3. Material Accounting Policies
A. Operating cycle
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and
cash equivalents. The Company has identified twelve months as its operating cycle.
B. Financial instruments
i) Recognition and initial measurement
Trade receivables are amounts due from customers for services performed in the ordinary course of business
and reflect the Company's unconditional right to consideration (that is, payment is due only on the passage of
time). Trade receivables and debt securities are initially recognised when they are originated. All other financial
assets and financial liabilities are initially recognised when the Company becomes a party to the contractual
provisions of the instrument.
A financial asset (except trade receivables which are initially recognised at transaction price as per Ind AS 115)
or financial liability is initially measured at fair value plus, for an item not at fair value through profit and loss
(FVTPL), transaction costs that are directly attributable to its acquisition or issue.
ii) Classification and subsequent measurement
Financial assets:
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated
as at FVTPL:
a) The asset is held within a business model whose objective is to hold assets to collect contractual cash flows;
and
b) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
A debt investment is measured at fair value through other comprehensive income if it meets both the following
conditions and is not designated as FVTPL:
a) The asset is held within a business model whose objective is achieved by both collecting contractual cash
flows and selling financial assets; and
b) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to
present subsequent changes in the investment's fair value in OCI (designated as FVOCI - equity investment).
This election is made on an investment by investment basis.
iii) Derivative financial instruments and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are
subsequently re-measured to their fair value at the end of each reporting period. The accounting for subsequent
changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the
nature of the item being hedged.
The Company enters into certain derivative contracts to hedge risks which are not designated as hedges. Such
contracts are accounted for at fair value through profit or loss and are included in other gains/(losses).
Hedge accounting
The Company is exposed to foreign currency fluctuations on foreign currency assets, liabilities and forecasted
cash flows denominated in foreign currency. The Company uses foreign currency forward contracts to hedge
its risks associated with foreign currency fluctuations relating to certain forecasted transactions. The Company
designates some of these forward contracts as hedge instruments and accounts for them as cash flow hedges
applying the recognition and measurement principles set out in Ind AS 109.
The use of foreign currency forward contracts is governed by the Company's risk management policy approved
by the Board of Directors, which provide written principles on the use of such financial derivatives consistent
with the Company's risk management strategy. The counter party to the Company's foreign currency forward
contracts is generally a bank.
Foreign currency forward contract derivative instruments are initially measured at fair value and are re¬
measured at subsequent reporting dates. Changes in the fair value of these derivatives that are designated and
effective as hedges of future cash flows are recognised in other comprehensive income and accumulated under
'effective portion of cash flow hedges' (net of taxes), and the ineffective portion is recognised immediately in
the Statement of Profit and Loss.
Amounts previously recognised in other comprehensive income and accumulated in effective portion of cash
flow hedges are reclassified to the Statement of Profit and Loss in the same period in which gains/losses on the
item hedged are recognised in the Statement of Profit and Loss.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised,
or no longer qualifies for hedge accounting. Cumulative gain or loss on the hedging instrument classified as
effective portion of cash flow hedges is classified to Statement of profit and loss when the forecasted transaction
occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in
effective portion of cash flow hedges is transferred to the Statement of profit and loss for the period.
Refer note 27(B) for other accounting policies relevant to financial instruments.
C. Property, plant and equipment
i) Recognition and initial measurement
Items of property, plant and equipment are measured at cost, (which includes capitalised borrowing costs, if
any) less accumulated depreciation and accumulated impairment losses, if any.
Depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted if
appropriate. Based on technical evaluation and consequent advice, the management believes that its estimates
of useful lives as above best represent the period over which management expects to use such assets.
Depreciation on additions (disposals) is provided on a pro-rata basis i.e. from (up to) the date on which asset
is ready for use (disposed of).
Refer note 27(D) for other accounting policies relevant to property, plant and equipment.
D. Intangible assets
i) Recognition and initial measurement
Intangible assets of the Company comprises of purchased software that are initially measured at cost. Such
intangible assets are subsequently measured at cost less accumulated amortisation and any accumulated
impairment losses.
ii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the
specific asset to which it relates.
iii) Amortisation
Amortisation is calculated to write off the cost of intangible assets less their estimated residual values over
their estimated useful lives using the straight-line method, and is included in depreciation and amortisation in
Statement of Profit and Loss.
E. Impairment
i) Impairment of financial assets
The Company recognises loss allowances for expected credit losses on financial assets measured at amortised cost.
The Company always measures the loss allowance for trade receivables at an amount equal to lifetime expected
credit loss (ECL). The Company has used a practical expedient by computing the expected credit loss allowance
for trade receivables based on a provision matrix under simplified approach. The provision matrix takes into
account historical credit loss experience and adjusted for forward-looking information. The expected credit loss
allowance is based on the ageing of the days the receivables are due.
ii) Impairment of non-financial assets
The Company's non-financial assets, other than deferred tax assets, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable
amount is estimated.
For impairment testing, assets that do not generate independent cash inflows are grouped together into cash¬
generating units (CGUs). Each CGU represents the smallest group of assets that generates cash inflows that are
largely independent of the cash inflows of other assets or CGUs.
The Company's corporate assets (e.g., head office building for providing support to various CGUs) do not
generate independent cash inflows. To determine impairment of a corporate asset, recoverable amount is
determined for the CGUs to which the corporate asset belongs.
Refer note 27(C) for other accounting policies relevant to impairment of financial and non-financial assets.
F. Employee benefits
Provident fund: A defined contribution plan is a post-employment benefit plan under which an entity pays
fixed contributions into a separate entity and will have no legal or constructive obligation to pay further
amounts. The Company makes specified monthly contributions towards Government administered provident
fund scheme. Obligations for contributions to defined contribution plans are recognised as an employee benefit
expense in profit or loss in the periods during which the related services are rendered by employees.
Gratuity: The Company provides for gratuity, a defined benefit plan (the "Gratuity Plan”), covering eligible
employees. The Plan provides payment to vested employees at retirement, death or termination of employment,
of an amount based on the respective employee's salary and the tenure of employment with the Company. The
Company provides the gratuity benefit through annual contribution to a fund managed by the Life Insurance
Corporation of India (LIC). Such contributions are determined by LIC based on actuarial valuation using
"projected unit credit method” as at the balance sheet date.
Share based payment: The grant date fair value of equity settled share-based payment awards granted to
employees is recognised as an employee expense, with a corresponding increase in equity, over the period
that the employees unconditionally become entitled to the awards. The amount recognised as expense is based
on the estimate of the number of awards for which the related service and non-market vesting conditions are
expected to be met, such that the amount ultimately recognised as an expense is based on the number of
awards that do meet the related service and non-market vesting conditions at the vesting date.
Refer note 27(F) for other accounting policies relevant to employee benefit expenses.
G. Revenue
The Company is primarily engaged in the business of rendering analytics services.
The Company has revenue from customer contracts. The Company recognizes revenue when it satisfies
performance obligations under the terms of its contracts, and control of its services is transferred to its customers
in an amount that reflects the consideration the Company expects to receive from its customers in exchange for
those services. This process involves identifying the customer contract, determining the performance obligations
in the contract, determining the contract price, allocating the contract price to the distinct performance
obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. A
performance obligation is considered distinct from other obligations in a contract when it (a) provides a benefit
to the customer either on its own or together with other resources that are readily available to the customer and
(b) is separately identified in the contract.
Taxes assessed by a government authority that are both imposed on and concurrent with a specific revenue-
producing transaction, that are collected by the Company from a customer, are excluded from sales.
A performance obligation is satisfied over time if one of the following criteria are met:
— The customer simultaneously receives and consumes the benefits as the entity performs;
— The entity's performance creates or enhances an asset that the customer controls as the asset is created or
enhanced; or
— The entity's performance does not create an asset with an alternative use to the entity, and the entity has an
enforceable right to payment for performance completed to date.
If control transfers over time, an entity selects a method to measure progress that is consistent with the objective
of depicting its performance.
Contract modifications
Contracts may be modified to add, remove or change existing performance obligations. The accounting for
modifications to our contracts involves assessing whether the services added to an existing contract are distinct
and whether the pricing is at the standalone selling price. Services added that are not distinct are accounted for
on a cumulative catch up basis, while those that are distinct are accounted for prospectively, either as a separate
contract if the additional services are priced at the standalone selling price, or as a termination of the existing
contract and creation of a new contract if not priced at the standalone selling price.
Nature of services
The Company generally recognizes revenue for analytical services over time as the Company's performance
creates or enhances an asset that the customer controls from fixed price contracts and the customers
simultaneously receives and consumes the benefits and/or as and when the milestones are completed as
per the terms of the contract. Revenue on time-and-material contracts are recognised as the related services
are performed.
The Company has adopted the 'as-invoiced' practical expedient for performance obligation satisfied over time
with respect to certain fixed price contracts. It permits an entity to recognize revenue in the amount to which
it has a right to invoice the customer if that amount corresponds directly with the value to the customer of the
entity's performance completed to date.
Other Income:
Dividend income is recognised when the right to receive payment is established by the balance sheet date.
Interest income is recognised on a time proportion basis taking into account the amount outstanding and the
effective interest rate. Interest income is included under the head "other income” in the Statement of Profit and Loss.
The 'effective interest rate' is the rate that exactly discounts estimated future cash payments or receipts through
the expected life of the financial instrument to:
- The gross carrying amount of the financial asset; or
- The amortised cost of the financial liability.
In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount
of the asset (when the asset is not credit-impaired) or to the net carrying amount of the financial asset after
deduction of loss allowance. However, for financial assets that have become credit-impaired subsequent to
initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of
the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the
gross basis.
Refer note 27(E) for other accounting policies relevant to revenue.
H.Leases
The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains,
a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange
for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the
Company assesses whether: (1) the contract involves the use of an identified asset (2) the Company has
substantially all of the economic benefits from use of the asset through the period of the lease and (3) the
Company has the right to direct the use of the asset.
As lessee
The Company's lease asset classes primarily consist of leases for buildings (office premises). The Company, at
the inception of a contract, assesses whether the contract is a lease or not. A contract is, or contains, a lease if
the contract conveys the right to control the use of an identified asset for a time in exchange for a consideration.
At the date of commencement of the lease, the Company recognizes a right-of-use asset ("ROU")and a
corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a
term of twelve months or less (short-term leases) and low value leases. For these short-term and low value
leases,the Company recognizes the lease payments as an operating expense on a straight-line basis over
the term of the lease.
The Company elected to use the following practical expedients on initial application:
a) Applied a single discount rate to a portfolio of leases of similar assets in similar economic environment with
a similar end date.
b) Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months
of lease term on the date of initial application.
c) Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the
lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they
will be exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct
costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and
impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter
of the lease term and useful life of the underlying asset. Right of use assets are evaluated for recoverability
whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For
the purpose of impairment testing, the recoverable amount (i.e.the higher of the fair value less cost to sell and
the value-in-use) is determined on an individual asset basis unless the asset does not generate cashflows that
are largely independent of those from other assets. In such cases, the recoverable amount is determined for the
Cash Generating Unit(CGU) to which the asset belongs.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, the Company's incremental borrowing rate. Generally, the Company uses its incremental borrowing
rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise the following:
- fixed payments, including in-substance fixed payments.
- variable lease payments that depend on an index or a rate, initially measured using the index or rate as at
the commencement date.
- amounts expected to be payable under a residual value guarantee; and
- the exercise price under a purchase option that the Company is reasonably certain to exercise, lease
payments in an optional renewal period if the Company is reasonably certain to exercise an extension
option, and penalties for early termination of a lease unless the Company is reasonably certain not to
terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when
there is a change in future lease payments arising from a change in an index or rate, if there is a change in
the Company's estimate of the amount expected to be payable under a residual value guarantee, or if the
Company changes its assessment of whether it will exercise a purchase, extension or termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have
been classified as financing cash flows.
I. Income taxes
Income tax comprises current and deferred tax. It is recognised in statement of profit and loss except to the extent
that it relates to a business combination or to an item recognised directly in equity or in other comprehensive income.
i) Current tax
The company benefits from the tax holiday available for units set up under the Special Economic Zone Act, 2005.
These tax holidays are available for a period of fifteen years from the date of commencement of operations.
Under the SEZ scheme, the unit which begins providing services on or after April 1, 2005 will be eligible for
deductions of 100% of profits or gains derived from export of services for the first five years, 50% of such profits
or gains for a further period of five years and 50% of such profits or gains for the balance period of five years
subject to fulfilment of certain conditions.
ii) Deferred tax
Deferred tax assets including Minimum alternative tax (MAT) are recognised to the extent that it is probable that
future taxable profits will be available against which they can be used. Deferred tax assets - unrecognised or
recognised, are reviewed at each reporting date and are recognised/reduced to the extent that it is probable/
no longer probable respectively that the related tax benefit will be realised.
The Company has availed the tax holiday benefits under section 10AA of the Income Tax Act, 1961 and
accordingly, its business income to the extent covered by the section is exempt from income tax up-to and
including the year ending March 31, 2025. Deferred taxes that are scheduled to reverse during the tax holiday
period are not recognised.
Refer note 27(G) for other accounting policies relevant to Income taxes.
10.1.3 Employee stock options
Under 2016 Employee stock option plan, the Company has an approved ESOP pool of 1,200,000 fully paid-up equity shares of '1 each has been adjusted and increased to 25,200,000 fully paid-up equity shares in the
company giving effect to the bonus issue of equity shares of ' 1 each. During the year ended March 31, 2023, on October 29, 2022, the Company has granted 363,000 Employee Stock Options (ESOP) to eligible employees.
During the year ended March 31, 2024, on May 18, 2023, the Company has granted 140,000 Employee Stock Options (ESOP) to eligible employees. The Terms attached to stock options granted to employees are described
in Note 15 regarding employee share based payments.
10.1.4 Rights, preferences and restrictions attached to equity shares
The Company has a single class of equity shares. Accordingly, all equity shares rank equally with regard to dividends and share in the company's residual assets. The equity shares are entitled to receive dividend as declared
from time to time.
The voting rights of an equity shareholder on a poll (not on show of hands) are in proportion to its share of the paid-up equity capital of the Company. Voting rights cannot be exercised in respect of shares on which any call
or other sums presently payable have not been paid. On winding up of the Company, the holders of equity shares will be entitled to receive the residual assets of the Company, remaining after distribution of all the preferential
amounts in proportion to the number of equity shares held.
10.2.1 Securities premium represents the premium collected on issuance of equity shares. The reserve is utilized in accordance with provisions of Companies Act, 2013.
10.2.2 The general reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item
of other comprehensive income, items included in the general reserve will not be reclassified subsequently to statement of profit and loss.
10.2.3 Retained earnings are the accumulated profits of the Company made till date.
10.2.4 The Company has established various equity-settled share-based payment plans for certain categories of employees of the Company. Refer to note 15 for further details of these plans.
10.2.5 Remeasurements of defined benefit (liability)/asset comprises actuarial gains and losses and return on plan assets (excluding interest income).
10.2.6 The Special Economic Zone (SEZ) Re-investment Reserve has been created out of the profit of eligible SEZ units in terms of the provisions of Sec 10AA(1)(ii) of Income-tax Act, 1961. The reserve should be utilized by the
Company for acquiring new plant and machinery for the purpose of its business in the SEZ unit as per the terms of the Sec 10AA(2) of the Income-tax Act, 1961.
10.2.7 The cash flow hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges. Such gains or
losses will be reclassified subsequently to statement of profit and loss in the period in which the hedged transaction occurs.
A. Funding
Plan is funded by the Company with LIC. The funding requirements are based on the gratuity fund's actuarial measurement framework set out in the funding policies of the plan. The funding of Plan is based on a separate actuarial
valuation for funding purposes for which the assumptions may differ from the assumptions set out in 12.1.7. Employees do not contribute to the plan.
B. Reconciliation of the net defined benefit liability/(asset)
The following table shows a reconciliation from the opening balances to the closing balances for the net defined benefit liability/(asset) and its components.
Notes on the principal assumptions:
1. The discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of the obligations.
2. The estimates of future salary increases, considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors, such as supply and demand factors in the employment market.
3. The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. In respect of other employees, gratuity is arrived at based on last drawn basic salary of 15 days for every completed year
of service, on completion of 4 years and 240 days of continuous service.
Note:
For the year ended March 31, 2025
Of the total 567,469 ESOP units exercised during the year carrying face value of ' 1 each, 25,000 equity shares were issued at a premium of '323 per share, 25,775 equity shares were issued at a premium of '358 per share,
82,000 equity shares were issued at a premium of '5.29 per share, 8,000 equity shares were issued at a premium of '131 per share and 4,26,694 equity shares were issued at a premium of '75 each, were allotted during the
current financial year and the proceeds were recognised towards Share capital and Securities Premium respectively.
For the year ended March 31, 2024
Of the total 1,002,445 ESOP units exercised during the year carrying face value of ' 1 each, 640,000 equity shares were issued at a premium of '39.14 per share, 356,595 equity shares were issued at a premium of '75 per
share, and 5,850 equity shares were issued at a premium of '358 each, were allotted during the current financial year and the proceeds were recognised towards Share capital and Securities Premium respectively.
The share based payment expense for the year has been disclosed in note 18 below.
The Company has not disclosed fair values of financial instruments such as trade receivables, investment in bonds, cash and cash equivalents, bank balances other than cash and cash equivalents, other financial assets, loans,
trade payables, lease liabilities and other financial liabilities, since their carrying amounts are reasonable approximates of fair values.
Fair value hierarchy levels have been defined as below:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
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