1. Company overview
Paired Technologies Limited (the ‘Company”) is a public limited company domiciled in India and incorporated under the provisions of the erstwhile Companies Act 1956. The Company's equity shares are listed on Bombay Stock Exchange (‘BSE5) and National Stock Exchange (“NSE5).
Subsequent to sale of the Company's transportation and logistics software products business in 2013-14, the management of the Company is yet to identify the business opportunities in the areas of IT solutions and services.
The Company has its registered office at H. No. 8-2-703/2/B, Plot No. 2, Road No. 12, Banjara Hills, Hyderabad, Telangana — 500 034.
2. General information and statement of compliance with Ind AS
The standalone financial statements of the Company have been prepared and presented in accordance with all the material aspects of the Indian Accounting Standards (‘Ind AS5) as notified under section 133 of the Companies Act 2013 read with the Companies (Indian Accounting Standards) Rules 2015 (by Ministry of Corporate Affairs (‘MCA5)) as amended from time to time. The Company has uniformly applied the accounting policies during the periods presented.
For all periods up to and including the year ended 31 March 2017, the Company has prepared its standalone financial statements in accordance with accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Previous GAAP). These financial statements for the year ended 31 March 2018 are the first which the Company has prepared in accordance with Ind AS (see note 27 for explanation for transition to Ind AS). For the purpose of comparatives, financial statements for the year ended 31 March 2018 are also prepared under Ind AS.
These financial statements for the year ended 31 March 2018 were authorized and approved for issue by the Board of Directors on 30 May 2018.
3. Basis of preparation of separate financial statements
The financial statements have been prepared on going concern basis under the historical cost basis except for the following:
i. certain financial assets and liabilities are measured either at fair value or at amortised cost depending on the classification; and
ii. employee defined benefit liabilities are recognised as the net total of the fair value of plan assets, plus actuarial losses, less actuarial gains and the present value of the defined benefit obligation, if any.
4. Otandatd nnt yet effective
Information on new standard, amendment and interprttaaion thrt are expected to Ire relevani io tho financial statements is provided below.
Appendix B to Ind A0 21 - Foreign aurrenay transactions and advance consideration:
On 28 March 2018, MCA has notified tire Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction (os the .urpose of determining the exchange rate to use on initial recognition of the related asset, expense or innome, when an rntity has received or paid advance consideration in a foreign currency. The amendment will crome into force from 1 April 20l 8. Ths CompanyRs. has evaluated the effece of this on the financial statements rnd the imprnt is not mate rial.
and A0 115- Revenue from Contraat with Customers:
On 28 Mtsch .018, MCA hrs notified thn Ind lit f t5r Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customera in an amount that refierts tie consideration io which the; entity expects to be entitled in exchange for those goods nr servites. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from tht enlity’s contracts with customero.
The standard permits two possible methods of transition:
- Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8- Accounting Policies, Changes in Accounting Estimates and Errors
- Modified retrospective approach - Under this approach the cumulative effect of retrospective application is recognised at the date of initial application.
The effective date for adoption of Ind AS 115 is financial periods beginning on or after 1 April 2018. The Company will adopt the standard on 1 April 2018 and accordingly comparatives for the year ended 31 March 2018 will not be retrospectivhly adjusied. Management does not expect adoption of the aforementioned requirement from 1 April 20i8 will have a maeerial effech on the financial statemrnts of the Company.
5. Key cccounting eatimates and judgements
The preparation of the Company’a financial statements requires the 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. Uncertainty about these assumptions and estimates could result in outcomes that: require a maieriat adjusSment to the carrying amount of assets or liabilities aifected in iuture periods. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of7 assets and liabilities within the next financial year, are described below:
Dtfemh income ttxas
Phe atsessment of the probability of future taxable profit in which deferred tax assets can be utilized is based on the Company’s latest approved forecast, which is adjusted for significant non-taxable profit and expenses and specific limits to the use of any unused tax loss or credit. If a positive forecast of taxable profit indicates the probable use of a deferred tax asset, especially when it can be utilized without a time limit, that deferred tax asset is usually reeognized in full
Usafui liaas of various astair
Management reviews the useful lives of depreciable assets at each reporting date, based on the expected utility of the aesets to the Clompany.
Current income taxes
Significant judgments are involved in determining the provision for income taxes including judgment on whether tax poshtions are probable of being sustained in tax assessments. A tax: assessment can involve complex isaues, which can onlybe resolved over extended time perioPs. The recognition of tqxes that are sabjeci to ceriain legal or tconomic limies or uncertainties is assessrd individuatly by management based on the specffin farts and circumstances.
Fair value of financial tnstruments
MancfemenS uses valuation techniques in measuring the fair value of financial instruments where active market quotes are not available. Details of the assumptions used are given in the notes regarding financial assets and liabilities. In applying the valuation techniques, management makes maximum use of market inputs and uses estimates and assumptions that Me, as far as possible, consistent with observable data that market participants would use in pricing the instrument. W/here applicable data fs nnt obsarvable, management uses its best estimate about the assumptions that market participants would make. These estimates may 'vary frbm the actual prices that would be tchievad in an arm’s length transaction at the reporting date.
(b) Terms attached to Equity Shares
The Company has only one class of equity shares having a par value of Rs.10 per share. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividends in Indian Rupees. In the event of liquidation of the Company, the holders of equity shares shall 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 shareholder.
(d) Shares reserved for issue under options
The Company has established Palred Employee Stock Option Scheme 2016 (‘ESOP 2016’) to administer for grant of options not exceeding 400,000 equity shares to eligible employees. The minimum vesting period shall be one year from the date of grant of options and maximum vesting period shall not exceed five years. The exercise price per option shall not be less than face value of equity share and shall not exceed market price of the equity share of the Company as on the date of grant of option.
(e) Capital reduction of equity shares during 5 years immediately preceding the Balance Sheet date
Subsequent to the approval of the High Court of Judicature at Hyderabad for the state of Telangana and Andhra Pradesh for reduction of 60% of the paid up equity share capital during the financial year ended 31 March 2016, the Company has returned an amount of Rs. 16.50 at a premium of Rs. 11.50 per share and cancelled and extinguished 60% of the equity shares of the Company of face value of Rs.5 each in July 2015. After reduction, the issued, subscribed and paid-up equity share capital of Rs. 195,184,850 consisting of 39,036,970 equity shares of Rs.5 each fully paid-up was reduced to 78,073,940 consisting of 15,614,788 equity shares of Rs.5 each.
(f) Consolidation of shares
The Company has consolidated its 2 equity shares of Rs.5 each into 1 equity share of Rs.10 each by issuing 8,213,083 shares of Rs.10 each and cancelled one equity share of Rs.5 from Promoter group as fractional shares can not be allotted. The Company obtained the requisite approval, including approval from the stock exchanges and resumed the trading with face of value Rs.10 each effective from 9 May 2016.
Nature and purpose of reserves
(a) Capital reserve
This reserve represents creation of capital reserve pursuant to the scheme of amalgamation.
(b) General reserve
The general reserve is used from time to time to transfer profit from retained earning for appropriation purpose.
(c) Securities premium reserve
Securities premium reserve is used to record the premium on the issue of the shares. The reserve is utilized in accordance with the provisions of the Act.
(d) Actuarial gains/(losses) on remeasurement of defined benefit obligation
The reserve represents the remeasurement gains/(losses) arising from the actuarial valuation of the defined benefit obligations of the Company. The remeasurement gains/(losses) are recognized in other comprehensive income and accumulated under this reserve within equity. The amounts recognized under this reserve are not reclassified to statement of profit or loss.
(i) The Company provides for gratuity for employees in India as per the Payment of the Gratuity Act, 1972. Employees who are in continuous service for a period of five years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionally for 15 days salary multiplied for the number of the years of service. The gratuity plan is unfunded. The assumptions used in accounting for the gratuity plan are set out as below:
The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotions and other relevant factors such as supply and demand in the employment market. The Company evaluates these assumptions annually based on its long term plans of growth and industry standards.
The amounts recognized in the balance sheet and the movements in the net defined benefit obligation over the year are as follows:
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practise, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.
Risk exposure
Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:
(a) Asset volatility The plan liabilities are calculated using a discount rate set with reference to current investment patterns in the economy; if plan assets underperform this yield, this will create a deficit.
(b) Changes in bond yields A decrease in bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings.
(c) Life expectancy The defined benefit obligation is to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plans’ liabilities. This is particularly significant where inflationary increases result in higher sensitivity to changes in life expectancy.
Defined benefit liability and employer contributions
There is no compulsion on the part of the Company to prefund the liability of the plan. The Company’s philosophy is not to externally fund these liabilities but instead create an accounting provisions in its books of account and pay the gratuity to its employees directly from its own resources as and when the employee leaves the Company.
The expected future cash flows in respect of gratuity as at 31 March 2018 were as follows:
6 Exceptional item
Advance tax as at 31 March 2017 includes ^7,791,886 relating to foreign tax credits for the financial years 2010-11, 201112 and 2012-13. Upon completion of tax assessments for these financial years, the Company had the taxable losses and accordingly was not able to utilize the foreign tax credits. On a detailed evaluation of these advances and based on management’s assessment, the Board has considered to create provision against such advances which have been categorized as exceptional items for the year ended 31 March 2017.
7 Deferred taxes
The Company has deferred tax assets primarily on account of unabsorbed business loss, unabsorbed tax depreciation and other items, which have not been recognized on the grounds of prudence. Consequently, there is no deferred tax asset recorded in the financial statements as at reporting periods presented.
8 Subsequent events
(i) Subsequent to the year end, the Company has invested in 1,000,000 equity shares of Rs.10 each of Palred Technology Services Private Limited, a subsidiary of the Company, at par value aggregating to Rs. 10,000,000.
(ii) Subsequent to the year end, the Company has invested in 640,000 equity shares of Rs.10 each of Palred Online Technologies Private Limited, a subsidiary of the Company, at a premium of Rs.52.50 per share aggregating to
(iii) Palred Retail Private Limited, a subsidiary of the Company with paid up share capital of ^500,000 consisting of 50,000 equity shares of Rs.10 each, is incorporated subsequent to the year end.
(c) Valuation technique used to determine fair value
Specific valuation techniques used to value financial instruments include:
-the use of quoted market prices or dealer quotes for similar instruments
-the fair value of the remaining financial instruments is determined using discounted cash flow analysis.
AH of the resulting fair value estimates are included in level 2. For unlisted equity securities, where the fair values have been determined based on present values and the discount rates used were adjusted for counterparty or own credit risk.
9 Financial risk management
The Company’s risk management assessment and policies and processes are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same. Risk assessment and management policies and processes are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Board of Directors and the Audit Committee is responsible for overseeing the Company’s risk assessment and management policies and processes. Currently, as the management is evaluating multiple business options, Company’s primary risk management focus is to minimize potential adverse effects of market risk on its financial performance.
A. 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 and certificates of deposit which are funds deposited at a bank for a specified time period. None of the Company’s cash equivalents, including term deposits (i.e., certificates of deposit) were past due or impaired as at the reporting periods.
B. Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company’s reputation.
The Company’s principle sources of liquidity are cash and cash equivalents and current investments. The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived. The Company closely monitors its liquidity position and maintains adequate source of funding. The Company had following working capital at the end of the reporting years:
C. Market risk
Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse changes in market rates (such as interest rates) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive financial instruments. The Company’s exposure to market risk is a function of investing activities.
10 Capital management
The Company manages its capital to ensure that it will continue as going concern while maximising the return to stakeholders. The company manages its capital structure and make adjustment in light of changes in business condition. The overall strategy remains unchanged as compare to last year. There is no debt in the Company as on the reporting dates presented and accordingly, Gearing Ratio is nil as at various reporting dates.
11 First-time adoption (’FTA’) of Ind AS - Transition to Ind AS
These financial statements, for the year ended 31 March 2018, are the first the Company has prepared in accordance with Ind AS. For periods up to and including the year ended 31 March 2017, the Company prepared its financial statements in accordance with Indian GAAP, including accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014 (previous GAAP or Indian GAAP). The Company has prepared financial statements which comply with Ind AS applicable for periods ending on or after 31 March 2018, together with the comparative period data as at and for the year ended 31 March 2017 and in the preparation of an opening Ind AS balance sheet at 1 April 2016 (the Company’s date of transition), as described in the summary of significant accounting policies. In preparing its opening Ind AS balance sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with previous GAAP. An explanation of how the transition from previous GAAP to Ind AS has affected the Company's financial position, financial performance and cash flows is set out in the following tables and notes.
A. Exemptions and exceptions availed
(a) Ind AS optional exemptions (i) Business combinations
Ind AS 101 provides the option to apply Ind AS 103 prospectively from the transition date or from a specific date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date. The Company elected to apply Ind AS 103 prospectively to business combinations occurring after its transition date. Business combinations occurring prior to the transition date have not been restated.
(ii) Deemed cost
Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets. Accordingly, the Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value.
(iii) Investment in subsidiaries
Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its investments in subsidiaries, joint ventures and associates as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition. Accordingly, the Company has elected to measure its investment in subsidiaries at their previous GAAP carrying value.
(b) Ind AS mandatory exceptions
(i) Estimates
An entity’s estimates in accordance with Ind ASs at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error. Ind AS estimates as at 1 April 2016 are consistent with the estimates as at the same date made in conformity with previous GAAP.
(ii) De-recognition of financial assets and liabilities
Ind AS 101 requires a first-time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows a first-time adopter to apply the de-recognition requirements in Ind AS 109 retrospectively from a date of the entity’s choosing, provided that the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognised as a result of past transactions was obtained at the time of initially accounting for those transactions. The Company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS.
(iii) Classification and measurement of financial assets
Ind AS 101 requires an entity to assess classification and measurement of financial assets on the basis of the facts and circumstances that exist at the date of transition to Ind AS.
B. Reconciliations between previous GAAP and Ind AS
(a) Reconciliation of total equity as at 31 March 2017 and 1 April 2016
The transition from Indian GAAP to Ind AS had no material impact on the total equity.
(b) Reconciliation of total comprehensive income for the year ended 31 March 2017
C. Notes to first-time adoption:
1 Remeasurements of post-employment benefit obligations
Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognised in other comprehensive income instead of profit or loss. Under the previous GAAP, these remeasurements were forming part of the profit or loss for the year. As a result of this change, the profit for the year ended 31 March 2017 decreased by Rs.37,548. There is no impact on the total equity as at 31 March 2017.
2 Retained earnings
Retained earnings as at 1 April 2016 has been adjusted consequent to the above Ind AS transition adjustments.
3 Other comprehensive income
Under Ind AS, all items of income and expense recognised in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognised in profit or loss but are shown in the statement of profit and loss as ‘other comprehensive income’ includes remeasurements of defined benefit plans. The concept of other comprehensive income did not exist under previous GAAP.
4 Statement of cash flows
The transition from Indian GAAP to Ind AS had no material impact on the statement of cash flows.
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