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You can view the entire text of Notes to accounts of the company for the latest year

BSE: 532755ISIN: INE669C01036INDUSTRY: IT Consulting & Software

BSE   ` 732.60   Open: 730.00   Today's Range 723.45
734.40
+5.80 (+ 0.79 %) Prev Close: 726.80 52 Week Range 463.00
780.05
Year End :2017-03 

1. Corporate Information:

Tech Mahindra Limited (referred to as “TechM” or the “Company”) operates mainly into two sectors i.e. Telecom business and Enterprise Solutions business. The telecom business provides consulting-led integrated portfolio services to customers which are Telecom Equipment Manufacturers, Telecom Service Providers and IT Infrastructure Services, Business Process Outsourcing as well as Enterprise Services (BFSI, Retail & Logistics, Manufacturing, E&U, and Healthcare, Life Sciences, etc.) of Information Technology (IT) and IT-enabled services delivered through a network of multiple locations around the globe. The enterprise solutions business provides comprehensive range of IT services, including IT enabled services, application development and maintenance, consulting and enterprise business solutions, extended engineering solutions and infrastructure management services to diversified base of corporate customers in a wide range of industries including insurance, banking and financial services, manufacturing, telecommunications, transportation and engineering services. The Company’s registered office is in Mumbai, India and has over 170 subsidiaries across the globe.

The financial statements for the year ended March 31, 2017 were approved by the Board of Directors and authorise for issue on May 26, 2017.

Note 2 : Equity Share Capital

i) Aggregate number of fully paid-up Equity Shares allotted by way of Bonus Shares in the immediately preceding five years : 240,161,577 Equity Shares of Rs.10 each fully paid-up equivalent to 480,323,154 Equity Shares of Rs.5 each fully paid-up during the year ended March 31, 2015.

ii) Each Equity Share entitles the holder to one vote and carries an equal right to dividend.

iii) The amount that can be distributed by the company as dividends to its equity shareholders is determined based on the separate financial statements of the company and also considering the requirements of the Companies Act, 2013. The Company declares and pays dividends in Indian Rupees. The shareholders at the Annual General Meeting held on August 2, 2016 approved dividend of Rs.12 per equity share for the year ended March 31, 2016 which was subsequently paid. The amount was recognized as distributions to equity shareholders and the total appropriation was Rs.13,787 Million including corporate dividend tax.

iv) Capital Management:

The Company manages its capital to ensure that it will be able to continue as going concerns while maximizing the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Company consists of net debt (borrowings as detailed in notes 20 and 24 offset by cash and bank balances) and total equity of the Company. The Company is not subject to any externally imposed capital requirements. The Company’s risk management committee reviews the capital structure of the Company on an ongoing basis. As part of this review, the committee considers the cost of capital and the risks associated with each class of capital.

v) Refer note 56 for details relating to stock options.

vi) On May 26, 2017, the Board of Directors of the company have proposed a final dividend of Rs.9 per share in respect of the year ended March 31, 2017 subject to the approval of shareholders at the Annual General Meeting. If approved, the dividend would result in a cash outflow of Rs.10,552 Million inclusive of dividend distribution tax of Rs.1,785 Million.

3 First-time adoption of Ind AS

The Company has prepared its first Indian Accounting Standards (Ind AS) compliant Financial Statements for the periods commencing April 1, 2016 with restated comparative figures for the year ended March 31, 2016 in compliance with Ind AS. The company had prepared these financial statements in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act 2013. Accordingly, the Balance Sheet, in line with Ind AS transitional provisions, has been prepared as at April 1, 2015, the date of company’s transition to Ind AS. In accordance with Ind AS 101, First-time Adoption of Indian Accounting Standards, the Company has presented below a reconciliation of net profit as presented in accordance with Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 (“Previous GAAP”) to total comprehensive income for the year ended March 31, 2016 and reconciliation of shareholders funds as per the previous GAAP to equity under Ind AS as at March 31, 2016 and April 1, 2015.

There were no significant reconciliation items between cash flows prepared under Previous GAAP and those prepared under Ind AS.

Exemptions availed

Ind AS 101 allows first-time adopter certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has availed the following exemptions:

1. Ind AS 103, Business Combinations, has not been applied to acquisitions of subsidiaries, which are considered as “businesses” for Ind AS, or of interests in associates and joint ventures that occurred before April 1, 2015. Use of this exemption means that the previous GAAP carrying amounts of assets and liabilities, which are required to be recognised under Ind AS, is their deemed cost at the date of the acquisition. After the date of the acquisition, measurement is in accordance with Ind AS.

Assets and liabilities that do not qualify for recognition under Ind AS are excluded from the opening Ind AS Balance sheet. The Group did not recognise or exclude any previously recognised amounts as a result of Ind AS recognition requirements.

2. In accordance with the exemption given in Ind AS 101, the Company has recorded investment in subsidiaries and associates at deemed cost i.e. Previous GAAP carrying amount, as on date of transition.

3. Recognition criteria of Employee stock option plans as per Ind AS 102, Share-based payment, is not applied to Employee stock options that vested before date of transition to Ind ASs.

4. Appendix C to Ind AS 17, Leases requires the Company to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. However, the Company has used Ind AS 101 exemption and assessed all relevant arrangements for leases based on conditions in place as at the date of transition.

Footnotes to the reconciliation between Previous GAAP and Ind AS. i) Reversal of Proposed dividend and tax thereon:

In accordance with Ind AS 10, Events after the Reporting Period, provision for proposed final dividend and tax on dividend has been derecognized by the company, as dividend was declared by the company and approved by shareholders in the annual general meeting which was after the end of the reporting period. This has resulted in increase in equity by Rs.13,978 Million as at March 31, 2016 and Rs.6,938 Million as at April 1, 2015.

ii) Fair Value Through Other Comprehensive Income (FVTOCI) Financial assets:

Under the Previous GAAP, the Company accounted for long term investments in unquoted and quoted equity shares as investment measured at cost less provision for other than temporary diminution in the value of investments. Under Ind AS, the Company has designated such investments (other than subsidiaries and associates) as FVTOCI investments. Ind AS requires FVTOCI investments to be measured at fair value and accordingly, the difference (gain) has been recognised in equity amounting to Rs.42 Million and Rs.97 Million as at March 31, 2016 and April 1, 2015 respectively and total comprehensive income has been decreased by Rs.55 Million for the year ended March 31, 2016.

The Company, under the Previous GAAP had made provision for diminution in value of quoted investments in earlier years, under Ind AS, investments are accounted at fair value, provision for diminution has been reversed by the company and corresponding effect has been given by crediting equity by Rs.243 Million as at transition date. During the year ended March 31, 2016, the company had already reversed the provision for diminution in value of quoted investment of Rs.243 Million in Previous GAAP financials. Since this impact had already been given on transition date, profit under Ind AS has been decreased by Rs.243 Million for the year ended March 31, 2016.

iii) Share based payments:

Company’s stock option cost applicable to employees of group companies, net of reimbursements, have been considered as capital contribution.

Further, under the Previous GAAP, the Company recognised compensation cost based on intrinsic value method. Ind AS 102 requires compensation cost to be recognised at fair value as at grant date to be determined using an appropriate pricing model over the vesting period.

Accordingly, stock compensation cost has been measured in accordance with Ind AS 102 and equity has increased by Rs.407 Million and Rs.170 Million as at March 31, 2016 and April 1, 2015 respectively, and profit has been decreased by Rs.91 Million for year ended March 31, 2016.

iv) Fair Value Through profit or loss in respect of Financial assets:

Under the Previous GAAP, the company accounted for its current investment in mutual funds on the basis of cost or net realizable value, whichever is lower. Ind AS 109, Financial Instruments requires the same to be measured at fair value. Accordingly, current investment in mutual funds have been measured at fair value and accordingly profit has increased by Rs.7 Million for the year ended March 31, 2016.

v) Other Comprehensive income:

Under the Previous GAAP, the company was not required to present other comprehensive income (OCI) separately. As per Ind AS 1, Presentation of Financial Statements, Ind AS 19, Employee Benefits and Ind AS 109, actuarial gain/loss on defined benefit liability and effective portion of cash flow hedges has been shown separately and routed through OCI.

4 Commitment and Contingencies

4.1 Capital Commitments

i. The estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for as at March 31, 2017 is Rs.974 Million (March 31, 2016: Rs.2,735 Million, April 1, 2015: Rs.5,821 Million).

ii. In respect of land, refer note 37.

4.2 Purchase commitments In respect of investments

i. The Company, on June 21, 2016 had entered into an agreement to acquire 100 % share capital in The Bio Agency Limited, a company based in UK, for a consideration upto GBP 43.26 Million. The Company, on July 1, 2016 completed the acquisition and paid the initial consideration of GBP 24.91 Million (Rs.2,265 Million). The balance consideration payable, on mutually agreed performance milestones, has been accrued on fair value amounting to GBP 11.33 Million (Rs.1,027 Million).

ii. The Company through its subsidiary, Tech Mahindra (Americas) Inc. signed a definitive agreement dated March 6, 2017 to acquire 84.70% equity stake in The CJS Solutions Group, LLC. doing business as “The HCI Group”, which is focused in the healthcare space and specializes in the implementations of EMR (Electronic Medical Records) software for an upfront consideration in cash of USD 89.50 Million and contingent consideration of a maximum of USD 130.50 Million payable in calendar years 2017, 2018 and 2019 for acquiring the remaining stake of 15.30% on the basis of achievement of agreed performance milestones.

iii. The Company, through its subsidiary, Tech Mahindra Fintech Holdings Limited acquired 100 % equity stake in Target Topco Limited, a company based in UK on August 19, 2016 for an aggregate consideration upto GBP 163.75 Million. The company, as per the share purchase agreement paid the initial consideration of GBP 102.75 Million (Rs.9,035 Million) and accrued on fair value the balance consideration of GBP 20.22 Million (Rs.1,778 Million) which is payable on mutually agreed performance milestones in Calendar year 2020.

Also, Target Topco Limited (100 % Subsidiary of Tech Mahindra Fintech Holdings Limited) through its 100 % subsidiary Target Servicing Limited, acquired wef September 1, 2016, the business and related assets from Commercial First Mortgages Limited for a total consideration of GBP 1.05 Million.

iv. The Company, pursuant to share purchase agreement dated January 8, 2015, had acquired 100% stake (comprising of 1,065,848 Ordinary Shares of Euro 1 each and 27,062 Class A shares of Euro 1 each) in Sofgen Holdings Limited (Sofgen) on March 13, 2015 for a consideration upto USD 24.25 Million, out of which USD 14.25 Million (Rs.895 Million) was paid upfront and balance amount of USD 10 Million being contingent on achieving agreed performance based milestones will be payable based on the performance of Sofgen for calendar year 2015 (USD 6 Million) and 2016 (USD 4 Million). Against the balance contingent consideration of USD 10 Million, an amount of USD 3 Million has been agreed to be paid by the Company as full and final settlement vide the settlement agreement.

v. Tech Mahindra Servicos De Informatica LTDA (100% subsidiary of the Company) which held 51% stake in Complex IT Services Consultoria EM Informatica LTDA (Complex IT Services) had acquired balance stake of 49% in Complex IT Services for a consideration of BRL 21.40 Million (Rs.415 Million), out of which BRL 0.40 Million was paid up front, of which BRL 8 Million was paid during the year ended March 31, 2016 and the balance BRL 16 Million is not yet paid by March 31, 2017 and the same is under discussion for final payment.

vi. During the year ended March 31, 2016, the Company had entered into a subscription agreement for a Limited Partnership interest with a USA based fund namely Northgate FinTech Innovations Partners, L.P (Northgate). The Company would invest upto USD 40 Million (Rs.2,667 Million) as a strategic investment as a limited partner in Northgate. Northgate is a venture capital fund which invests primarily in securities issued by companies with primary business focus of development of technological solutions for financial institutions. As at March 31, 2017, the Company has not made any investment in this fund.

vii. Comviva Technologies B.V. (a wholly owned subsidiary of Comviva Technologies Limited) through the agreement dated January 22, 2016 acquired 100% equity control in ATS Advanced Technologies Solutions SA (“ATS - AR”) and ATS Advanced Technology Solutions do Brasil, Industria, Comercio, Importacao y Exportacao LTDA (“ATS - BR”) in Argentina and Brazil respectively for a consideration of USD 4.65 Million (Rs.314 Million) subject to agreed terms and conditions. Post the achievement of agreed terms and conditions, “ATS - AR” & ”ATS - BR” became wholly owned subsidiaries of Comviva Technologies B.V w.e.f February 1, 2016.

viii. The Company has agreed to fund its subsidiary FixStream Networks Inc. to an amount upto USD 20 Million (Rs.1,350 Million) through Convertible Promissory Note. As at March 31, 2017, the Company has given a loan of USD 4.50 Million (Rs.292 Million) to FixStream Networks Inc. as per the terms of the Convertible Promissory Note. This loan is convertible into equity shares of FixStream Networks Inc. at a predetermined conversion ratio at the option of the Company once the total loan of USD 20 Million is provided to FixStream Networks Inc.

ix. During the year ended March 31, 2017, the Company had provided for Rs.131 Million with respect to “Revenue Linked Earnout Consideration” for erstwhile shareholders of Comviva Technologies Limited as per the terms of Share Purchase Agreement, however, the company has paid Rs.131 Million during the year ended March 31, 2017.

4.3 Other commitments

The Company has outstanding commitments with respect to discharge of services to an international sports federation amounting to Rs.29 Million as at March 31, 2017 (March 31, 2016: Rs.30 Million, April 1, 2015: Rs.27 Million).

4.4 Contingent Liabilities

i. Bank Guarantees / corporate guarantees outstanding as at March 31, 2017: Rs.27,387 Million (March 31, 2016: Rs.18,314 Million, April 1, 2015: Rs.9,592 Million)

(The above includes corporate guarantees of USD 100 Million: Rs.6,485 Million, (March 31, 2016 USD 100 Million: Rs.6,626 Million, April 1, 2015: USD 40 Million, Rs.2,500 Million), GBP 5 Million: Rs.404 Million (March 31, 2016: GBP 5 Million, Rs.478 Million, April 1, 2015: GBP Nil, Rs.Nil) and EUR 114 Million: Rs.7,924 Million (March 31, 2016: EUR Nil, April 1, 2015: EUR Nil) given to the bankers of two group companies for loan availed by them).

ii. Letter of support/letter of comfort of USD 75 Million: Rs.4,831 Million (March 31, 2016: USD 25 Million, Rs.1,656, April 1, 2015: USD 51 Million, Rs.3,187 Million) to banks for loans availed by step down subsidiaries of the Company.

iii. Outstanding Bill discounting as at March 31, 2017 Rs.5,177 Million (March 31, 2016: Rs.1,301 Million, April 1, 2015: Rs.2,696 Million).

4.5 Contingent Liabilities in respect of Income Taxes / Service Tax/Value Added Tax and other taxes and additional taxation matter:

4.5.1 Additional taxation matters

i. Petition before Hon’ble High Court of Judicature at Hyderabad: Financial years 2002-03 to 2007-08

Erstwhile Satyam had filed various petitions before Central Board of Direct Taxes (CBDT) requesting for stay of demands aggregating to Rs.6,170 Million for the financial years 2002-03 to 2007-08 till the correct quantification of income and taxes payable is done for the respective years. In March 2011, the CBDT rejected the petition and erstwhile Satyam filed a Special Leave Petition before the Hon’ble Supreme Court which directed erstwhile Satyam to file a comprehensive petition/ representation before CBDT and to submit a Bank Guarantee (BG) for Rs.6,170 Million which was complied by erstwhile Satyam.

The CBDT, vide its Order dated July 11, 2011, disposed-off the erstwhile Satyam’s petition directing it to make its submissions before the Assessing Officer in course of the ongoing proceedings for the aforesaid years. Aggrieved by CBDT’s Order, erstwhile Satyam filed a writ petition before the Hon’ble High Court of Judicature at Hyderabad on August 16, 2011.

The Hon’ble High Court of Judicature at Hyderabad, vide its Order dated January 31, 2012, directed the parties to maintain status quo and directed the Income-tax Department not to en-cash the BG until further Orders. The BG has been extended upto October 14, 2017.

In the meanwhile, the Assessing Officer served an Order dated January 30, 2012, for provisional attachment of properties under Section 281B of the Income-tax Act, 1961 attaching certain immovable assets of erstwhile Satyam on the grounds that there is every likelihood of a large demand to be raised against erstwhile Satyam for the financial years 2002-03 to 2008-09 along with interest liability. Aggrieved by such Order, erstwhile Satyam filed a writ petition in the Hon’ble High Court of Judicature at Hyderabad that has granted a stay on the operation of the provisional attachment Order until disposal of this writ.

ii. Appointment of Special Auditor and re-assessment proceedings

- In August, 2011, the Additional Commissioner of Income-tax issued the Draft of Proposed Assessment Orders accompanied with the Draft Notices of demand resulting in a contingent liability of Rs.7,948 Million and Rs.10,329 Million for the financial years 2001-02 and 2006-07, respectively, proposing variations to the total income, including variations on account of Transfer Pricing adjustments. Erstwhile Satyam has filed its objections to the Draft of Proposed Assessment Orders for the aforesaid years on September 16, 2011 with the DRP, Hyderabad, which is pending disposal.

- Consequent to the letter of erstwhile Chairman of the erstwhile Satyam, the Assessing Officer had commissioned special audits for the financial years 2001-02, 2002-03, 2006-07, 2007-08 and 2008-09 on various dates. Erstwhile Satyam had filed petitions before Hon’ble High Court of Judicature of Hyderabad challenging the special audits which are pending disposal.

iii. Provision for taxation for years prior to amalgamation with the Company

The erstwhile Satyam had accounted for provision for taxation for several prior years aggregating Rs.4,989 Million (net of taxes paid) as at March 31, 2013 (before giving effect to its amalgamation with the Company), for which the assessments are under dispute.

Subsequent to the amalgamation of erstwhile Satyam with the Company, considering the professional advice obtained in the matter, the Management has re-evaluated the effects of the possible outcomes of the tax matters in dispute relating to erstwhile Satyam and the estimated excess tax provision aggregating Rs.2,266 Million, has been written back during the year ended March 31, 2014. In the opinion of the Management the balance provision for taxation carried in the books is adequate.

iv. During the year ended March 31, 2017, the Company has received the VAT refund from the Joint Commissioner of Commercial Tax, Bangalore for Karnataka Value Added Tax and Central Sales Tax amounting to Rs.19 Million for the period pertaining to 2006-07 and 2007-08 and accordingly, the Company has written back the corresponding provision amounting to Rs.21 Million, provided in an earlier year, as the same is no longer required.

v. In November 2014, the Company has received a notice from Income-tax Department for filing of petition in Hon’ble High Court of Judicature at Hyderabad against the ITAT Order for financial year 1998-99. The Income-tax Department has raised a demand of Rs.13 Million on account of dispute in treatment of foreign taxes payment treated as self-assessment tax thereby levying interest under section 234B and 234C. The Company has filed an objection citing the limitation of time (almost four years from the date of ITAT Order) which is pending hearing.

vi. In October 2015, the Company has received a notice from Income-tax Department for filing of petition in High Court of Judicature at Hyderabad against the ITAT Order for financial year 2000-01. The Income-tax Department has raised a demand of Rs.2 Million on account of dispute in treatment of foreign taxes payment treated as self-assessment tax, which is pending hearing.

4.6 Other Claims on the Company not acknowledged as debt

i. Alleged Advances: refer note 34.

ii. Claims against erstwhile Satyam not acknowledged as debts: Rs.1,000 Million and interest (March 31, 2016: Rs.1,000 Million, April 1, 2015: Rs.1,000 Million).

iii. Claims made on the erstwhile Satyam by vendors, its employees and customers: Rs.91 Million (March 31, 2016: Rs.82 Million, April 1, 2015: Rs.82 Million).

iv. Claims made on the erstwhile Satyam BPO towards damages: Rs.286 Million (March 31, 2016: Rs.264 Million, April 1, 2015: Rs.242 Million).

v. Dispute in relation to a subsidiary, refer note 38.

vi. Claims made on the Company not acknowledged as debts: Rs.107 Million (March 31, 2016: Rs.107 Million, April 1, 2015: Rs.107 Million).

vii. Other Miscellaneous claims on the Company of Rs.8 Million (March 31, 2016: Rs.8 Million, April 1, 2015: Rs.8 Million).

viii. Claims made on the Company by vendors towards breach of contract amounting to Rs.20 Million (SGD 0.4 Million) (March 31, 2016: SGD 0.4 Million, Rs.22 Million, April 1, 2015: SGD Nil, Rs.Nil) pending in arbitration.

ix. Claims against the Company for not contributing towards provident fund for employees working overseas in non-SSA countries, deputed from India Rs.2,448 Million (March 31, 2016: Rs.Nil, April 1, 2015: Rs.Nil). The Company has provided Bank Guarantee of Rs.500 Million (March 31, 2016: Rs.Nil, April 1, 2015: Rs.Nil).

x. Others Rs.407 Million (March 31, 2016: Rs.Nil, April 1, 2015: Rs.Nil).

4.7 Management’s assessment of contingencies/claims

The amounts disclosed under contingencies/claims represent the best possible estimates arrived at on the basis of the available information. Due to high degree of judgment required in determining the amount of potential loss related to the various claims and litigations mentioned above and the inherent uncertainty in predicting future settlements and judicial decisions, the Company cannot estimate a range of possible losses.

However, the Company is carrying a provision for contingencies as at March 31, 2017, which, in the opinion of the Management, is adequate to cover any probable losses in respect of the above litigations and claims. Refer note 54.

5 Certain matters relating to erstwhile Satyam Computer Services Limited (erstwhile Satyam):

In the letter dated January 7, 2009 Mr. B. Ramalinga Raju, the then Chairman of erstwhile Satyam, stated that the Balance Sheet of erstwhile Satyam as at September 30, 2008 carried inflated cash and bank balances, non-existent accrued interest, an understated liability and an overstated debtors position. Consequently, various regulators/investigating agencies such as the Serious Fraud Investigation Office (SFIO)/Registrar of Companies (ROC), Directorate of Enforcement (ED), Central Bureau of Investigation (CBI) had initiated investigations on various matters and conducted inspections and issued notices calling for information including from certain subsidiaries which have been responded to.

In 2009, SFIO initiated two proceedings against erstwhile Satyam for violations of Companies Act, 1956, which have since been compounded. On December 24, 2009, SFIO filed its report under Section 235 of the Companies Act, 1956 before the Company Law Board (CLB) which stated that ‘all these offences and violations relating to fraud have already been covered by CBI in its charge-sheet and a prosecution has been launched by CBI under various sections of Indian Penal Code in none of which erstwhile Satyam was made a party. Consequently, the CLB vide its further Order dated March 1, 2016 struck off the name of the Company from the array of respondent in the Company Petition filed by the Ministry of Company Affairs (MCA). There are no other proceedings initiated by SFIO/CLB against the Company and the Management does not expect any further proceedings or penal action in this regard.

On a FIR filed by one of the investors, the Andhra Pradesh Crime Branch, Crime Investigation Department (AP CB CID), Hyderabad started an investigation into the fraud in 2009, which was subsequently transferred to CBI, Hyderabad. In all, there were 3 separate complaints instituted by the CBI before the XIV Additional Chief Metropolitan Magistrate cum Special Sessions Court, Hyderabad (Special Court). By a common judgment dated April 9, 2015, the Special Court found the accused persons guilty and convicted them. The Company was not named as an accused in the proceedings and in the said judgment. Thus, in the opinion of the Management, the matter is closed so far as the Company is concerned and no proceedings against the Company are envisaged in this regard.

Further, certain non-compliances/breaches of various laws and regulations by the erstwhile Satyam under the former Management (prior to Government nominated Board) were identified by various agencies including but not limited to the following - payment of remuneration/commission to whole-time directors/ non-executive directors in excess of the limits prescribed under the Companies Act, 1956, unauthorised borrowings, excess contributions to Satyam Foundation, loan to ASOP Trust (Satyam Associates Trust) without prior Board approval under the Companies Act, 1956, delay in deposit of dividend in the bank, dividend paid without profits, non-transfer of profits to general reserve relating to interim dividend declared, utilisation of the Securities Premium account, declaration of bonus shares and violation of SEBI ESOP Guidelines, which have been responded to/appropriately addressed by the erstwhile Satyam/the Company and the Company does not expect any further proceedings in this regard.

On May 22, 2013, the ED had issued a show-cause notice to the erstwhile Satyam for contravention of provisions of the Foreign Exchange Management Act, 1999 (FEMA) for alleged non-repatriation of American Depository Receipts (ADR) proceeds aggregating USD 39.2 Million. The Company has responded to the ED’s show-cause notice on March 28, 2014 and has not received any further communication in this regard.

The ED had also issued a show-cause notice to the erstwhile Satyam on April 28, 2011 for contravention of the provisions of FEMA and the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000, in respect of the non-realisation and repatriation of export proceeds to the extent of foreign exchange equivalent to Rs.506 Million for invoices raised during the period July 1997 to December 31, 2002. The erstwhile Satyam has responded to the show-cause notice and has not received any further communication in this regard.

As per the assessment of the Management, based on the forensic investigation and the information available, all identified/required adjustments/disclosures arising from the identified financial irregularities, had been made in the financial statements of erstwhile Satyam as at March 31, 2009. Considerable time has elapsed after the initiation of investigation by various regulators/agencies and no new information has come to the Management’s notice which requires adjustments to the financial statements. Further, as per above, the investigations have been completed and no new claims have been received which need any further evaluation/adjustment/disclosure in the books of account.

Proceedings in relation to ‘Alleged Advances’:

Pursuant to the aforesaid letter dated January 7, 2009, the erstwhile Satyam received letters from 37 companies seeking confirmation by way of acknowledgement of receipt of certain alleged amounts by the erstwhile Satyam (referred to as alleged advances). These letters were followed by legal notices from these companies dated August 4/5, 2009, claiming repayment of the alleged advances aggregating Rs.12,304 Million stated to be given as temporary advances but without any evidence in support of the nature of these transactions. This is also borne out in the internal forensic investigation. The legal notices also claimed damages/compensation @18% per annum from the date of the advances till the date of repayment. The erstwhile Satyam has not acknowledged any liability to any of the 37 companies and has replied to the legal notices stating that the claims are legally untenable.

The 37 companies have filed petitions/suits for recovery against the erstwhile Satyam before the City Civil Court, Secunderabad (Court), with a prayer that these companies be declared as indigent persons for seeking exemption from payment of requisite court fees.

One petition where court fees have been paid, the pauper petition was converted into a suit which is pending disposal. The petitions filed by remaining 36 companies are before the Court, at various stages of rejection of pauperism/trial of pauperism/inquiry. In one petition, the delay in submission of the petition has been condoned by the Court and the Company has obtained an interim stay Order from the Hon’ble High Court of Andhra Pradesh, which has remanded the matter to the lower Court directing to consider the application afresh. Lower Court upon hearing the application has condoned the delay in re-submission of pauper petition. The Company has challenged the said order in Revision before the High Court of Andhra Pradesh, which is pending hearing. In another development, Company has also filed a Revision against the orders of the Lower Court in the application filed by the Company to recall the Order in numbering the pauper petition as Original Petition. Hon’ble High Court has been pleased to stay the proceedings until further orders.

The Hon’ble High Court in its Order approving the merger of the erstwhile Satyam with the Company, further held that in the absence of Board resolutions and documents evidencing acceptance of unsecured loans, i.e. alleged advances, by the former Management of the erstwhile Satyam, the new Management of the erstwhile Satyam is justified in not crediting the amounts received in their names and not disclosing them as creditors and in disclosing such amounts as ‘Amounts pending investigation suspense account (net)’ in the financial statements. The Hon’ble High Court held, inter-alia, that the contention of the 37 companies that Satyam is retaining the money, i.e. the alleged advances, of the ‘creditors’ and not paying them does not appear to be valid and further held that any right of the objecting creditors can be considered only if the genuineness of the debt is proved beyond doubt which is not so in this case.

The said 37 companies have filed appeals before the Division Bench of the Hon’ble High Court of Andhra Pradesh, against the Orders of the Hon’ble High Court of Andhra Pradesh and the Hon’ble High Court of Judicature at Bombay sanctioning the scheme of merger of Satyam Computer Services Limited (Satyam) with the Company w.e.f. April 1, 2011, which are yet to be heard. One of the aforesaid companies has also appealed against the Order rejecting the Petition for winding-up of the erstwhile Satyam. These matters have been combined for hearing.

The Directorate of Enforcement (ED) while investigating the matter under the Prevention of Money Laundering Act, 2002 (PMLA) had directed the erstwhile Satyam not to return the alleged advances until further instructions. In furtherance to the investigation, certain fixed deposits of the Company with certain banks, then aggregating to Rs.8,220 Million were alleged by ED to be ‘proceeds of crime’ and were provisionally attached vide Order dated October 18, 2012 by the ED (the Order). The Hon’ble High Court of Andhra Pradesh (the Court) had, pending further Orders, granted stay of the said Order and all proceedings thereto vide its Order dated December 11, 2012. The ED had challenged this interim Order passed by the Single Judge before the Division Bench of the Court. Vide order dated December 31, 2014, the Hon’ble High Court upon hearing the matter, has dismissed the Appeal filed by ED and affirmed the Stay granted by the Single Judge. Consequently, out of the aforesaid fixed deposits which were attached, fixed deposits aggregating Rs.3,570 Million have been redeemed. Certain banks have not honored the redemption claim and the Company is pursuing the matter legally.

A criminal case was filed by the ED before the Hon’ble XXI Additional Chief Metropolitan Magistrate, Hyderabad cum Special Sessions Court (Trial Court) under Section 3 of the PMLA against erstwhile Satyam along with 212 accused persons. The Company had challenged the above prosecution before the Hon’ble High Court of Andhra Pradesh which quashed the criminal complaint against the Company vide its Order dated December 22, 2014. ED had preferred an appeal before the Divisional Bench of the AP High Court challenging the order of quashing the prosecution and the Division Bench of the High Court passed an interim Order allowing the hearing for framing of ‘Charges’. A Special Leave Petition was filed by the Company before the Hon’ble Supreme Court of the India, which, vide its Order dated May 11, 2015, requested the Hon’ble AP High Court to dispose off the Writ Appeal on its merits and preferably within a period of four months and further stayed the proceeding before the Trial Court. By an order dated March 30, 2017, the Hon’ble Division Bench of AP High Court has dismissed the Appeal filed by ED, thereby confirming the order of quashing prosecution against the Company.

In view of the aforesaid developments, which occurred and crystallized during the previous year and also based on an independent legal opinion the Management believes that the claim by the 37 companies for repayment of the alleged advances, including interest thereon is not legally tenable. Consequently, pending the final outcome of the proceedings, as a matter of prudence, at this point of time, the Company has accounted and disclosed the amount of Rs.12,304 Million as ‘Suspense Account (net)’, provided earlier. Although remote, in the event that these cases are decided against the Company, there would be no effect on the financial results or financial position of the company.

6 Claims by certain Shareholders of erstwhile Satyam

In terms of the Settlement of claims made by Aberdeen Asset Management PLC., UK and Aberdeen Claims Administration Inc., USA, the erstwhile Satyam has deposited a total amount of USD 80.16 Million towards the Settlement Amount and interest in an Escrow Account during the financial year ended March 31, 2013. The Company has initiated steps to make remittance from the Escrow Account.

In the meanwhile, Commissioner of Income Tax Mumbai has filed two writ petitions before the Hon’ble High Court of Bombay, seeking to set aside the orders of Authority for Advance Ruling dated February 15, 2016, which ruled that no withholding tax is applicable for remittance of Settlement Amount. The above writ petitions are yet to be admitted.

7 Scheme of Amalgamation / Merger:

i. Pursuant to the Scheme of Amalgamation (the Scheme) sanctioned by the Honorable High Court of Judicature at Bombay vide its order dated March 4, 2016, Tech Mahindra BPO Limited (TMBPO), and New vC Services Private Limited (New vC) have been merged with the Company with effect from April 1, 2015 (the appointed date). The Scheme came into effect on March 29, 2016, the day on which the order was delivered to the Registrar of the Companies, and pursuant thereto the entire business and all assets and liabilities, income and expense have been included retrospectively in the financial statements of the company prepared under Ind AS in accordance with Ind AS 103 as the amalgamated companies are entities under common control. Amount of Share capital of the transferor companies and gross value recorded as investments is adjusted and the difference is debited to General Reserves in accordance with the Scheme.

ii. During the year ended March 31, 2017 the Board of Directors of a step down subsidiary of the company, Complex IT Solution Consultoria Em Informatica S/A has approved the scheme of merger with Tech Mahindra Servicos De Informatica LTDA a 100% subsidiary of the Company with effect from January 1, 2017.

8 Notes with respect to immovable properties 37.A Land / Immovable Properties

i. In respect of land admeasuring 19.72 acres purchased by erstwhile Satyam in Hyderabad, erstwhile Satyam entered into an agreement with the Government of Andhra Pradesh (GoAP) pursuant to which, it is eligible for incentives, concessions, privileges and amenities under the Information and Communications Technology (ICT) Policy of the GoAP. During the financial year ended March 31, 2009, erstwhile Satyam accounted for an eligible grant amounting to Rs.96 Million towards the basic cost of the land on acquisition which was adjusted to the cost of the land. Erstwhile Satyam’s entitlement to the aforesaid grant is subject to the fulfillment of certain conditions (secured by bank guarantees issued in favor of Andhra Pradesh Industrial Infrastructure Corporation Limited (APIIC), including employment of a minimum of eligible employees in facilities constructed over the said land, that have been substantially met and are under validation by the GoAP. The Company has earlier provided bank guarantee of Rs.23 Million which is expired and no new bank guarantee has been submitted by the Company. Further, the Company has filed an application dated March 26, 2014 to Andhra Pradesh Industrial Infrastructure Corporation Limited requesting execution of sale deed. Sale deed was executed on December 4, 2014 and original documents are in process of being obtained from the Telangana State Industrial Infrastructure Corporation Limited then APIIC.

ii. In respect of land admeasuring 50 acres purchased from Andhra Pradesh Industrial Infrastructure Corporation Limited in Vishakhapatnam for a total cost of Rs.50 Million, there are certain disputes which have arisen and the Government of Andhra Pradesh has ordered the District Collector to allot alternate land- to erstwhile Satyam. The Government of Andhra Pradesh has signed Memorandum of Understanding (MOU) with the Company on September 29, 2014, to allot 10 acres of land to Company for a total cost of Rs.50 Million on lease in lieu of land earlier allotted. In terms of the MOU signed with the government, the Company registered a Lease Deed on July 10, 2015 for 6 acres of land, took the possession and the cost of Rs.30 Million is being amortised through prepaid expenses. Balance 4 acres of land is reserved for the Company for which Lease Deed will be executed and possession will be given on fulfillment of conditions as laid down in MOU. The proportionate amount of Rs.20 Million pertaining to balance 4 acres land is included in Capital Advances (under other non-current assets) as at March 31, 2017 (March 31, 2016: Rs.50 Million, April 1, 2015: Rs.50 Million).

iii. The erstwhile Satyam, in 2011, had entered into an agreement with the Maharashtra Airport Development Company Limited (MADC) for the land taken on lease in Nagpur for which it has obtained extension to erect a facility for its own use and commence commercial activities by July 27, 2017.

iv. Pursuant to the Scheme of Amalgamation and Arrangement (the Scheme) sanctioned by the Hon’ble High Court of Andhra Pradesh vide its order dated June 11, 2013 and the Hon’ble High Court of Judicature at Bombay vide its order dated September 28, 2012, Venturbay Consultants Private Limited (Venturbay), CanvasM Technologies Limited (CanvasM) and Mahindra Logisoft Business Solutions Limited (Logisoft), the wholly owned subsidiaries of the Company, and Satyam Computer Services Limited (Satyam) an associate of the Company (through Venturbay) and C&S System Technologies Private Limited (C&S) a wholly owned subsidiary of erstwhile Satyam, merged with the Company with effect from April 1, 2011 (the appointed date). The Scheme came into effect on June 24, 2013, the day on which both the orders were delivered to the Registrar of the Companies, and pursuant thereto the entire business and all the assets and liabilities, duties and obligations of Satyam, Venturbay, CanvasM, Logisoft and C&S have been transferred to and vested in the Company with effect from April 1, 2011. Pursuant to the Scheme, the title deeds for the immovable properties pertaining to the amalgamating companies are pending conveyance in the name of the Company. Further, the Company has initiated the name change formalities to transfer the title in respect of the other properties, contracts etc.

v. The Company intends to sell a freehold land situated at Pune and land & Building situated at Bengaluru in next 12 months, whose carrying amount is Rs.127 Million and Rs.138 Million respectively as on March 31, 2017 and accordingly these assets has been recorded at net book value and classified as “Asset held for sale”. The fair value of these assets is higher than the carrying amount in the books of account.

8.B Details of the investment property and its fair value:

The company has obtained the fair valuation of its investment property as at March 31, 2017, March 31, 2016 and April 1, 2015 from a Government registered independent valuer who holds a recognised and relevant professional qualification and has experience in the location and category of the investment property being valued.

The fair value was derived considering various factors as mentioned below :

- For Land - Location, nature of title, area, development made, market value, etc.

- For Building - Location, year of construction, present condition, market value, etc.

- For Plant & Machinery, Furniture & Fixtures and Office Equipment - Purchase cost, age, use, present condition, technical parameters, technology obsolescence, etc.

9 Dispute with Venture Global Engineering LLC

Pursuant to a Joint Venture Agreement in 1999, the erstwhile Satyam and Venture Global Engineering LLC (VGE) incorporated Satyam Venture Engineering Services Private Limited (SVES) in India with an objective to provide engineering services to the automotive industry.

On or around March 20, 2003, numerous corporate affiliates of VGE filed for bankruptcy and consequently the erstwhile Satyam, exercised its option under the Shareholders Agreement (the SHA), to purchase VGE’s shares in SVES. The erstwhile Satyam’s action, disputed by VGE, was upheld in arbitration by the London Court of International Arbitration vide its award in April 2006 (the Award).

The Courts in Michigan, USA, confirmed and directed enforcement of the Award. They also rejected VGE’s challenge to the Award. In 2008, the District Court of Michigan further held VGE in contempt for its failure to honour the Award and inter-alia directed VGE to dismiss the nominees of VGE on its Board and replace them with individuals nominated by the erstwhile Satyam. This Order was also confirmed by the Sixth Circuit Court of Appeals in 2009. Consequently, erstwhile Satyam’s nominees were appointed on the Board of SVES and SVES confirmed the appointment at its Board meeting held on June 26, 2008. The erstwhile Satyam was legally advised that SVES became its subsidiary only with effect from that date.

In the meantime, while proceedings were pending in the USA, VGE filed a suit in April 2006, before the District Court of Secunderabad in India for setting aside the Award. The City Civil Court, vide its judgment in January 2012, has set aside the Award, against which the erstwhile Satyam preferred an appeal (Company Appeal) before the High Court.

VGE also filed a suit before the City Civil Court, Secunderabad inter alia seeking a direction to the Company to pay sales commission that it was entitled to under the Shareholders Agreement. In the said suit, two ex-parte Orders were issued directing the Company and Satyam to maintain status quo with regard to transfer of 50% shares of VGE and with regard to taking major decisions which are prejudicial to interest of VGE. The said suit filed by VGE is still pending before the Civil Court.

The Company has challenged the ex-parte Orders of the City Civil Court Secunderabad, before the High Court (SVES Appeal).

The High Court of Andhra Pradesh consolidated all the Company appeals and by a common Order dated August 23, 2013 set aside the Order of the City Civil Court, Hyderabad setting aside the award and also the ex-parte Orders of the City Civil Court, Secunderabad. The High Court as an interim measure ordered status quo with regard to transfer of shares, originally given by Supreme Court to be maintained for four weeks which was extended for a further period of three weeks. VGE has filed special leave petition against the said Order before Supreme Court of India, which is currently pending. The Supreme Court by an interim Order dated October 21, 2013 extended the High Court Order on the status-quo on transfer of shares. The Company has also filed a Special Leave Petition before the Supreme Court of India challenging the judgment of the High Court only on the limited issue as to whether the Civil Court has jurisdiction to entertain VGE’s challenge to the Award. The said Petitions are pending before the Supreme Court.

In a related development, in December 2010, VGE and the sole shareholder of VGE (the Trust, and together with VGE, the Plaintiffs), filed a complaint against the erstwhile Satyam in the United States District Court for the Eastern District of Michigan (District Court) inter alia asserting claims under the Racketeer Influenced and Corrupt Organization Act, 1962 (RICO), fraudulent concealment and seeking monetary and exemplary damages (the Complaint). The District Court vide its order in March 2012 has dismissed the Plaintiffs Complaint. The District Court also rejected VGE’s petition to amend the complaint. In June 2013, VGE’s appeal against the order of the District Court has been allowed by the US Court of Appeals for the Sixth Circuit. The matter is currently before the District Court and the Company has filed a petition before District Court seeking dismissal of the Plaintiff’s Complaint. The said petition is pending before the District Court. On March 31, 2015, the US District Court stayed the matter pending hearing and decision by the Indian Supreme Court in the Special Leave Petitions filed by Venture and the Company.

10 Other matters Foreign currency receivables

I n respect of overdue foreign currency receivables for the period’s upto March 31, 2009 pertaining to erstwhile Satyam, the Company is taking steps under the provisions of FEMA, for recovery and/or permissions for write-offs, as appropriate. Erstwhile Satyam under the Management post Government nominated Board has fully provided for these receivables.

11 Share application money pending allotment

The amount received from employees on exercise of stock options is accounted as Share application money pending allotment. Upon allotment, the amount received corresponding to the shares allotted against the options exercised is transferred to Share capital and Securities premium account (if applicable) and taxes (if applicable) recovered from employees. An amount of Rs.19 Million is outstanding as at March 31, 2017 (March 31, 2016: Rs.14 Million, April 1, 2015: Rs.3 Million) representing amounts received from employees of the Company on exercise of stock options towards face value, securities premium and perquisite tax recovered by the Company from the employees, pending allotment.

12.A) Acquisitions / Additional Investments in entities

i) On April 29, 2016, Company had incorporated a subsidiary, PF Holdings B.V. in Netherlands. The Company infused EUR 25.10 Million (Rs.1,884 Million) in share capital of PF Holdings B.V. for 60% stake. On May 30, 2016, the Company jointly with Mahindra and Mahindra Limited, through PF Holdings B.V., completed the acquisition of purchasing the controlling stake in Pininfarina S.p.A., an iconic Italian brand in automotive and industrial design. As per the agreement, the Company and Mahindra and Mahindra Limited purchased 76.06 % stake for a total upfront consideration of EUR 25.24 Million (Rs.1,895 Million). Accordingly, Pininfarina S.p.A. became a step-down subsidiary of the Company w.e.f the said date.

Further, as per the share purchase agreement, PF Holdings B.V. made an open public offer to acquire remaining 7,205,128 shares of Pininfarina S.p.A at a price of Euro 1.10 per share, payable upfront. The open offer concluded on July 29, 2016 in which 22,348 equity shares were purchased and transferred on August 5, 2016 in the name of PF Holdings B.V. and accordingly, PF Holdings B.V. increased its holding to 76.18% of the share capital of Pininfarina S.p.A.

ii) Refer note no. 33.2 (i).

iii) Refer note no. 33.2 (ii).

iv) Refer note no. 33.2 (iii).

v) On March 23, 2017, the Company formed a 100% subsidiary in Vietnam namely Tech Mahindra Vietnam Company Limited. No capital is infused in the said subsidiary till March 31, 2017.

vi) During the year ended March 31, 2016, the Company has infused SEK 0.05 Million (Rs.0.4 Million) in Tech Mahindra Sweden AB (a 100% Subsidiary of the Company) which was incorporated on May 19, 2016.

vii) On March 30, 2015, Company had incorporated 100% subsidiary as Tech Mahindra DRC SARLU in Congo DRC. During the year ended March 31, 2016, the Company has made an investment of USD 0.1 Million (Rs.6 Million).

viii) On May 15, 2015, Company had incorporated a subsidiary Nth Dimension Ltd in United Kingdom with a stake of 86.50%. During the year ended March 31, 2016, the Company has infused share capital of GBP 8.65. The company has entered into an agreement with shareholders of its subsidiary, Nth Dimension Limited on June 2, 2015 to purchase remaining stake of 13.5% in Nth Dimension Limited. The Company has purchased call option for acquiring remaining stake and simultaneously, shareholders of Nth Dimension Limited have written put option to sell remaining stake at a price based on achievement of certain targets by Nth Dimension Limited over a period of five years.

As per Ind AS 103 and Ind AS 110, the Company has present access to returns associated with remaining stake of 13.5%. The company has recorded this transaction at fair value as an investment based on management’s best estimate for GBP 10.60 Million (Rs.852 Million).

ix) The Company has entered into a joint venture agreement dated April 25, 2015 with “Qatar Engineering Trading and Contracting Company” and “KPC Aurion Holding WLL.” in an incorporated entity namely IQS Information Solutions WLL in Qatar. The Company holds minority stake in this entity and has infused USD 0.02 Million (Rs.1 Million) in IQS Information Solutions WLL during the year ended March 31, 2016, which is classified as investment in associate.

x) During the year ended March 31, 2016, the Company has infused additional share capital USD 5.69 Million (Rs.379 Million) in its 100% subsidiary Tech Mahindra Servicos De Informatica LTDA.

xi) During the year ended March 31, 2016, the Company has infused additional share capital of RM 10 Million (Rs.159 Million) in its 100% Subsidiary Tech Mahindra ICT Services (Malaysia) SDN. BHD.

xii) During the year ended March 31, 2016, Company had incorporated a subsidiary Tech Mahindra Arabia Limited in Saudi Arabia wherein the Company holds controlling stake i.e. 51% equity. The Company has infused SAR 0.51 Million (Rs.9 Million) in Tech Mahindra Arabia Limited.

xiii) During the year ended March 31, 2016, the Company has infused additional share capital of USD 0.37 Million (Rs.24 Million) in its 100% subsidiary Satyam Computer Services De Mexico S.DE R.L.DE C.V. Further, the name of Satyam Computer Services De Mexico S.DE R.L.DE C.V was changed to Tech Mahindra De Mexico S.DE R.L.DE C.V.

xiv) During the year ended March 31, 2016, the Company formed a 100% subsidiary in France namely Tech Mahindra France SAS. The Company infused EUR 0.1 Million (Rs.7 Million) in share capital of Tech Mahindra France SAS.

xv) The Company formed a 100% subsidiary in India namely Tech Mahindra Growth Factories Limited (TMGFL). During the year ended March 31, 2016 and 2017, the Company infused Rs.98 Million and Rs.200 Million respectively in share capital of TMGFL.

xvi) During the year ended March 31, 2016, the Company formed a 100% subsidiary in Netherlands namely Tech Mahindra Netherlands B.V. The Company infused EUR 0.05 Million (Rs.3 Million) in the share capital of Tech Mahindra Netherlands B.V.

xvii) During the year ended March 31, 2016, as per the notarized merger order, Mahindra Engineering GmbH was merged with Tech Mahindra GmbH w.e.f. April 1, 2015. Tech Mahindra Limited and Mahindra Engineering Services (Europe) Limited are shareholders of Mahindra Engineering GmbH holding 84% and 16% respectively.

As per the merger order, all assets and liabilities with duties and obligations are transferred to Tech Mahindra GmbH and the shareholders of Mahindra Engineering GmbH to waive off their rights. The Company has already provided for its investment in Mahindra Engineering GmbH during the previous years. The Company is in process of applying to RBI for the approval of write off for the said investment in the books of accounts.

12.B) Disinvestments in / Liquidations of entities:

During the year ended March 31, 2017, the following entities of the Company / Group have applied for liquidation and the same are under process of liquidation or liquidated.

100% subsidiaries of Tech Mahindra Limited:

- Tech Mahindra (Nanjing) Co. Limited

- Tech Mahindra (Malaysia) SDN. BHD.

- TechM Canada, Inc. (liquidated on August 19, 2016)

100% subsidiary of Tech Mahindra Servicos DE Informatica LTDA:

- Satyam Colombia Servicios DE Informatica SAS (liquidated on February 15, 2016)

100% subsidiaries of Lightbridge Communications Corporation:

- LCC do Brasil LTDA

- LCC Diseno y Servicios de RED Peru S.R.L.

- Leadcom Mexico S.A. de C.V.

- Merlin Projects (liquidated on January 24, 2017)

100% subsidiaries of Sofgen Holding Limited:

- Sofgen Limited

- Sofgen Australia Pty. Limited (liquidated on June 29, 2016)

- Sofgen Luxembourg SARL. (liquidated on August 10, 2016)

- Compania Sofgen SRL (closed effective December 6, 2016)

100% subsidiaries of Target Group Limited:

- Target Financial Solution Limited

- Target Computer Group Limited

- Target Group Trustee Limited

13. The Company’s Management assesses the operations of the subsidiaries/entities, including the future projections, to identify indications of diminution, other than temporary, in the value of the investments recorded in the books of account and accordingly no additional provision is required to be made, other than the amounts provided for in the books of account.

14 Provision made / reversed against Investments of subsidiaries / entities

i. In September 2008, the Company had made an investment of Rs.85 Million which was equal to 17.28% of the equity share capital of Servista Limited, a leading European system integrator. With this investment, the Company became Servista’s exclusive delivery arm for three years and would assist Servista in securing more large scale European IT off shoring business. Subsequently, the business plan of Servista was adversely affected by the economic downturn and it continued to incur losses and therefore, Servista in June 2009 decided to close down its operations. Hence, the Company made a provision of Rs.85 Million in the year ended March 31, 2010 as diminution in the value of its investments in Servista. As of March 31, 2017, Servista is in process of winding up and in the view of the Management; the Company would have no further unrecorded obligations towards settlement of any further liability.

ii. Based on the Management’s assessment and improved financial performance of Tech Mahindra GmbH and Tech Mahindra (Shanghai) Co. Limited, the Company, during the year ended March 31, 2016, has reversed the provision for diminution in value of its investment in the said subsidiaries of Rs.354 Million and Rs.283 Million respectively, which was provided for in earlier years.

15 Details of employee benefits as required by the IND AS-19 - Employee Benefits are as under:

i. Defined Contribution Plan

The Company makes contributions to Provident Fund, Superannuation Fund and National Pension Fund which are defined contribution plans for qualifying employees. Under these Schemes, the Company contributes a specified percentage of the payroll costs to the respective funds.

The Company recognized as an expense in the Statement of Profit and Loss amounting to:

- Rs.2,211 Million (March 31, 2016: Rs.2,233 Million) for Provident Fund contributions,

- Rs.415 Million (March 31, 2016: Rs.386 Million) for Superannuation Fund contributions,

- Rs.22 Million (March 31, 2016: Rs.20 Million) for National Pension Scheme contributions and

The contributions to these plans are made at specified percentage/applicable amounts. Contributions to defined contribution plans for key management personnel have been disclosed. Refer note 55 (ii).

ii. Defined Benefit Plan

The defined benefit plan comprises of gratuity. The gratuity plan is partially funded. Changes in the present value of Defined Benefit Obligation (DBO) are representing reconciliation of opening and closing balances thereof and fair value of Trust Fund Receivable recognized in the Balance Sheet is as under:

*The Trust fund was created to fund the gratuity liability of the erstwhile Tech Mahindra (R&D) Services Limited (TMRDL) and Mahindra Engineering Services Limited (MESL). After amalgamation of TMRDL and MESL with the Company prior to April 1, 2015, the balance in Trust Fund can be utilized only for the payment of obligation arising for gratuity payable to employees of erstwhile TMRDL and MESL. There are no minimum funding requirements for plans mandated in India & the Company does not maintain any other fund.

- The discount rate is based on the prevailing market yields of Indian Government Bonds as at the balance sheet date for the estimated terms of the obligations.

- The estimate of future salary increase takes into account inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

16 Segment information has been presented in the Consolidated Financial Statements as permitted by Indian Accounting Standard Ind AS 108, Operating Segments as notified under the Companies (Indian Accounting Standard) Rules, 2015.

17 Based on the information available with the Company, there are no outstanding amount payable to creditors who have been identified as “suppliers” within the meaning of “Micro, Small and Medium Enterprises Development (MSMED) Act, 2006”.

18 Additional Disclosures

Disclosure pursuant to Regulation 34(3) of Securities and Exchange Board of India (Listing Obligation and Disclosure requirements) Regulation, 2015.

19 Leases

i. The Company has taken premises on operating lease. The expense on such lease rentals recognized in the Statement of Profit and Loss for the year ended March 31, 2017 is Rs.1,441 Million (year ended March 31, 2016: Rs.1,408 Million). The future lease payments of such operating lease are as follows:

ii. The Company has taken computers, its related equipments and vehicles on operating lease. The expense on such lease rentals recognized in the Statement of Profit and Loss for the year ended March 31, 2017 is Rs.200 Million (year ended March 31, 2016: Rs.209 Million). The future lease payments of operating lease are as follows:

iii. The Company has taken vehicles on finance lease. The future lease rent payable on such vehicles taken on finance lease are as follows:

iv. The Company has taken computer equipments on finance lease. The future lease rent payable on such computer equipments taken on finance lease are as follows:

v. The Company has taken software equipments on finance lease. The future lease rent payable on such Software equipments taken on finance lease are as follows:

vi. The Company has taken plant and equipment on finance lease. The future lease rent payable on such plant & machinery taken on finance lease are as follows:

vii. The Company has given premises on operating lease. The rental income recognized in the Statement of Profit and Loss for the year ended March 31, 2017 is Rs.108 Million (year ended March 31, 2016: Rs.96 Million). The future lease rent receivable are as follows:

viii. During the year ended March 31, 2015, the Company, has given an owned building and related fixed assets on lease to Mahindra Education Institutions (MEI), a Company incorporated under section 8 of Companies Act, 2013. The rental income is included under other income (Rental income). Accordingly, the Company has classified these fixed assets as investment property.

ix. The Company has given computer equipment on finance lease. The future lease rent receivable on such computer equipment given on finance lease are as follows:

Unearned finance income of assets leased under finance leases at the end of the reporting period are Rs.20 Million (March 31, 2016: Rs.Nil, April 1, 2015 Rs.Nil)

Unguaranteed residual values of assets leased under finance leases at the end of the reporting period are estimated at Rs.Nil (March 31, 2016: Rs.Nil, April 1, 2015 Rs.Nil)

The interest rate inherent in the leases is fixed at the contract date for the entire lease term.

x. The Company has entered into Sale and lease back arrangements with leasing companies for certain computer equipment at book value. The future lease rent payable are as follows:

50 The Honorable Supreme Court of India vide its order dated February 2, 2012 cancelled 2G licenses issued to some of Telecom operators in India in 2008. As a result of the cancellation, the business of Company’s two customers has become unviable and one of the customers has started winding up proceedings of the Indian operations. The Company had made provision of Rs.679 Million in the year ended March 31, 2012 on account of likely impairment in the carrying value of the related assets.

20 Financial Instruments and Risk Review Financial Risk Management Framework

Tech Mahindra Limited is exposed primarily to fluctuations in foreign currency exchange rates, credit, liquidity, which may adversely impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential adverse effects on the financial performance of the Company.

Credit Risk

Credit risk is the risk of financial loss arising from counterparty failure to repay or service debt according to the contractual terms or obligations. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit.

Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, investments, loans, cash and cash equivalents, other balances with banks and other financial assets. None of the financial instruments of the Company result in material concentration of credit risk.

Credit risk on cash and cash equivalents is limited as the Company generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations, non-convertible debentures issued by government aided institutions which are funds deposited at a bank for a specified time period.

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was Rs.184,059 Million, Rs.157,263 Million and Rs.128,864 Million as of March 31, 2017, March 31, 2016 and April 1, 2015 respectively, being the total of the carrying amount of trade receivables, investments, cash and cash equivalents, other balance with banks, loans and other financial assets.

In addition, the Company is exposed to credit risk in relation to financial guarantees given to banks provided by the Company. The Company’s maximum exposure in this respect is the maximum amount the Company would have to pay if the guarantee is called on. Refer Note 33.4 above.

Trade receivables

Ind AS requires expected credit losses to be measured through a loss allowance. The Company assesses at each date of statements of financial position whether a financial asset or a group of financial assets is impaired. The Company recognises lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to the 12 months expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.

The Company has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking information. Company’s exposure to customers is diversified and no single customer contributes to more than 10% of outstanding accounts receivable and unbilled revenue as of March 31, 2017, March 31, 2016 and April 1, 2015. The concentration of credit risk is limited due to the fact that the customer base is large and unrelated.

Before accepting any new customer, the Company uses an external/internal credit scoring system to assess the potential customer’s credit quality and defines credit limits by customer. Limits and scoring attributed to customers are reviewed on periodic basis.

The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates as given in the provision matrix. Movement in the expected credit loss allowance:

Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Such changes in the values of financial instruments may result from changes in the foreign currency exchange rates, interest rates, credit, liquidity and other market changes. The Company’s exposure to market risk is primarily on account of foreign currency exchange rate risk.

a) Foreign Currency exchange rate risk

The fluctuation in foreign currency exchange rates may have potential impact on the statement of profit or loss and other comprehensive income and equity, where any transaction references more than one currency or where assets / liabilities are denominated in a currency other than the functional currency of the respective entities. Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in US Dollar, Euro, Great Britain Pound, Australian Dollar and Canadian Dollar against the respective functional currencies of Tech Mahindra Limited. The Company, as per its risk management policy, uses derivative instruments primarily to hedge foreign exchange.

The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks by using derivative financial instruments in line with its risk management policies.

The foreign exchange rate sensitivity is calculated by aggregation of the net foreign exchange rate exposure and a simultaneous parallel foreign exchange rates shift of all the currencies by 10% against the respective functional currencies of Tech Mahindra Limited.

The following analysis has been worked out based on the net exposures for each of the subsidiaries and Tech Mahindra Limited as of the date of statements of financial position which could affect the Statements of profit or loss and other comprehensive income and equity. Further the exposure as indicated below is mitigated by some of the derivative contracts entered into by the Company as disclosed in note below.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:

b) Forward Exchange Contracts

The Company enters into foreign Exchange Forward Contracts and Currency Option Contracts to offset the foreign currency risk arising from the amounts denominated in currencies other than the Indian Rupee. The counter party to the Company’s foreign currency Forward Contracts and Currency Option Contracts is generally a bank. These contracts are entered into to hedge the foreign currency risks of certain forecasted transactions. Forward Exchange Contracts and Currency Option Contracts in UK Pound exposure are split into two legs, which are GBP to USD and USD to ’ These contracts are for a period between 1 day and 2 years.

The following are the various outstanding foreign currency exchange forward contracts (sell) entered into by the Company which have been designated as Cash Flow Hedges:

In addition to the above cash flow hedges, the Company has outstanding foreign exchange options with notional amount aggregating to GBP 12 Million (Rs.970 Million approximately) whose fair value showed a net loss of Rs.1 Million as at March 31, 2017. Although these contracts are effective as hedges from an economic perspective, they do not qualify for hedge accounting.

Exchange gain (net) of Rs.3,860 Million (year ended March 31, 2016 : Exchange loss (net) ‘ (8) Million) on foreign exchange forward contracts and option contracts for the year ended March 31, 2017 have been recognised in the statement of profit and loss.

c) Liquidity Risk

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

The amounts included above for financial guarantee contracts are the maximum amounts the Company could be forced to settle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty to the guarantee. Based on expectations at the end of the reporting period, the Company considers that it is more likely than not that such an amount will not be payable under the arrangement.

21 Current Tax and Deferred Tax

The income tax expense for the year ended can be reconciled to the accounting profit as follows:

The tax rate used for the above reconciliation is the rate as applicable for the respective period payable by corporate entities in India on taxable profits under the India tax laws.

Current tax for the year ended March 31, 2017 includes tax expense w.r.t. foreign branches amounting to Rs.1,214 Million (year ended March 31, 2016: Rs.1,297 Million).

Current tax expense for the year ended March 31, 2017 is net of reversal of provision of Rs.632 Million (year ended March 31, 2016: Rs.531 Million) pertaining to earlier periods written back, no longer required.

Deferred Tax:

The following is the analysis of Deferred Tax Assets presented in the Balance Sheet:

22 The Company makes provision for Claims and Warranties on a need basis. The Company also provides warranty support to some of its customers as per the terms of the contracts. The details of provision for claims and warranties are as follows:

23 Provision for contingencies

The Company carries a general provision for contingencies towards various claims made/anticipated against the Company based on the Management’s assessment. The Management estimates the same to be settled in 3-5 years. The movement in the said provisions is summarized below:

@@ The Company has been liquidated/dissolved as per the laws of the respective country. However, the Company is awaiting approval from the Reserve Bank of India for writing off these amounts from the books of the Company. Such outstanding amount has been fully provided for, net of payables.

A The Company has been liquidated/dissolved as per the laws of the respective country and no transactions were entered with these subsidiaries during the year ended March 31, 2017.

* Executive Vice Chairman till August 9, 2015.

24 Employee Stock Option Scheme

i. ESOP 2000 & ESOP 2010:

The Company has instituted ‘Employee Stock Option Plan 2000’ (ESOP 2000) and ‘Employee Stock Option Plan 2010’ (ESOP 2010) for eligible employees and Directors of the Company and its subsidiaries. The vesting pattern of the schemes has been provided below. The options can be exercised over a period of 5 years from the date of grant. Each option carries with it the right to purchase one equity share of the Company at the exercise price determined by the Company at the time of grant for ESOP 2000 and exercise price as determined by the Nomination and remuneration Committee for ESOP 2010.

ii. ESOP 2006 & ESOP 2014:

The Company has instituted ‘Employee Stock Option Plan 2006’ (ESOP 2006) and ‘Employee Stock Option Plan 2014’ (ESOP 2014) for eligible employees and Directors of the Company and its subsidiaries. In terms of the said plan, the Nomination and Remuneration Committee has granted options to the employees of the Company. The maximum exercise period is 7 years from the date of grant for ESOP 2006 and options can be exercised over a period of 5 years from the date of each vesting for ESOP 2014.

iii. TML ESOP - B 2013:

Erstwhile Satyam has established a scheme ‘Associate Stock Option Plan - B’ (ASOP - B) under which 28,925,610 options were available for grant/exercise at the time the Scheme of Amalgamation became effective. Post-merger, these options were adjusted in terms of the approved Scheme of Amalgamation and obtained Listing approval for 3,403,013 options and each option entitles the holder one equity share of the Company. These options vest over a period of 1 to 4 years from the date of the grant. Upon vesting, employees have 5 years to exercise the options. Post-merger, the name of the ESOP scheme has been changed to ‘TML ESOP B 2013’.

iv. TML- RSU:

The erstwhile Satyam has established a scheme ‘Associate Stock Option Plan - Restricted Stock Units (ASOP - RSUs)’ to be administered by the Administrator of the ASOP - RSUs, a committee appointed by the Board of Directors of the erstwhile Satyam in May 2000. Under the scheme, 1,529,412 equity shares (equivalent number of equity shares post-merger) are reserved to be issued to eligible associates at a price to be determined by the Administrator which shall not be less than the face value of the share. These RSUs vest over a period of 1 to 4 years from the date of the grant. The maximum time available to exercise the options upon vesting is five years from the date of each vesting. Post-merger, the name of the ESOP scheme has been changed to TML RSU.

v. ESOP - A:

Erstwhile Satyam had established an ESOP scheme viz., ‘Associate Stock Option Plan - A’ (ASOP - A) formulated prior to the SEBI Guidelines on ESOP and ESPS issued in 1999. This plan was administered through a Trust viz., Satyam Associates Trust (Satyam Trust). At the time the Scheme of Amalgamation and Arrangement became effective, the Satyam Trust was holding 2,055,320 shares of erstwhile Satyam, which post amalgamation were converted into 241,802 shares of the Company at the approved share exchange ratio and this scheme has been transitioned and renamed as ESOP-A. Satyam Trust grants warrants to the employees of the Company with an exercise price and terms of vesting advised by the Nomination and Remuneration Committee of the Company. Each warrant shall entitle the warrant holder one equity share. The exercise period is 180 days from the date of each vesting.

vi. Employee Stock Option Scheme - ESOS:

Erstwhile MESL has established Employee Stock Option Scheme (ESOS) - ESOS for which 1,400,000 equity shares respectively were earmarked. ESOS Scheme is administered through a Trust viz., MES Employees Stock Option Trust. The options under this Scheme vest over a period of 1 to 3 years from the date of the grant. Upon vesting, employees have 7 years to exercise the options. As on the effective date of amalgamation, only 18,084 options were outstanding under ESOS which are converted into equivalent 30,144 options of the Company giving effect to approved share exchange ratio, split and bonus.

viii. Average Share price on date of exercise

The weighted average share price for the year over which stock options were exercised was Rs.471.49 (year ended March 31, 2016: Rs.551.92).

ix. Company’s stock option cost pertaining to employees of group companies, net of reimbursements, have been considered as capital contribution in the books of account of the company.

x. The employee stock compensation cost for the Employee Stock Option Plan 2010, Employee Stock Option Plan 2000, Employee Stock Option Plan- B 2013, ESOP-A, ESOP 2014 and TML-RSU schemes issued at par has been computed by reference to the fair value of share options granted and amortized over each vesting period. For the year ended March 31, 2017 the Company has accounted for employee stock compensation cost (equity settled) amounting to Rs.1,288 Million (March 31, 2016: Rs.1,936 Million).

xi. The fair value of each option is estimated on the date of grant based on the following assumptions (on weighted average basis):

The weighted average fair value of the stock options granted during the current year ended March 31, 2017 is Rs.478.38 (March 31, 2016: Rs.380.51). The Black and Scholes valuation model has been used for computing the weighted average fair value.

Expected volatility is based on the historical share price volatility over the past 3 years. To allow for the effects of early exercise, it was assumed that executives and senior employees would exercise the options after vesting date when the share price is two and half of the exercise price.

25 Pursuant to MCA notification dated March 30th, 2017 read with Section 143 and Section 469 (1) (2) of Companies Act, 2013, the Company had not dealt in Specified Bank Notes and other notes in the form of any deposit, withdrawal, payment or receipt during the period from November 8, 2016 to December 30, 2016.