 | ||||||||||||
Available for sale investments |
46,005 | 501 | 46,506 | 3 | ||||||||||||
Investment in equity accounted investees |
1,451 | | 1,451 | |||||||||||||
Inventories |
7,760 | 632 | 8,392 | 4 | ||||||||||||
Trade receivables |
43,042 | (1,614 | ) | 41,428 | 4 | |||||||||||
Unbilled revenues |
11,892 | (244 | ) | 11,648 | 4 | |||||||||||
Cash and cash equivalents |
18,348 | | 18,348 | |||||||||||||
Net tax
assets (including deferred taxes) |
560 | (377 | ) | 183 | 5 | |||||||||||
Other assets |
16,488 | 1,941 | 18,429 | 2(a),4 | ||||||||||||
TOTAL ASSETS |
Rs. | 235,277 | Rs. | 7,766 | Rs. | 243,043 | ||||||||||
Share capital and share premium (net of shares
hold by controlled trust) |
Rs. | 28,555 | Rs. | (750 | ) | Rs. | 27,805 | 9 | ||||||||
Retained earnings |
96,895 | 12,310 | 109,205 | |||||||||||||
Cash flow hedging reserve |
(9,344 | ) | 1,028 | 8,316 | 5(b),8 | |||||||||||
Other reserves |
2,233 | 751 | 2,984 | 3,7(b), 8 | ||||||||||||
Total equity (A) |
118,339 | 13,339 | 131,678 | |||||||||||||
Minority interest |
132 | | 132 | |||||||||||||
Loan and borrowings |
50,693 | (99 | ) | 50,594 | 6 | (b) | ||||||||||
Trade payables, accrued expenses and liabilities |
32,987 | | 32,987 | |||||||||||||
Unearned revenues |
4,709 | (83 | ) | 4,626 | 4 | |||||||||||
Employee benefit obligations |
2,629 | (125 | ) | 2,504 | 7 | |||||||||||
Other liabilities |
25,788 | (5,266 | ) | 20,522 | 6 | |||||||||||
Total liabilities (B) |
116,938 | (5,573 | ) | 111,365 | ||||||||||||
TOTAL LIABILITIES AND EQUITY (A)+(B) |
Rs. | 235,277 | 7,766 | Rs. | 243,043 | |||||||||||
Notes: |
1) | The key differences in goodwill between U.S. GAAP and Previous GAAP are as follows: |
a) | Under Previous GAAP, prior to the Transition Date, the Company merged certain wholly owned subsidiaries and adjusted the goodwill relating to acquisition of such entities against the retained earnings, whereas this adjustment was not recorded under U.S. GAAP. | ||
b) | Under U.S. GAAP, all the assets and liabilities arising from a business combination are identified and recorded at fair values. Accordingly, in respect of all business combinations a portion of purchase price was allocated towards acquired intangibles, net of related deferred taxes. Under Previous GAAP, assets and liabilities arising from a business combination are recognized at carrying value in the books of the acquired entity. This resulted in difference between the carrying amount of goodwill, intangible assets and deferred tax liabilities between U.S.GAAP and Previous GAAP |
2) | The key differences in property, plant and equipment and intangibles between U.S. GAAP and Previous GAAP are as follows: |
54
a) | Under U.S. GAAP, lease of land is classified as an operating lease unless the title to the leasehold land is expected to be transferred to the Company at the end of the lease term. Lease rentals paid in advance and lease deposits are recognized as other assets under U.S.GAAP. Under Previous GAAP, the lease rentals paid in advance and lease deposits are recognized in property, plant and equipment. This is a presentation difference between line items within statement of financial position and has no impact on equity. | ||
b) | Difference in the basis of interest capitalization between Previous GAAP and U.S. GAAP. | ||
c) | Under U.S. GAAP, finite life intangible assets are amortized in the proportion of economic benefits consumed during the period to the expected total economic benefits. Under Previous GAAP, such intangible assets are usually amortized on a straight line basis over the estimated useful life. |
3) | Under US GAAP, available for sale investments are measured at fair value at each reporting date. The changes in fair value of such investments, net of related deferred taxes, are recognized directly in equity. Under Previous GAAP, short-term investments are measured at lower of cost or fair value. | |
4) | The key differences in revenue recognition principles between Previous GAAP and U.S. GAAP are as follows: |
a) | Under U.S. GAAP, in respect of certain multiple element arrangements, revenue recognition in respect of products/services delivered is limited to the amount of consideration that is not contingent upon delivery of additional items or meeting other specified performance conditions. Under Previous GAAP, revenue for products/services delivered is recognized in full, if the delivery of additional items or meeting other specified performance conditions is considered probable at the time of delivery. | ||
b) | Differences in revenue recognition principles between Previous GAAP and U.S. GAAP in respect of revenue arrangements involving delivery of third-party software products and related services. | ||
The above adjustments consequently impact trade receivables, unbilled revenues, inventory, other assets and unearned revenues balances. |
5) | The key difference in net tax assets between Previous GAAP and U.S. GAAP are as follows: |
a) | Under U.S. GAAP, deferred tax assets in respect of carry forward tax losses are recognized if it is more likely than not that, sufficient taxable profits would be available in the future to realize the tax benefits. Under Previous GAAP, deferred tax assets in respect of carry forward tax losses is recognized only if it is virtually certain that sufficient future taxable income would be available in the future to realize the tax benefits. | ||
b) | Previous GAAP requires an entity to follow the income statement approach for recognizing deferred taxes, while U.S. GAAP requires balance sheet approach in recognizing deferred taxes. |
c) | Consequential tax impact of the reconciliation items between Previous GAAP and U.S. GAAP discussed herein. |
6) | The key differences between Previous GAAP and U.S. GAAP are as follows: |
a) | Under Previous GAAP, liability is recognized in respect of proposed dividend even-though the dividend is expected to be approved by the shareholders subsequent to the reporting date. Under U.S. GAAP, liability for dividend is recognized only when it is approved by the shareholders. | ||
b) | Certain liabilities to state finance institutions are reflected as borrowings under Previous GAAP, while these amounts are classified as liabilities under U.S. GAAP. This is a presentation difference between line items within statement of financial position and has no impact on equity. |
7) | The key difference in defined employee benefit obligations between Previous GAAP and U.S. GAAP are as follows: |
a) | Under Previous GAAP, the Company considers the yield on government securities as the discounting rate in determining such employee retirement benefit obligation. Under U.S. GAAP, the Company considers yield on corporate bonds as the discount rate. | ||
b) | Under U.S. GAAP, actuarial gains and losses relating to defined employee retirement obligation is recognised in equity, which is subsequently recycled into the income statement using the corridor approach. Under Previous GAAP, the actuarial gains and losses are recognised in the statement of income in the period in which they occur. |
8) | Foreign currency borrowings and related cross currency swap are considered as effective hedge of net investment in non-integral foreign operation. Consequently, the changes in the fair value of such derivative instrument and the impact of foreign currency translation adjustment on such foreign currency borrowings that are determined to be an effective hedge are recognised in the equity. Under U.S. GAAP, combination of foreign currency borrowings and related cross currency swap do not qualify for hedge accounting, and consequently, the changes in fair value of such derivative instrument and the foreign currency translation adjustments on foreign currency borrowings are recognized in the statement of income. |
55
9) | The key differences between Previous GAAP and U.S. GAAP relates to accounting of the Companys employee stock option plan including modification of fully vested stock options in March 2007 |
56
Amount as per | Amount as | Relevant | |||||||||||||||
Previous | Reconciliation | per US | Notes for | ||||||||||||||
Particulars | GAAP | adjustment | GAAP | adjustments | |||||||||||||
Goodwill |
Rs. | 56,521 | Rs. | (7,019) | Rs. | 49,502 | 1 | ||||||||||
Property, plant and equipment and intangible assets |
52,563 | 14,903 | 67,466 | 1 | (b),2 | ||||||||||||
Available for sale investments |
16,426 | 92 | 16,518 | 3 | |||||||||||||
Investment in equity accounted investees |
1,670 | | 1,670 | ||||||||||||||
Inventories |
7,586 | 1,100 | 8,686 | 4 | |||||||||||||
Trade receivables |
48,859 | (2,642 | ) | 46,217 | 4 | ||||||||||||
Unbilled revenues |
14,108 | (265 | ) | 13,843 | 4 | ||||||||||||
Cash and cash equivalents |
49,117 | | 49,117 | ||||||||||||||
Net tax assets (including deferred taxes) |
4,143 | (277 | ) | 3,866 | 5 | ||||||||||||
Other assets |
21,380 | 2,408 | 23,788 | 2 | (a),4 | ||||||||||||
TOTAL ASSETS |
Rs. | 272,373 | Rs. | 8,300 | Rs. | 280,673 | |||||||||||
Share capital and share premium (net of shares
held by controlled trust) |
Rs. | 29,668 | Rs. | (453 | ) | Rs. | 29,215 | 9 | |||||||||
Retained earnings |
119,957 | 8,685 | 128,642 | ||||||||||||||
Cash flow hedging reserve |
(16,150 | ) | 1,644 | (14,506 | ) | 5 | (b),8 | ||||||||||
Other reserves |
2,809 | 4,022 | 6,831 | 3,7 | (b),8 | ||||||||||||
Total equity (A) |
136,284 | 13,898 | 150,182 | ||||||||||||||
Minority interest |
237 | | 237 | ||||||||||||||
Loan and borrowings |
56,892 | (86 | ) | 56,806 | 6 | (b) | |||||||||||
Trade payables, accrued expenses and liabilities |
42,779 | | 42,779 | ||||||||||||||
Unearned revenues |
6,734 | 182 | 6,916 | 4 | |||||||||||||
Employee benefit obligations |
3,111 | (146 | ) | 2,965 | 7 | ||||||||||||
Other liabilities |
26,336 | (5,548 | ) | 20,788 | 6 | ||||||||||||
Total liabilities (B) |
136,089 | (5,598 | ) | 130,491 | |||||||||||||
TOTAL LIABILITIES AND EQUITY (A)+(B) |
Rs. | 272,373 | Rs. | 8,300 | Rs. | 280,673 | |||||||||||
Notes: |
1) | The key differences in goodwill between U.S. GAAP and Previous GAAP are as follows: |
a) | Under Previous GAAP, prior to the Transition Date, the Company merged certain wholly owned subsidiaries and adjusted the goodwill relating to acquisition of such entities against the retained earnings, whereas this adjustment was not recorded under U.S. GAAP. |
57
b) | Under U.S. GAAP, all the assets and liabilities arising from a business combination are identified and recorded at fair values. Accordingly, in respect of all business combinations a portion of purchase price was allocated towards acquired intangibles, net of related deferred taxes. Under Previous GAAP, assets and liabilities arising from a business combination are recognized at carrying value in the books of the acquired entity. This resulted in difference between the carrying amount of goodwill, intangible assets and deferred tax liabilities between U.S.GAAP and Previous GAAP |
2) | The key differences in property, plant and equipment and intangibles between U.S. GAAP and Previous GAAP are as follows: |
a) | Under U.S. GAAP, lease of land is classified as an operating lease unless the title to the leasehold land is expected to be transferred to the Company at the end of the lease term. Lease rentals paid in advance and lease deposits are recognized as other assets under U.S.GAAP. Under Previous GAAP, the lease rentals paid in advance and lease deposits are recognized in property, plant and equipment. This is a presentation difference between line items within statement of financial position and has no impact on equity. | ||
b) | Difference in the basis of interest capitalization between Previous GAAP and U.S. GAAP. | ||
c) | Under U.S. GAAP, finite life intangible assets are amortized in the proportion of economic benefits consumed during the period to the expected total economic benefits. Under Previous GAAP, such intangible assets are usually amortized on a straight line basis over the estimated useful life. |
3) | Under US GAAP, available for sale investments are measured at fair value at each reporting date. The changes in fair value of such investments, net of related deferred taxes, are recognized directly in equity. Under Previous GAAP, short-term investments are measured at lower of cost or fair value. | |
4) | The key differences in revenue recognition principles between Previous GAAP and U.S. GAAP are as follows: |
a) | Under U.S. GAAP, in respect of certain multiple element arrangements, revenue recognition in respect of products/services delivered is limited to the amount of consideration that is not contingent upon delivery of additional items or meeting other specified performance conditions. Under Previous GAAP, revenue for products/services delivered is recognized in full, if the delivery of additional items or meeting other specified performance conditions is considered probable at the time of delivery. | ||
b) | Differences in revenue recognition principles between Previous GAAP and U.S. GAAP in respect of revenue arrangements involving delivery of third-party software products and related services. | ||
The above adjustments consequently impact trade receivables, unbilled revenues, inventory, other assets and unearned revenues balances. |
5) | The key difference in net tax assets between Previous GAAP and U.S. GAAP are as follows: |
a) | Under U.S. GAAP, deferred tax assets in respect of carry forward tax losses are recognized if it is more likely than not that, sufficient taxable profits would be available in the future to realize the tax benefits. Under Previous GAAP, deferred tax assets in respect of carry forward tax losses is recognized only if it is virtually certain that sufficient future taxable income would be available in the future to realize the tax benefits. | ||
b) | Previous GAAP requires an entity to follow the income statement approach for recognizing deferred taxes, while U.S. GAAP requires balance sheet approach in recognizing deferred taxes. |
c) | Consequential tax impact of the reconciliation items between Previous GAAP and U.S. GAAP discussed herein. |
6) | The key differences between Previous GAAP and U.S. GAAP are as follows: |
a) | Under Previous GAAP, liability is recognized in respect of proposed dividend even-though the dividend is expected to be approved by the shareholders subsequent to the reporting date. Under U.S. GAAP, liability for dividend is recognized only when it is approved by the shareholders. | ||
b) | Certain liabilities to state finance institutions are reflected as borrowings under Previous GAAP, while these amounts are classified as liabilities under U.S. GAAP. This is a presentation difference between line items within statement of financial position and has no impact on equity. |
7) | The key difference in defined employee benefit obligations between Previous GAAP and U.S. GAAP are as follows: |
58
a) | Under Previous GAAP, the Company considers the yield on government securities as the discounting rate in determining such employee retirement benefit obligation. Under U.S. GAAP, the Company considers yield on corporate bonds as the discount rate. | ||
b) | Under U.S. GAAP, actuarial gains and losses relating to defined employee retirement obligation is recognised in equity, which is subsequently recycled into the income statement using the corridor approach. Under Previous GAAP, the actuarial gains and losses are recognised in the statement of income in the period in which they occur. |
8) | Foreign currency borrowings and related cross currency swap are considered as effective hedge of net investment in non-integral foreign operation. Consequently, the changes in the fair value of such derivative instrument and the impact of foreign currency translation adjustment on such foreign currency borrowings that are determined to be an effective hedge are recognised in the equity. Under U.S. GAAP, combination of foreign currency borrowings and related cross currency swap do not qualify for hedge accounting, and consequently, the changes in fair value of such derivative instrument and the foreign currency translation adjustments on foreign currency borrowings are recognized in the statement of income. | |
9) | The key differences between Previous GAAP and U.S. GAAP relates to accounting of the Companys employee stock option plan including modification of fully vested stock options in March 2007 |
59
Amount as per | Amount as | Relevant | ||||||||||||||
Previous | Reconciliation | per US | Notes for | |||||||||||||
Particulars | GAAP | adjustment | GAAP | adjustments | ||||||||||||
Revenues |
Rs. | 60,365 | Rs. | (742) | Rs. | 59,623 | 1 | |||||||||
Operating profit |
10,224 | (472 | ) | 9,752 | 2 | |||||||||||
Other income / (expense) |
285 | (557 | ) | (272 | ) | 3 | ||||||||||
Equity in earnings of equity-accounted investees |
107 | | 107 | |||||||||||||
Profit before taxes |
10,616 | (1,029 | ) | 9,587 | ||||||||||||
Income taxes |
(1,526 | ) | 90 | (1,436 | ) | 4 | ||||||||||
Minority Interest |
(12 | ) | | (12 | ) | |||||||||||
Net Income |
9,078 | (939 | ) | 8,139 |
Notes: |
1) | The key differences in revenue recognition principles between Previous GAAP and U.S. GAAP are as follows: |
a) | Under U.S. GAAP, in respect of certain multiple element arrangements, revenue recognition in respect of products/services delivered is limited to the amount of consideration that is not contingent upon delivery of additional items or meeting other specified performance conditions. Under Previous GAAP, revenue for products/services delivered is recognized in full, if the delivery of additional items or meeting other specified performance conditions is considered probable at the time of delivery. |
b) | Differences in revenue recognition principles between Previous GAAP and U.S. GAAP in respect of revenue arrangements involving delivery of third-party software products and related services. |
c) | Under U.S. GAAP, generally cash payments to customers pursuant to sales promotional activities are considered as sales discount and reduced from revenue. Under Previous GAAP, such payments are considered as cost of revenues and selling and marketing expenses. This is a presentation difference and has no impact on net income. |
2) | The key differences in operating profit between Previous GAAP and U.S. GAAP are as follows: |
a) | Impact of difference in revenue recognition principles described above. |
b) | Under U.S. GAAP, all the assets and liabilities arising from a business combination are identified and recorded at fair values. Under U.S. GAAP, finite life intangible assets are amortized in the proportion of economic benefits consumed during the period to the expected total economic benefits. Under Previous GAAP, such intangible assets are usually amortized on a straight line basis over the estimated useful. This has resulted in a difference in the underlying amortization expense between Previous GAAP and U.S. GAAP. |
c) | Indian tax laws levies fringe benefit tax (FBT) in respect of various fringe benefits provided to employees. Under Previous GAAP, such FBT is treated as income taxes, whereas under U.S. GAAP such FBT is treated as an operating expense. This is a presentation difference and has no impact on net income. |
d) | Indian tax laws levies FBT on all stock options exercised on or after April 1, 2007. The Company has modified its stock option plans to recover the FBT from employees. Under U.S. GAAP, FBT recovery is treated as an additional exercise price and recorded in stockholders equity. Under Previous GAAP, recovery of FBT from employees is offset against the related FBT expense. |
3) | The key differences in other income / (expense), net between Previous GAAP and U.S. GAAP are as follows: |
60
a) | Foreign currency borrowings and related cross currency swap are considered as effective hedge of net investment in non-integral foreign operation. Consequently, the changes in the fair value of such derivative instrument and the impact of foreign currency translation adjustment on foreign currency borrowings that are determined to be an effective hedge are recognised in the equity. Under U.S. GAAP, combination of foreign currency borrowings and related cross currency swap do not qualify for hedge accounting, and consequently, the changes in fair value of such derivative instrument and the foreign currency translation adjustments on foreign currency borrowings are recognized in the statement of income. |
b) | Difference in the basis of interest capitalization between Previous GAAP and U.S. GAAP. |
4) | The key differences in income taxes between Previous GAAP and U.S. GAAP are as follows: |
a) | Reclassification of FBT to operating expenses from income tax expense; refer note 2(c) above. |
b) | Under U.S. GAAP, deferred tax assets in respect of carry forward tax losses are recognized if it is more likely than not that, sufficient taxable profits would be available in the future to realize the tax benefits. Under Previous GAAP, deferred tax assets in respect of carry forward tax losses is recognized only if it is virtually certain that sufficient future taxable income would be available in the future to realize the tax benefits. |
c) | Previous GAAP requires an entity to follow the income statement approach for recognizing deferred taxes, while U.S. GAAP requires balance sheet approach in recognizing deferred taxes. | ||
d) | Consequential tax impact of the reconciliation items between Previous GAAP and U.S. GAAP discussed herein. |
61
Amount as per | Amount as | Relevant | ||||||||||||||
Previous | Reconciliation | per U.S. | Notes for | |||||||||||||
Particulars | GAAP | adjustment | GAAP | adjustments | ||||||||||||
Revenues |
Rs. | 256,995 | Rs. | (2,431) | Rs. | 254,564 | 1 | |||||||||
Operating profit |
44,004 | (2,614 | ) | 41,390 | 2 | |||||||||||
Other income / (expense) |
1,192 | (3,008 | ) | (1,816 | ) | 3 | ||||||||||
Equity in earnings of equity-accounted investees |
362 | | 362 | |||||||||||||
Profit before taxes |
45,558 | (5,622 | ) | 39,936 | ||||||||||||
Income taxes |
(6,460 | ) | 1,038 | (5,422 | ) | 4 | ||||||||||
Minority Interest |
(99 | ) | | (99 | ) | |||||||||||
Profit for the period |
38,999 | (4,584 | ) | 34,415 |
Notes: |
1) | The key differences in revenue recognition principles between Previous GAAP and U.S. GAAP are as follows: |
a) | Under U.S. GAAP, in respect of certain multiple element arrangements, revenue recognition in respect of products/services delivered is limited to the amount of consideration that is not contingent upon delivery of additional items or meeting other specified performance conditions. Under Previous GAAP, revenue for products/services delivered is recognized in full, if the delivery of additional items or meeting other specified performance conditions is considered probable at the time of delivery. |
b) | Differences in revenue recognition principles between Previous GAAP and U.S. GAAP in respect of revenue arrangements involving delivery of third-party software products and related services. |
c) | Under U.S. GAAP, generally cash payments to customers pursuant to sales promotional activities are considered as sales discount and reduced from revenue. Under Previous GAAP, such payments are considered as cost of revenues and selling and marketing expenses. This is a presentation difference and has no impact on net income. |
2) | The key differences in operating profit between Previous GAAP and U.S. GAAP are as follows: |
a) | Impact of difference in revenue recognition principles described above. |
b) | Under U.S. GAAP, all the assets and liabilities arising from a business combination are identified and recorded at fair values. Under U.S. GAAP, finite life intangible assets are amortized in the proportion of economic benefits consumed during the period to the expected total economic benefits. Under Previous GAAP, such intangible assets are usually amortized on a straight line basis over the estimated useful. This has resulted in a difference in the underlying amortization expense between Previous GAAP and U.S. GAAP. |
c) | Indian tax laws levies fringe benefit tax (FBT) in respect of various fringe benefits provided to employees. Under Previous GAAP, such FBT is treated as income taxes, whereas under U.S. GAAP such FBT is treated as an operating expense. This is a presentation difference and has no impact on net income. |
d) | Indian tax laws levies FBT on all stock options exercised on or after April 1, 2007. The Company has modified its stock option plans to recover the FBT from employees. Under U.S. GAAP, FBT recovery is treated as an additional exercise price and recorded in stockholders equity. Under Previous GAAP, recovery of FBT from employees is offset against the related FBT expense. |
3) | The key differences in other income / (expense), net between Previous GAAP and U.S. GAAP are as follows: |
a) | Foreign currency borrowings and related cross currency swap are considered as effective hedge of net investment in non-integral foreign operation. Consequently, the changes in the fair value of such derivative instrument and the impact of foreign currency translation adjustment on foreign currency borrowings that are determined to be an effective hedge are recognised in the equity. Under U.S. GAAP, combination of foreign currency borrowings and related cross currency swap do not qualify for hedge accounting, and consequently, the changes in fair value of such derivative instrument and the foreign currency translation adjustments on foreign currency borrowings are recognized in the statement of income. |
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b) | Difference in the basis of interest capitalization between Previous GAAP and U.S. GAAP. |
4) | The key differences in income taxes between Previous GAAP and U.S. GAAP are as follows: |
a) | Reclassification of FBT to operating expenses from income tax expense; refer note 2(c) above. |
b) | Under U.S. GAAP, deferred tax assets in respect of carry forward tax losses are recognized if it is more likely than not that, sufficient taxable profits would be available in the future to realize the tax benefits. Under Previous GAAP, deferred tax assets in respect of carry forward tax losses is recognized only if it is virtually certain that sufficient future taxable income would be available in the future to realize the tax benefits. |
c) | Previous GAAP requires an entity to follow the income statement approach for recognizing deferred taxes, while U.S. GAAP requires balance sheet approach in recognizing deferred taxes. | ||
d) | Consequential tax impact of the reconciliation items between Previous GAAP and U.S. GAAP discussed herein. |
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Wipro Limited and subsidiaries | ||||||||||||
Three months ended June 30, | Year on Year | |||||||||||
2008 | 2009 | Change | ||||||||||
Revenue |
Rs. | 59,719 | Rs. | 62,462 | 4.59 | % | ||||||
Cost of revenue |
(42,301 | ) | (43,247 | ) | 2.24 | % | ||||||
Gross profit |
17,418 | 19,215 | 10.31 | % | ||||||||
Operating income |
9,980 | 11,424 | 14.47 | % | ||||||||
Profit attributable to equity holders |
8,948 | 10,104 | 12.92 | %(1) | ||||||||
As a percentage of Revenue: |
||||||||||||
Selling and marketing expenses |
7.05 | % | 6.79 | % | 26 | bps | ||||||
General and administrative expenses |
5.41 | % | 5.69 | % | (28 | ) bps | ||||||
Gross margins |
29.17 | % | 30.76 | % | 159 | bps |
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Wipro Limited and subsidiaries | ||||||||||||
Three months ended June 30, | Year on Year | |||||||||||
2008 | 2009 | Change | ||||||||||
Operating margin |
16.71 | % | 18.29 | % | 158 | bps | ||||||
Earnings per share |
||||||||||||
Basic |
6.16 | 6.94 | ||||||||||
Diluted |
6.11 | 6.89 |
(1) | Our adjusted non-GAAP profit for the three months ended June 30, 2009 is Rs. 10,077, an increase of 10.70 % over the three months ended June 30, 2008. See discussion below: |
Three months ended June 30, | ||||||||
2008 | 2009 | |||||||
(In Percentage) | ||||||||
Revenue: |
||||||||
IT Services and Products |
||||||||
IT Services |
74 | 77 | ||||||
IT Products |
12 | 12 | ||||||
Total |
86 | 89 | ||||||
Consumer Care and Lighting |
8 | 8 | ||||||
Others |
6 | 3 | ||||||
100 | 100 | |||||||
Operating income: |
||||||||
IT Services and Products |
||||||||
IT Services |
92 | 94 | ||||||
IT Products |
3 | 3 | ||||||
Total |
95 | 97 | ||||||
Consumer Care and Lighting |
6 | 7 | ||||||
Others |
(1 | ) | (4 | ) | ||||
100 | 100 |
Three months ended June 30, | ||||||||
2008 | 2009 | |||||||
Profit for the period as per IFRS |
Rs. | 8,948 | Rs. | 10,104 | ||||
Adjustments: |
||||||||
Accelerated amortization of stock options that vest in a graded manner |
155 | (27 | ) | |||||
Adjusted non-GAAP profit |
Rs. | 9,103 | Rs. | 10,077 | ||||
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| Our total revenues increased by 5%. This was driven primarily by a 10% and 9% increase in revenue from our IT Services and Consumer Care and Lighting business segments respectively. This increased revenue was partially offset by a decline of 118% in revenue from our Others, including reconciling items segment. |
| Our gross profit as percentage of our total revenue increased by 159 basis points (bps). This was primarily on account of an increase in gross profit as a percentage of revenue from our IT Products segment by 404 bps and an increase in gross profit as a percentage of revenue from our Consumer Care and Lighting segment by 595 bps. This increase was partially offset by a decline in gross profit as a percentage of revenue from our Others segment, including reconciling items. |
| Our selling and marketing expenses as a percentage of revenue has declined from 7.05% for the three months ended June 30, 2008 to 6.79% for the three month periods ended June 30, 2009. In absolute terms selling and marketing expenses have declined marginally by 0.67%, primarily due to a decline in the IT Services segment and Others segment, including reconciling items. This decline was partially offset by an increase in the IT Products and Consumer Care and Lighting segment. |
| Our general and administrative expenses as a percentage of revenue has increased from 5.41% for the three month periods ended June 30, 2008 to 5.69% for the three month periods ended June 30, 2009. In absolute terms the general and administrative expenses increased by 10.04%, primarily due to increased expenses in the IT Products segment, Consumer Care and Lighting segment and IT Services segment. |
| As a result of the foregoing factors, our operating income increased by 14.47%, from Rs. 9,980 for the three months period ended June 30, 2008 to Rs. 11,424 for the three months period ended June 30, 2009. |
| Our finance (expenses)/income and other income, net, increased from Rs. 316 for the three months ended June 30, 2008 to Rs. 355 for the three months ended June 30, 2009. |
| Our income taxes increased by Rs. 297, from Rs. 1,443 for the three months ended June 30, 2008 to Rs. 1,740 for the three months ended June 30, 2009. Our effective tax rate increased from 13.9% for the three months ended June 30, 2008 to 14.6% for the three months ended June 30, 2009. The increase is attributable to an increase in the proportion of income subject to income taxes. |
| Our equity in earnings of affiliates for the three months ended June 30, 2008 and 2009 was Rs. 107 and Rs. 114, respectively. Equity in earnings of affiliates primarily relates to the equity in earnings of Wipro GE. |
| As a result of the foregoing factors, our profit for the period increased by Rs. 1,156 or 12.92%, from Rs. 8,948 for the three months ended June 30, 2008 to Rs. 10,104 for the three months ended June 30, 2009. |
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Three months ended June 30, | Year on Year | |||||||||||
2008 | 2009 | Change | ||||||||||
Revenue |
Rs. | 44,028 | Rs. | 48,266 | 9.62 | % | ||||||
Gross profit |
14,500 | 15,901 | 9.66 | % | ||||||||
Selling and marketing expenses |
(2,588 | ) | (2,336 | ) | (9.75 | )% | ||||||
General and administrative expenses |
(2,745 | ) | (2,867 | ) | 4.43 | % | ||||||
Operating income |
9,167 | 10,698 | 16.70 | % | ||||||||
As a percentage of Revenue: |
||||||||||||
Selling and marketing expenses |
5.88 | % | 4.84 | % | 104 | bps | ||||||
General and administrative expenses |
6.23 | % | 5.94 | % | 29 | bps | ||||||
Gross margin |
32.93 | % | 32.94 | % | 1 | bps | ||||||
Operating margin |
20.82 | % | 22.16 | % | 134 | bps |
| Our revenue from IT Services increased by 10%. In USD terms our revenue decreased by 3% from $ 1,068 to $ 1,033. Our average USD/INR realization increased from Rs. 41.25 for the three months ended June 30, 2008 to Rs. 46.74 for the three months ended June 30, 2009. | |
This decline of 3% was primarily due to a 16% decline in revenue from technology, media and telecom services, a 8% decline in revenue from energy and utility services. This was partially offset by a 15% increase in revenue from retail and transportation services and a 3% increase in revenue from manufacturing and healthcare services. While our onsite price realization has remained almost constant, our offshore realization has increased by 2.3%. In our IT Services segment, we added 26 new clients during the three months ended June 30, 2009. | ||
| Our gross profit as a percentage of our revenue from our IT Services segment increased marginally by 1bps. The improvement in gross margin as percentage of revenue is primarily on account of improvement in utilization rates and better exchange rate realization. Our average utilization of billable employees improved from 67.9% for the three month ended June 30, 2008 to 70% for the three month ended June 30, 2009. This was offset by the higher increase in the personnel cost arising on account of compensation review in fiscal 2009. | |
| Selling and marketing expenses as a percentage of revenue from our IT Services segment declined from 5.88% for the three months ended June 30, 2008 to 4.84% for the three months ended June 30, 2009. This is primarily attributable to cost curtailment measures adopted by the company; for example we used video conferencing and virtual meeting tools to reduce our travel spends. Further, our integrated service offering approach resulted in lower selling and marketing expense as a percentage of revenue from our IT Services segment. | |
| General and administrative expenses as a percentage of revenue from our IT Services segment declined marginally from 6.23% for the three months ended June 30, 2008 to 5.94% for the three months ended June 30, 2009. The increase in general and administrative expenses in absolute terms is primarily due to increase in personnel cost arising on account of compensation review. This was partially offset by the decline in other expenses, which is attributable to cost curtailment measures. |
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| As a result of the above, operating income of our IT Services segment increased by 16.70%. |
Three months ended June 30, | Year on Year | |||||||||||
2008 | 2009 | Change | ||||||||||
Revenue |
Rs. | 7,322 | Rs. | 7,337 | 0.20 | % | ||||||
Gross profit |
600 | 898 | 49.76 | % | ||||||||
Selling and marketing expenses |
(264 | ) | (332 | ) | 25.92 | % | ||||||
General and administrative expenses |
(78 | ) | (274 | ) | | |||||||
Operating income |
258 | 292 | 12.96 | % | ||||||||
As a Percentage of Revenues: |
||||||||||||
Selling and marketing expenses |
3.61 | % | 4.53 | % | (92 | ) bps | ||||||
General and administrative expenses |
1.07 | % | 3.73 | % | (266 | ) bps | ||||||
Gross margin |
8.19 | % | 12.23 | % | 404 | bps | ||||||
Operating margin |
3.53 | % | 3.97 | % | 44 | bps |
| Our revenue from the IT Products segment increased marginally. |
| Our gross profit as a percentage of our revenue of our IT products segment increased by 404 bps. This increase is primarily due to increase in proportion of revenues from certain large deals in India and Middle East markets, which have higher gross margins. |
| Selling and marketing expenses as a percentage of revenue from our IT Products segment has increased from 3.61% for the three months ended June 30, 2008 to 4.53% for the three months ended June 30, 2009. In absolute terms selling and marketing expenses increased by Rs. 68. |
| General and administrative expenses as a percentage of revenue from our IT Products segment has increased from 1.07% for the three months ended June 30, 2008 to 3.73% for the three months ended June 30, 2009. The increase in general and administrative expenses in absolute terms was primarily due to focus on our increasing presence in select geographies, which is in line with the long-term strategy of the Company to invest in emerging geographies. |
| As a result of the above, operating income from our IT Products segment increased by 12.96%. |
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Three months ended June 30, | Year on Year | |||||||||||
2008 | 2009 | Change | ||||||||||
Revenue |
Rs. | 4,749 | Rs. | 5,198 | 9.44 | % | ||||||
Gross profit |
2,093 | 2,600 | 24.21 | % | ||||||||
Selling and marketing expenses |
(1,184 | ) | (1,473 | ) | 24.37 | % | ||||||
General and administrative expenses |
(286 | ) | (335 | ) | 17.36 | % | ||||||
Operating income |
623 | 792 | 27.22 | % | ||||||||
As a Percentage of Revenues: |
||||||||||||
Selling and marketing expenses |
24.94 | % | 28.34 | % | (340 | ) bps | ||||||
General and administrative expenses |
6.01 | % | 6.45 | % | (44 | ) bps | ||||||
Gross margin |
44.07 | % | 50.02 | % | 595 | bps | ||||||
Operating margin |
13.11 | % | 15.24 | % | 213 | bps |
| Our Consumer Care and Lighting revenue increased by 9.44%. The increase in revenue is attributable to an increase in the volume of our soap, lighting, furniture products and Personal Care Products of Unza. |
| Our gross profit as a percentage of our revenues from Consumer Care and Lighting segment increased by 595bps. This increase was primarily due to an increase in the proportion of revenue from the range of products manufactured by Unza, which typically have higher gross margins. Further, decrease in input prices also contributed to the expansion in gross margin in the Indian markets. |
| Selling and marketing expense as percentage of revenue from our Consumer Care and Lighting segment has increased from 24.94% for the three months ended June 30, 2008 to 28.34% for the three months ended June 30, 2009. This increase is primarily due to the increase in proportion of revenues from Unza. Selling and distribution expense as a percentage of our revenues is typically higher in Unza products. Further during the three months ended June 30, 2009, we incurred higher brand promotion and advertisement spends in Indian market. |
| General and administrative expense as a percentage of revenue from our Consumer Care and Lighting segment has increased from 6.01% for the three months ended June 30, 2008 to 6.45% for the three month ended June 30, 2009. This increase is primarily due to expenses incurred by Unza. General and administrative expense as a percentage of our revenue is typically higher in Unza products. |
| As a result of the above, operating income of our Consumer Care and Lighting increased by 27.22%. |
| Revenue from our Others segment, including reconciling items, decreased by 54.10%, from Rs. 3,620 for the three months ended June 30, 2008 to Rs. 1,661 for the three months ended June 30, 2009. This decrease was primarily driven by a decrease in revenue from our hydraulic cylinders and tipping gear systems business. The decline in the revenues is attributable to slowdown in the global markets which has impacted the market for infrastructure engineering products in Indian and European markets. |
| Operating income from our Others segment, including reconciling items, decreased from Rs. (68) for the three months ended June 30, 2008 to Rs. (358) for the three months ended June 30, 2009. This is primarily due to loss of Rs. (280) in our hydraulic cylinders and tipping gear systems business as against income of Rs. 225 in the corresponding previous year. This loss is attributable to the contraction in the sales volume of infrastructure engineering business due to the slowdown in the global market. This was partially offset by lower stock compensation expense on accelerated amortization basis during the three months ended June 30, 2009 of Rs. (27) as compared to Rs. 155 for the three months ended June 30, 2008. The incremental impact of accelerated amortization of stock compensation expense over stock compensation expense allocated to the individual business segments is reported in reconciling items. |
69
| exchange differences arising from the translation or settlement of transactions in foreign currency, except for exchange differences on debt denominated in foreign currency (which are reported within finance and other income/(expenses), net); and |
| the changes in fair value for derivatives not designated as hedging derivatives and ineffective portion of the hedging instruments. For forward foreign exchange contracts which are designated and effective as cash flow hedge hedges, the marked to market gains and losses are deferred and reported as a component of other comprehensive income in stockholders equity and subsequently recorded in the income statement when the hedged transactions occur, along with the hedged items. |
70
Three months ended June 30, | ||||||||||||
2008 | 2009 | Change | ||||||||||
Net cash provided by/(used in) continuing operations: |
||||||||||||
Operating activities |
Rs. | 9,832 | Rs. | 16,594 | 6,762 | |||||||
Investing activities |
(34,714 | ) | (21,568 | ) | 13,146 | |||||||
Financing activities |
3,560 | (6,916 | ) | (10,476 | ) | |||||||
Net change in cash and cash equivalents |
(21,322 | ) | (11,890 | ) | 9,432 | |||||||
Effect of exchange rate changes on cash and cash equivalent |
405 | (118 | ) | (523 | ) |
71
72
| Our limited ability to increase prices; | ||
| Increases in the proportion of services performed at client location; and | ||
| The impact of exchange rate fluctuations on our rupee realizations |
| Performance And Capital Efficiency (PACE) program- reduce capex spends, deliver process and application optimization and assume ownership of specific IT areas to reduce baseline IT spends for the client; | ||
| strengthening our delivery model; | ||
| cost containment initiatives and driving higher employee productivity; | ||
| aligning our resources to expected demand; and | ||
| increasing the utilization of our IT professionals. |
73
74
We derive revenue primarily from: | |||
| software development and maintenance services; | ||
| BPO services; and | ||
| Sale of IT and other products. |
a) | Services: We recognise revenue when the significant terms of the arrangement are enforceable, services are being delivered and the collectability is reasonably assured. The method for recognizing revenues and costs depends on the nature of the services rendered: |
(i) | Time and materials contracts: Revenues and costs relating to time and materials contracts are recognized as the related services are rendered. | ||
(ii) | Fixed-price contracts: Revenues from fixed-price contracts, including systems development and integration contracts are recognized using the percentage-of-completion method. Percentage of completion is determined based on direct labor costs incurred to date as a percentage of total estimated project costs required to complete the project. The cost expended (or input) method has been used to measure progress towards completion as there is a direct relationship between input and productivity. Costs which relate to future activity on the contract are recognized as contract work in progress. If we do not have a sufficient basis to measure the progress of completion or to estimate the total contract revenues and costs, revenue is recognized only to the extent of contract cost incurred for which recoverability is probable. When total cost estimates exceed revenues in an arrangement, the estimated losses are recognized in the income statement in the period in which such losses become probable based on the current contract estimates. | ||
Unbilled revenues included in other current assets represent cost and earnings in excess of billings as at the end of the reporting period. Unearned revenues included in other current liabilities represent billing in excess of revenue recognized. | |||
(iii) | Maintenance contract: Revenue from maintenanc |