1. Corporate information
Ramco Systems Limited (the “Company”) is a public limited company domiciled and headquartered in India and incorporated under the provisions of Companies Act,1956. Its shares are listed in BSE Limited and National Stock Exchange of India Limited. The registered offi ce of the Company is located at No. 47, P.S.K Nagar, Rajapalayam 626108 and corporate office and R&D center is located at 64, Sardar Patel Road, Taramani, Chennai 600113.
The Company develops Enterprise Resource Planning (ERP) Software solutions for various verticals in various domains like Human Capital Management, Aviation Maintenance Repair & Overhaul, Logistics and provides these with related solutions and services, including managed services. The Software is either delivered on-premise or offered as a service hosted on cloud.
The financial statements of the Company for the year were approved and adopted by Board of Directors of the Company in its meeting held on 23 May 2018.
2. Basis of preparation of separate financial statements
The financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013 (‘the Act’) read together with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 as amended and the provisions of the Act to the extent notified.
Accounting policies have been consistently applied except where a newly-issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
Figures for the year ended March 31, 2017 and as at March 31, 2017 were audited by previous auditors M/s. CNGSN & Associates LLP.
2.1 The financial statements have been prepared under the historical cost convention on accrual basis except certain financial instruments and defined benefit plan assets, share based payments that are measured at fair values.
2.2 Foreign currency transactions
The functional currency of the Company is Indian Rupee. Transactions denominated in foreign currency are recorded at the exchange rate prevailing on the date of transaction. The monetary items denominated in the foreign currency at the year-end are translated at the exchange rates prevailing on the date of the balance sheet and the loss or gain arising out of such transactions is adjusted in the Statement of Profit and Loss.
2.3 Translation of financial statements of foreign branches
Functional currency of foreign branches is the respective local currency of domicile. All income and expenditure transactions during the year are reported at a monthly moving average exchange rate for the respective periods. All assets and liabilities are translated at the rate prevailing on the Balance Sheet date. Net gain / loss on foreign currency translation is recognized in Other Comprehensive Income.
2.4 An asset is treated as current when it is:
- Expected to be realized or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realized within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
2.5 A liability is current when:
- It is expected to be settled in normal operating cycle
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
All other liabilities are classified as non-current.
2.6 Deferred tax assets and liabilities are classified as non-current assets and liabilities.
2.7 The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
2.8 The financial statements are presented in Indian Rupees rounded to the nearest million with two decimals. Figures less than ten thousands are shown as nil.
3.1. Recent Accounting pronouncements - Standards issued but not effective
Ind AS 115 - Revenue from contracts with customers:
In March 2018, the Ministry of Corporate Affairs (‘MCA’) issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2018, notifying deletion of existing standard Ind AS 18 and insertion of new standard Ind AS 115 on Revenue from contracts with customers. The amendments are applicable to the company from April 1, 2018. This Standard establishes a five-step model to account for revenue arising from contracts with customers. Revenue is recognized at an amount that refi ects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The Company’s existing policy of eliminating the imputed interest attributable to arrangements having extended credit period from the revenue and accounting the same as interest over the credit period is in line with the requirements of Ind AS 115. The Company is also evaluating the further requirements of the amendment and the effect on the financial statements.
Ind AS 21 - Foreign currency translations and advance consideration:
In March 2018, MCA further notif i ed the Companies (Indian Accounting Standards) (Amendments) Rules, 2018, containing Appendix B to Ind AS 21, Foreign currency translations and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendments are applicable to the company from April 1, 2018. The Company is evaluating the requirements and its effect on the financial statements.
4. Significant estimates and judgements
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures, and the disclosure of contingent liabilities. Actual results could vary from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision effects only that period or in the period of the revision or future periods, if the revision affects both current and future years.
Accordingly, the management has applied the following estimates / assumptions / judgements in preparation and presentation of financial statements:
Property, plant and equipment (PPE) and intangible assets
The residual values and estimated useful life of PPEs, Intangible assets are assessed by technical team duly reviewed by the management at each reporting date. Wherever the management believes that the assigned useful life and residual value are appropriate, such recommendations are accepted and adopted for computation of depreciation / amortization / impairment.
Current taxes
Calculations of income taxes for the current period are done based on applicable tax laws and management’s judgement by evaluating positions taken in tax returns and interpretations of relevant provisions of law.
Deferred tax asset (including MAT credit entitlement)
Significant management judgement is exercised by reviewing the deferred tax assets at each reporting date to determine the amount of deferred tax assets that can be retained / recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
Contingent liabilities
Management judgement is exercised for estimating the possible outflow of resources, if any, in respect of contingencies/ claims / litigations against the Company as it is not possible to predict the outcome of pending matters with accuracy.
Impairment of financial assets
The impairment of financial assets are done based on assumptions about risk of default and expected loss rates. Theassumptions, selection of inputs for calculation of impairment are based on management judgement considering the past history, market conditions and forward looking estimates at the end of each reporting date.
Impairment of non-fnancial assets (PPE / Intangible assets)
The impairment of non-fnancial assets is determined based on estimation of recoverable amount of such assets. The assumptions used in computing the recoverable amount are based on management judgement considering the timing of future cash flows, discount rates and the risks specific to the asset.
Def ned benefit plans and other long term benefits
The cost of the def ned benef t plan and other long term benef ts, and the present value of such obligation are determined by the independent actuarial valuer. Management believes that the assumptions used by the actuary in determination of the discount rate, future salary increases, mortality rates and attrition rate are reasonable. Due to the complexities involved in the valuation and its long term nature, this obligation is highly sensitive to changes in these assumptions.
Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities could not be measured based on quoted prices in active markets, management uses valuation techniques including the Discounted Cash Flow (DCF) model, to determine its fair value. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is exercised in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility.
Share based payments
The Company initially measures the equity settled transactions with employees using fair value model. This requires determination of most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including volatility and dividend yield and making assumptions about them.
Note:
a. Movement in investment in Ramco Systems Pte. Ltd., Singapore represents conversion of loan of Rs.418.34 Mln. (SGD 8.53 Mln.) to equity and additional equity contribution of Rs.187.60 Mln. (SGD 3.77 Mln.) (Previous year movement represents conversion of loan of Rs.346.65 Mln. (SGD 7.45 Mln.) to equity).
b. Movement in investment in RSL Enterprise Solutions (Pty) Ltd., South Africa represents conversion of loan of Rs.99.02 Mln. (ZAR 19.35 Mln.) to equity.
c. Movement in investment in Ramco Systems Australia Pty Ltd., Australia represents conversion of loan of Rs.473.68 Mln. (AUD 9.38 Mln.) to equity.
Note:
1 During the previous year, the Company had, based on the estimates, determined that future taxable profit will be available against which the deductible temporary differences and unused tax losses / unused tax credits can be utilised and hence has recognised net deferred tax asset as above including the credit pertaining to earlier years.
2 During the previous year, the Company had, based on the estimates, determined that future economic benefits in the form of adjustment against the discharge of the normal tax liability within the specified period in which the MAT is allowed to be utilised, will be available and hence has recognised MAT credit entitlement as above including the credit pertaining to earlier years.
Loans are non-derivative financial assets and are carried at amortised cost. Loans - others carry an interest at the rate of 10% p.a. and are repayable in equated monthly instalments at quarterly rests. Loans - subsidiaries carry an interest ranging between 10% p.a. to 12.50% p.a. (previous year 10.50% p.a. to 12.50% p.a.) and are repayable on demand.
5.1 Terms / rights attached to class of shares
The Company has only one class of share referred to as Equity Shares having a par value of Rs.10 each. The holders of Equity Shares are entitled to one vote per share. In the event of liquidation of the Company, the equity shareholders will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
Nature and purpose of reserves Securities Premium
Represents excess of share application money received over par value of shares and includes employee stock compensation costs accrued.
Currency translation reserve
Exchange differences relating to the translation of the results and net assets of the Company’s foreign operations from their functional currencies to the Company’s presentation currency (i.e. Currency Units) are recognised directly in other comprehensive income and accumulated in the foreign currency translation reserve. Exchange differences previously accumulated in the foreign currency translation reserve will be reclassif ed to profit or loss on the disposal of the foreign operation.
Employee stock options outstanding
The share options outstanding account is used to recognise the grant date fair value of options issued to employees under various employees stock option schemes of the Company.
Retained earnings
Represents the portion of the net income / (loss) of the Company.
Note: The share application money pending allotment as at 31 March 2018 represents receipt pursuant to the exercise of options under the Employee Stock Option Schemes ESOS 2009 Plan B, ESOS 2013 and ESOS 2014 of the Company. Under the said scheme, one share of Rs.10 each, at a premium of Rs.Nil for 6,014 shares & Rs.145 for 5,625 shares Rs.335 for 282 shares & Rs.346 for 375 shares needs to be issued for each option exercised. The shares need to be allotted within 6 weeks of receipt of exercise application along with remittance of exercise money. No such application money has been pending beyond the stipulated time for allotment.
6.1 The Company provides for expenses towards compensated absences (leave encashment) provided to its employees. The expenses are recognised in the statement of profi t and loss account and the liabilities are recognised at the present value of the amount payable determined based on an independent external actuarial valuation made as at each Balance Sheet date, using Projected Unit Credit method.
As at 31 March 2018 - Security details
Axis Bank Ltd. - Cash credit - This loan is secured by pari passu fi rst charge on the current assets, both present and future and unencumbered fixed assets (Property, plant and equipment excluding building) of the Company.
IDBI Bank Ltd. - WCDL - This loan is secured by pari passu first charge on the receivables, both present and future, of the Company.
Kotak Mahindra Bank Limited - WCDL - This loan is unsecured
Short Term Borrowings carry interest ranging from 8.60% p.a. to 9.85% p.a.
As at 31 March 2017 - Security details
Axis Bank Ltd. - Cash credit - This loan is secured by pari passu fi rst charge on the current assets, both present and future and unencumbered fixed assets (Property, plant and equipment excluding building) of the Company. Short Term Borrowings carry an interest of 11.25% p.a.
There are no Micro and Small Enterprises, to whom the Company owes dues as at 31 March 2018 and 31 March 2017. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identif ed on the basis of information available with the Company.
7.1 Net debt reconciliation for the year
Effective April 01, 2017, the Company adopted the amendments to Ind AS 7, which require the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from f nancing activities, including both changes arising from cash fi ows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the Balance Sheet for liabilities arising from fi nancing activities, to meet the disclosure requirement. Accordingly the following statement is produced for:
8. Corporate social responsibility (CSR)
As per Section 135 of the Companies Act, 2013, a company meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on CSR activities. Accordingly, the gross amount required to be spent by the Company during the year ended 31 March 2018 is Rs.4.14 Mln. Details of amount spent during the year on CSR activities are given below:
9. Related party transactions
Information on names of related parties and nature of relationship as required by Ind AS 24 on related party disclosures are given below:
a. Subsidiary companies
1. Ramco Systems Corporation, USA
2. Ramco Systems Ltd., Switzerland
3. Ramco Systems Pte Ltd., Singapore
4. Ramco Systems Sdn. Bhd., Malaysia
5. RSL Enterprise Solutions (Pty) Ltd., South Africa
6. Ramco Systems Canada Inc., Canada (wholly owned subsidiary of Ramco Systems Corporation, USA)
7. Ramco Systems FZ-LLC, Dubai
8. RSL Software Company Limited, Sudan
9. Ramco Systems Australia Pty Ltd., Australia
10. Ramco System Inc., Philippines
11. Ramco Systems (Shanghai) Co. Ltd., China
12. Ramco System Vietnam Company Limited, Vietnam
13. PT Ramco Systems Indonesia, Indonesia
b. Key managerial personnel (KMP), including KMP under Companies Act, 2013
1. P R Ramasubrahmaneya Rajha, Chairman upto 11th May 2017
2. P R Venketrama Raja, Vice Chairman & Managing Director upto 3rd June 2017, Chairman from 4th June 2017
3. P V Abinav Ramasubramaniam Raja , Whole Time Director w.e.f. 4th June 2017
4. Virender Aggarwal, Chief Executive Officer
5. R Ravi Kula Chandran, Chief Financial Officer
6. G Kathikeyan, Company Secretary upto 5th December 2016
7. P R Karthic, Company Secretary w.e.f. 3rd July 2017
8. M M Venkatachalam, Independent Director
9. V Jagadisan, Independent Director upto 16th March 2018
10. A V Dharmakrishnan, Non-Executive, Non-Independent Director
11. R S Agarwal, Independent Director
12. Soundara Kumar, Independent Director
c. Relatives of KMP
1. P R Venketrama Raja, Son of P R Ramasubrahmaneya Rajha
2. R Sudarsanam, Spouse of P R Ramasubrahmaneya Rajha
3. S Saradha Deepa, Daughter of P R Ramasubrahmaneya Rajha
4. R Nalina Ramalakshmi, Daughter of P R Ramasubrahmaneya Rajha
5. P V Nirmala, Spouse of P R Venketrama Raja
6. B Srisandhya Raju, Daughter of P R Venketrama Raja
7. P V Abinav Ramasubramaniam Raja, Son of P R Venketrama Raja
d. Enterprises over which the above persons exercise significant inf uence
1. Rajapalayam Mills Limited
2. The Ramco Cements Limited
3. Ramco Industries Limited
4. The Ramaraju Surgical Cotton Mills Limited
5. Sri Vishnu Shankar Mills Limited
6. Sandhya Spinning Mill Limited
7. Thanjavur Spinning Mill Limited
8. Rajapalayam Spintex
(A division of Rajapalayam Mills Ltd)
9. Sri Harini Textiles Limited
10. Swarna Boomi Estate
11. Thanga Vilas Estate
12. Rajapalayam Textile Limited
13. Shri Harini Media Limited
14. Sudarsanam Estate
15. Shri Abhinava Vidya Theertha Seva Trust
16. Smt. Lingammal Ramaraju Shastra Prathista Trust
17. The Ramco Cements Limited Educational and Charitable Trust
18. Gowrihouse Metal Works
19. JKR Enterprises Limited
20. Gowrishankar Screws
21. P A C R Sethuramammal Charity Trust
22. P A C R Sethuramammal Charities
23. Rajapalayam Spinners Limited
24. Ontime Industrial Services Limited
25. Madurai Trans Carrier Limited
26. Ramco Welfare Trust
27. Lynks Logistics Limited
28. Ramco Management Private Limited
e. Employee benefi t funds where control exists
1. Ramco Systems Limited employees group gratuity scheme
2. Ramco Systems Limited employees superannuation scheme
Notes:
a) Details of corporate guarantee / Undertaking given by the Company are given in the note no.35.
b) The above figures include Service Tax / VAT / CST / GST as applicable.
c) The transactions with related parties are at arm’s length basis. The outstanding balances are unsecured and interest free, except loan transactions. The Company has not recorded any impairment of receivables owed by related parties. Payment terms for related party transactions are 30 to 60 days, except in the case of overseas subsidiaries, from whom the receivables are realised within the prescribed period.
d) 2,500 options granted during the previous year under the employee stock option to G Karthikeyan, Company Secretary.
e) Disclosure of Key Management Personnel compensation in total and for each of the following categories:
10. The fair values of financial assets and liabilities are determined at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value of cash and short-term deposits, trade and other short term receivables, trade payables, other current liabilities, short term loans from banks and other financial instruments approximate their carrying amounts largely due to the short term maturities of these instruments.
11. Capital management
For the purpose of the Company’s capital management, capital means the Total Equity as per the Balance Sheet. The primary objective of the Company’s capital management is to maximise the Shareholder’s wealth.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. The Company monitors capital using a gearing ratio, which is Net Debt divided by the Total Equity.
In order to achieve the overall objective, the Company’s capital management, amongst other things, aims to ensure that it meets financial covenants if any, attached to the interest-bearing loans and borrowings that defi ne capital structure requirements. There have been no breaches in the financial covenants of any interest bearing loans/ borrowings. There are no signifi cant changes in the objectives, policies or processes for managing capital during the years ended 31 March 2018 and 31 March 2017.
The Company has undertaken to provide continued financial support to its subsidiaries, Ramco Systems Pte. Ltd., Singapore and Ramco Systems Australia Pty. Ltd., Australia, for their operations and have also undertaken to ensure their going concern status with respect to debt dues to Ramco Systems Limited, Switzerland.
Note: The Company is engaged in development of software products, which are marketed by the Company and its overseas subsidiaries. The intellectual property rights are held by the Company. There are in-built warranties for performance and support. Claims which may arise out of these are not quantifiable and hence not provided for.
12. Financial risk management objectives and policies
The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework and thus established a risk management policy to identify and analyse the risks faced by the Company. The risk management systems are reviewed periodically. The Audit Committee of the Board overseas the compliance with the policy. The Internal Audit reviews the risk management controls and procedures and reports to the Audit Committee.
The Company’s financial risks comprise of market risk, credit risk and liquidity risk.
A. Market risk
Market risk is the risk that the fair value of future cash fiows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk: interest rate risk and currency risk.
A.1 Interest rate risk
The Company has borrowed debt at variable rates to fi nance its operations, which exposes it to interest rate risk. The Company’s interest rate risk management planning includes achieving the lowest possible cost of debt fi nancing, while managing volatility of interest rates, applying a prudent mix of fixed and fi oating debt, either directly or through the use of derivative financial instruments affecting a shift in interest rate exposures between fixed and floating.
1% change in interest rate on variable rate borrowing would impact the interest cost for 2017-18 by Rs.0.05 Mln. (2016-17 by Rs.0.12 Mln.).
A.2 Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s transactions denominated in a foreign currency including trade receivables, unbilled revenues, loans given to overseas subsidiaries, trade payables and bank balances.
B. Credit risk
Credit risk is the risk of financial loss to the Company, if the customer or counter party to the financial instruments fail to meet its contractual obligations and arises principally from the Company’s receivables, treasury operations and other operations that are in the nature of lease.
Customer credit risk is managed by Company’s established policy, procedures and control relating to customer credit risk management. Outstanding customer receivables and unbilled revenues are regularly monitored.
B.1 Trade receivables
Trade receivables of the Company include a) dues from its overseas subsidiaries amounting to 76 % as at 31 March 2018 (74% as at 31 March 2017), of total trade receivables which are risk free and b) dues from others which are exposed to credit risk. The number of other customers and percentage out of total other customers who owed more than Rs.5.00 Mln. were 8 customers and 34% as at 31 March 2018 (13 customers and 43% as at 31 March 2017).
Trade receivables are written off / provided for, when there is no reasonable expectation of realisation, such as debtor declaring bankruptcy or failing to engage in a repayment plan with the Company and where there is a probability of default. Apart from this, the Company maintains a provision based on Expected Credit Loss for trade receivables at the rate of 3% on outstanding more than 365 days.
B.2 Unbilled revenues
Unbilled revenues of the Company are also exposed to risk in the event of the inability to bill the customer. Unbilled revenues are written off / provided for, when there is no reasonable expectation of billing. Apart from this, the Company maintains a provision based on Expected Credit Loss at the rate of 3% on the outstanding more than 365 days.
B.3 Financial instruments and cash deposits
Investments of surplus funds are made only with approved counterparties. The Company is presently exposed to counter party risk relating to deposits with banks and investments made in mutual funds. The Company places its cash equivalents based on the creditworthiness of the financial institutions.
C. Liquidity risk
Liquidity risks are those risks that the Company will not be able to settle or meet its obligations on time or at reasonable price. In the management of liquidity risk, the Company monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Company’s operations and to mitigate the effects of fluctuations in cash flows. Due to the dynamic nature of the underlying business, the Company aims at maintaining flexibility in funding by keeping both committed and uncommitted credit lines available.
13. The Company has only one operating segment, viz., Software Solutions & Services and hence the segment reporting required under Ind AS 108 does not apply.
14. The Company’s shares are listed on BSE Limited and The National Stock Exchange of India Limited. In line with the provisions of the listing agreement with the stock exchanges, the listing fee for the financial year 2018-19 have been paid to the BSE Limited and The National Stock Exchange of India Limited.
15. Figures for the previous year(s) have been regrouped / restated wherever necessary to make them comparable with the figures for the current year.
16. The figures in Rupees have been rounded off to the million in current and previous years.
|