1 Corporate information

MT Educare Limited ('MTEL' or 'the Company') is an education support and coaching services provider for students in the secondary and higher secondary school and for students pursuing graduation degree in commerce, preparing for various competitive examinations and undertaking chartered accountancy examinations.

The Company is a public limited company domiciled in India and is incorporated under the provisions of Companies Act, 1956. The Company's share are listed on two recognised stock exchanges - National Stock Exchange and Bombay Stock Exchange.

Based on the preliminary assessment performed by the Company, the impact of application of the standard is not expected to be material.

(b) Amendment to Existing issued Ind AS

The MCA has also carried out amendments of the following accounting standards:

i. Ind AS 21 - The Effects of Changes in Foreign Exchange Rates

ii. Ind AS 12 - Income Taxes

The Company is evaluating the requirement of the amendments and the impact on the financial statements. Based on the management's view, the effect of the amendments, if any, on the financial statements is expected to be insignificant.

3.2 Reconciliations

The following reconciliations provides the effect of transition to Ind AS from IGAAP in accordance with Ind AS 101, Firsttime Adoption of Indian Accounting Standards:

3.3 Notes to first-time adoption

(i) Lease equalization reserve

Ind AS 17, Leases, requires lease payments to be recognized on straight-line basis if the increase is not in line with expected general inflation to compensate for the lessor's expected inflationary cost increases. The Company has lease agreements with an escalation clause which is in line with expected general inflation, and hence no straight-lining of the lease payments have been done in Ind AS.

(ii) Security deposit

Under IGAAP, interest-free security deposit (that are refundable in cash on completion of the lease term) are recorded at their transaction value. Under Ind AS, all financial assets are required to be recognized at fair value. Accordingly the Company has fair valued these security deposits under Ind AS. Difference between the fair value and transaction value of the security deposit has been recognized as prepaid rent, with a corresponding charge in rent expense and other income. The security deposit in 2016 has reduced by Rs.983.66 lakhs and 2017 by Rs. 943.42 lakhs with a corresponding increase in prepaid rent. Other income for the year has increased by Rs.97.93 lakhs in 2017 with a corresponding increase in rent expense, with no impact on retained earnings.

(iii) Defined benefit liabilities

Both under IGAAP and Ind AS, the Company recognized costs related to its post-employment defined benefit plan on an actuarial basis. Under IGAAP, the entire cost, including actuarial gains and losses, are charged to Statement of Profit and Loss. Under Ind AS, re-measurements comprising of actuarial gains and losses are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI. Thus there is an impact in employee benefit cost with a corresponding amount recognized in OCI amounting to Rs.6.98 lakhs, net of taxes of Rs.3.69 lakhs

(iv) Expected credit loss

Under IGAAP, allowance for doubtful debts was made as per management policy based on ageing of debtors. Under Ind AS, the company applies expected credit loss (ECL) model for recognising impairment loss on these financial assets on the transition date. On transition to Ind AS, provision for doubtful receivables/ other financial assets is measured under ECL model, which is higher than the provision as per IGAAP, the resultant change are recognised in statement of profit and loss. ECL provision made in 2016 amounted to Rs.600 lakhs and a corresponding deferred tax assets created of Rs.207.66 lakhs and additional provision made in 2017 amounted to Rs.2,067.25 lakhs and a corresponding deferred tax assets created of Rs.715.48 lakhs

(v) Revenue

Under the IGAAP, revenue from Gross fees received was recognized equally over the period of service rendered (course duration) except CRF and Robomate. The Course Registration Fees (CRF) was part of total fees and being non refundable was recognised at the time of admission. Under Ind AS, Revenue is measured at the fair value of the consideration received or receivable net of returns, rebates and discounts, if any, and excluding taxes or duties collected on behalf of the government. Hence, recognistion of CRF had to be streamlined and recognised over the course period. Also, robomate was fair valued and impact considered under Ind AS adjustments. Hence, advance fees included under other current liabilities has increased by Rs.943.74 lakhs in 2016 with deferred tax asset impact of Rs.326.61 lakhs and by Rs.509.77 lakhs in 2017 with a corresponding reduction in retained earnings, thereby revenue has increased by Rs.433.98 lakhs in 2017 with deferred tax liabilty impact of Rs.150.28 lakhs.

(vi) Deferred tax

IGAAP requires assessment of virtual certainty in case of losses for recognizing deferred tax asset, but under Ind AS deferred tax assets are recognized for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses. Hence deferred tax asset amounting to Rs.534.27 lakhs was recognised in 2016 and Rs.1,095.78 lakhs in 2017 on account of revenue, ECL and defined benefit impact as mentioned in note

(iv) and (v) above.

(vii) Other comprehensive income

The concept of Other Comprehensive Income (OCI) did not exist under IGAAP. Also refer point (iii) above.

(viii) Borrowings

Ind AS 109 "Financial Instruments" requires transaction costs incurred towards origination of borrowings to be deducted from the carrying amount of borrowings on initial recognition. These costs are recognised in the profit and loss over the tenure of the borrowing as part of the interest expense by applying the effective interest rate method. Under IGAAP, these transaction costs were charged to profit or loss as and when required. Accordingly, borrowings has reduced by Rs.9.98 lakhs with a corresponding increase is retained earnings.

(ix) Proposed dividend

Under Ind AS 10, "Events after reporting date" proposed dividend are considered as non adjusting events, hence dividend declared after the balance sheet date are not recognised at the end of the reporting period, as no obligation exists at that time. Hence, proposed dividend including dividend distribution tax has been reduced from current provisions in 2016 and reconsidered in 2017 amounting to ' 670.98 lakhs.

(x) Statement of cash flows

The Ind AS adjustments are either non cash adjustments or are regrouping among the cash flow from operating, investing and financing activities. Consequently, Ind AS adoption has no impact on the net cash flow for the year ended 31 March, 2017 as compared with the IGAAP.

Note:

11.1 Held as lien by bank against bank guarantees issued

11.2. The Company can utilise these balances only towards settlement of unclaimed dividend.

11.3.Zee Learn has entered into share subscription agreement dated February 14, 2018 with the Company and had invested Rs.20,000 lakhs by way of issue of 31,964,200 equity shares of the Company @ Rs.62.57 per share on preferential basis. The subscription money is held in escrow account as on balance sheet date.

15.2 Rights, preferences and restrictions attached to shares

The company has only one class of equity shares having par value of Rs.10 per share. Each shareholder is entitled to one vote per share held. The company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the company, the holders of equity shares 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

* As per the terms of Share Subscription Agreement, Zee Learn Limited shall not exercise any voting rights pending successful completion of the proposed open offer.

As per records of the company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.

15.4 Aggregate number of equity shares issued as bonus shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date:

Nil (previous year 2017 Nil and 2016 Nil)

15.5 Shares reserved for issue under options

For details of shares reserved for issue under the Share Based Payment plan of the company, please refer note 34.

Note:

16.1 Securities premium reserve is created due to premium on issue of shares. This reserve is utilised in accordance with the provisions of the Act.

16.2 The General Reserve is used from time to time to transfer profits / (loss) from retained earnings for appropriation purposes. The General reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive Income.

16.3 The Employee Share options outstanding account is used to recognise the grant date fair value of options issued to employees under employee stock option plan.

17.1 Nature of security and terms of repayment for secured borrowings:

(i) Nature of security:

Term loan from bank is secured by:

- first pari passu hypothecation charge on the entire current assets and movable assets (except vehicle) of the Company both present and future;

- pledge of shares owned by the promoter of the Company; and

- personal guarantee given by the promoter of the Company.

Term loan from other party is secured by:

- first pari passu hypothecation charge on the entire current assets and movable assets of the Company both present and future;

- pledge of shares owned by the promoter of the Company; and

- personal guarantee given by the promoter of the Company.

(ii) Terms of repayment:

In case of term loan from bank:

- Repayable in 8 half yearly installments starting from September 2018. Last installment due in April 2022.Rate of interest is 2.75% over banks 12 months MCLR (Range from 10.75% to 11.00% per annum as on March 31, 2018).

- Repayable in 16 quarterly installments starting from August 2018. Last installment due in May 2022. Rate of interest is 2.75% over banks 12 months MCLR. (Range from 10.75% to 11.00% per annum as on March 31, 2018).

In case of term loan from other party:

- Repayable in 10 half yearly installments starting from October 2018. Last installment due in March 2023. Rate of interest is 13% per annum.

Terms of repayment for unsecured borrowings:

- Repayable in 36 monthly installments starting from February 2017. Last installment due in January 2020. Rate of interest is 17.50% per annum.

20.1 Nature of security and terms of repayment for secured borrowings:

(i) Nature of security:

Loan from banks and other parties is secured by:

- first pari passu hypothecation charge on the entire current assets and movable assets of the Company both present and future;

- pledge of shares owned by the promoter of the Company; and

- personal guarantee given by the promoter of the Company.

(ii) Terms of repayment:

Loan from banks and other parties is repayable on demand.

20.2 Terms of repayment for unsecured borrowings:

Loan from other parties and related parties is repayable on demand.

31.1.1 Corporate guarantee is provided to a bank in respect of loan taken by Sri Gayatri Educational Society pursuant to the long term partnership arrangement entered through company's subsidiary Sri Gayatri Educational Services Private Limited. Corporate guarantee is utilised for business purposes.

31.1.2 Corporate guarantee is provided to a party in respect of loan taken by subsidiary company, Lakshya Educare Private Limited. Corporate guarantee is utilised for business purposes.

2. Share based payments

MT Educare Employee Stock Option Scheme (ESOS) 2016

- The shareholders' vide its special resolution dated February 17, 2016 approved ESOS 2016 for granting employee stock options in form of equity shares to eligible employees of the Company, monitored and supervised by the Board of Directors.

- The ESOS 2016 was granted to eligible employees to reward for their performance and to motivate them to contribute to the growth and profitability of the Company. The employees can purchase equity shares by exercising the options as vested at the price specified in the grant.

- Options are granted under the ESOS 2016 for no consideration and carry no dividend and voting rights.

The fair value of the share options is estimated at the grant date using a Black Scholes Option Pricing Model, taking into account the terms and conditions upon which the share options were granted.

- When excersiable, each option is convertible into one equity share.

- There are no cash settlement alternatives in ESOS 2016.

In accordance with the above mentioned ESOS 2016, Rs.67.82 lakhs (Previous year 2017 Rs.Nil) has been charged to the Statement of Profit and Loss in relation to the options granted under the Employee Stock Option Scheme Compensation. (Refer Note 28)

*During the year ended March 31, 2017, 731,000 options were granted and forfeited / surrendered in the previous year itself. Accordingly, no expenses in respect of these options has been recognized in the financial statement.

The options outstanding at the year ending on March 31, 2018 with the range of exercise price of Rs.10 are 738,450 options (March 31, 2017: Nil) and a weighted average remaining contractual life of all options are 4.72 (March 31, 2017: Nil).

3 Operating Lease

The Company has entered into operating lease arrangements for certain facilities and Coaching Center premises. The lease rentals are payable by the company on monthly/quarterly basis.

Lease payments recognised in the Statement of Profit and Loss is Rs.3,271.51 lakhs ( Previous year 2017- Rs.3,676.52 lakhs)

4. Segment Reporting

The Company's operations predominantly relates to a single segment viz. conducting commercial training, coaching, tutorial classes and activities incidental and ancillary thereon. The Chief Operating Decision Maker (CODM) reviews the operations of the Company as one operating segment. Hence no separate segment information has been furnished herewith.

5 Employee benefit plans

In accordance with the Indian Accounting Standard-19 'Employee Benefits', the Company has calculated the various benefits provided to employees as under:

a Defined contribution plans

The Company makes contributions towards provident fund and Labour Welfare fund to a defined contribution retirement benefit plan for qualifying employees. Under the plan, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit schemed to fund the benefits.

b Defined benefit plans

(a) Gratuity

The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. The gratuity plan is a funded plan and the Company makes contributions to recognised funds in India.

(b) Compensated absences

The compensated absences are payable to all eligible employees at the rate of daily salary of each day of accumulated leave on death or on resignation or upon retirement on attaining retirement age, whichever is earlier. The liability towards compensated absences are determined based on actuarial valuation carried out by using Projected Unit Credit Method.

In accordance with Indian Accounting Standard 19, an actuarial valuation was carried out in respect of the aforesaid defined benefit plans based on the following assumptions:

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

- Estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

The expected rate of return on plan assets is determined after considering several applicable factors such as the composition of the plan assets, investment strategy, market scenario, etc. In order to protect the capital and optimise returns within acceptable risk parameters, the plan assets are well diversified.

The sensitivity analysis above have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period and may not be representative of the actual change. It is based on a change in the key assumption while holding all other assumptions constant. When calculating the sensitivity to the assumption, the method (Projected Unit Credit Method) used to calculate the liability recognised in the balance sheet has been applied. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared with the previous period.

These plans typically expose the Company to actuarial risks such as: Investment Risk, Interest Risk, Longevity Risk and Salary Risk.

Investment Risk -The present value of the defined benefit liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds.

Interest Risk - A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on the plan's investments.

Longevity Risk - The present value of the defined benefit liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan's liability.

Salary Risk - The present value of the defined benefit liability is calculated by reference to the future salaries of plan participants. As such, an increase in salary of the plan participants will increase the plan's liability.

viii Employer's best estimate for contribution during next year:

The expected contribution for defined benefit plan for the next financial year will be in line with 2017-18.

(b) Compensated absences (Unfunded)

The leave salary are payable to all eligible employees at the rate of daily salary of each day of accumulated leave (upto 39 days) on death or on resignation or upon retirement on attaining retirement age.

The liability for compensated absences as at year end is Rs.141.66 lakhs (March 31, 2017: Rs.166.89 Lakhs and April 1, 2016: Rs.139.81 lakhs)

Short term Provision as at year end is Rs.34.30 Lakhs (March 31, 2017: Rs.41.93 Lakhs and April 1, 2016: Rs.31.84 lakhs)

Long term Provision as at year end is Rs.101.62 Lakhs(March 31, 2017: Rs.124.96 lakhs and April 1, 2016: Rs.107.97 lakhs)

Current liability as at the year end is Rs.5.74 lakhs (March 31, 2017: Rs.Nil and April 1, 2016: Nil)

6 Financial instruments - Fair value hierarchy

The following is the hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

Financial Instrument measured at Fair Value through Profit and Loss

No financial assets/liabilities have been valued using level 1 and 2 fair value measurements.

Financial Instrument measured at Amortised Cost

The carrying amount of financial assets and financial liabilities measured at amortised cost in the financial statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.

7 Financial instruments - Risk management objectives and policies

The Company is exposed to various financial risks. These risks are categorized into market risk, credit risk and liquidity risk. The Company's risk management is coordinated by the Board of Directors and focuses on securing long term and short term cash flows. The Company does not engage in trading of financial assets for speculative purposes.

(A) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk.

(i) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company exposure to the risk of changes in market interest rates relates primarily to the Company's long-term debt obligations with floating interest rates. For details of the Company's current and non current loans and borrowings, including interest rate profiles, refer to Note 17 and 20 of these financial statements.

(ii) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument 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 operating activities (when revenue or expense is denominated in a different currency from the Company's functional currency).

(iii) Other price risk

The Company does not have exposure to equity securities price risk arising from investments in equity shares (Unquoted) held by the Company and classified in the balance sheet at fair value through profit and loss.

(B) Credit risk

Credit risk arises from the possibility that the counter party may not be able to settle their obligations as agreed. To manage this, the Company periodically assesses financial reliability of customers and other counter parties, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of financial assets. Individual risk limits are set and periodically reviewed on the basis of such information.

The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis through each reporting period. To assess whether there is a significant increase in credit risk, the Company compares the risk of default occurring on asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information such as:

i) Actual or expected significant adverse changes in business;

ii) Actual or expected significant changes in the operating results of the counter-party;

iii) Financial or economic conditions that are expected to cause a significant change to the counter-party's ability to meet its obligations;

iv) Significant increase in credit risk on other financial instruments of the same counter-party; and

v) Significant changes in the value of the collateral supporting the obligation or in the quality of the third-party guarantees or credit enhancements.

Financial assets are written off when there is no reasonable expectations of recovery, such as a debtor failing to engage in a repayment plan with the Company. Where loans or receivables have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognized as income in the statement of profit and loss.

The Company measures the expected credit loss of trade receivables and loan from individual customers based on historical trend, industry practices and the business environment in which the entity operates. Loss rates are based on actual credit loss experience and past trends. Based on the historical data, loss on collection of receivable is not material hence no additional provision considered.

The Company limits its exposure to credit risk of balances held with banks by dealing with highly rated banks and institutions and retaining sufficient balances in bank accounts required to meet a month's operational costs. The management reviews the bank accounts on regular basis and fund draw downs are planned to ensure that there is minimal surplus in bank accounts.

Under the simplified approach, the company does not track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.

For recognition of impairment loss on other financial assets, the company determines whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity recognises impairment loss allowance based on 12-month ECL.

(C) 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 management monitors rolling forecast on the liquidity position and cash and cash equivalents on the basis of expected cash flows.

8 Capital management

The Company aim to manages its capital efficiently so as to safeguard its ability to continue as a going concern and to optimise returns to our shareholders.

The capital structure of the Company is based on management's judgement of the appropriate balance of key elements in order to meet its strategic and day-to-day needs. Company consider the amount of capital in proportion to risk and manage the capital structure in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares.

The Company's policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain future development and growth of its business. The Company will take appropriate steps in order to maintain, or if necessary adjust, its capital structure.

9 The Scheme of Arrangement ('Scheme') between Lakshya Forum for Competitions Private Limited (LFCPL), Lakshya Educare Private Limited (LEPL) and their respective Shareholders was filed with the High Court of Judicature at Bombay and the High Court of Punjab & Haryana at Chandigarh. The Hon'ble High Court of Judicature at Bombay approved the Scheme on May 4, 2016 subject to approval of the Scheme by High Court of Judicature at Punjab & Haryana. The Scheme was subsequently approved vide Order dated August 17, 2017 passed by National Company Law Tribunal Court - Chandigarh Bench, Chandigarh on account of transfer from High Court of Judicature at Punjab & Haryana, effective April 1, 2014 which is the 'Appointed Date' prescribed in the Scheme. The Scheme has, accordingly, been given effect to in the financial statements of Lakshya Educare Private Limited for the year ended March 31, 2018.

10 Events after the reporting period

No significant events have occurred after the balance sheet date which requires adjustment or disclosure in the financial statements of the Company.

11 Approval of financial statements

The financial statements are approved for issue by the Audit Committee and Board of Directors at its meeting held on May 29, 2018.

12 Previous year figures have been regrouped/ reclassified to confirm presentation as per Ind AS as required by Schedule III of the Act.