2. Material accounting policies
i. Basis of preparation
The financial statements of the Company have been prepared in accordance with Indian Accounting
Standards (Ind AS) notified under section 133 of the Companies Act, 2013 (the Act) read with the
Companies Indian Accounting Standards Rules, 2015 as amended and other relevant provisions of the
Act.
The financial statements were authorised for issue by the Board of Directors on 26th May, 2025.
ii. Basis of measurement
The financial statements have been prepared on a historical cost basis, except for certain items, which
are measured on an alternative basis on each reporting date.
iii. Functional and presentation currency
These financial statements are presented in Indian Rupees (INR), which is the Company's functional
currency. All financial information is presented in Lakhs in INR, unless otherwise stated.
iv. Current or non-current classification
All assets and liabilities have been classified as current or non-current as per the company's normal
operating cycle and other criteria as set out in the Division II of Schedule III as amended to the Act.
Based on the nature of products and the time between acquisition of assets for processing and their
realization in cash and cash equivalents, the company has ascertained its operating cycle as 12 months
for the purpose of current or non-current classification of assets and liabilities for product business.
v. Significant accounting judgements, estimates and assumptions
The preparation of financial statements in conformity with Ind AS requires the management to make
judgments, estimates and assumptions that affect the reported amounts of revenue, expenses, current
assets, non-current assets, current liabilities, non-current liabilities and disclosure of the contingent
liabilities at the end of each reporting period. Although these estimates are based on management's
best knowledge of current events and actions, uncertainty about these assumptions and estimates
could result in the outcomes requiring a material adjustment to the carrying value of assets or liabilities
in future periods.
This note provides an overview of the areas that involved a higher degree of judgement or complexity,
and of items which are more likely to be materially adjusted due to estimates and assumptions turning
out to be different than those originally assessed.
Critical estimates and judgements
The preparation of the Company's standalone financial statements requires management to make
estimates and assumptions that affect the reported amounts of revenue, expenses, assets and
liabilities, and the accompanying disclosures, and disclosure of contingent liabilities. Uncertainty about
these assumptions and estimates could result in outcomes that require a material adjustment to the
carrying amount of assets or liabilities effected in future period.
- Estimation of defined benefit plan
Employee benefit obligations are determined using independent actuarial valuations. An actuarial
valuation involves making various assumptions that may differ from actual results in the future. These
include the determination of discount rate, future salary increase, experience of employee departure
and mortality rates. Due to the complexities involves in the valuation and its long-term nature,
employee benefit obligation is highly sensitive to changes in these assumptions. All assumptions are
reviewed at each reporting date.
- Fair value measurements of financial instruments
When fair value of financial assets and financial liabilities recorded in balance sheet cannot be
measured based on quoted prices in active markets, their fair value is measured using valuation
technique including the Discounted Cash flow ("DCF") model. Th e inputs to these models are taken
from observable markets where possible, but where there is not feasible, a degree of judgement is
required in establishing their values. Judgement includes consideration of inputs such as credit risk
and future projections. Changes in assumptions about these factors could affect the reported fair
values of financial instruments.
- Impairment of investment in subsidiaries and associates
The company reviews its carrying value of investment in subsidiaries carries at cost (net of impairment,
if any) when there is indication of impairment. If the recoverable amount is less than its carrying
amount, the impairment loss is accounted for in the standalone statement of profit and loss. Significant
judgement and estimate is required in determining recoverable amount.
- Impairment of other non-financial assets i.e. Intangible Assets and Intangible Assets under
Development
The Company assesses at each reporting date whether there is an indication that an asset may be
impaired. If any indication exists, or when annual impairment testing for an asset is required, the
company estimates the asset's recoverable amount. An asset's recoverable amount is the higher of its
fair value less cost of disposal and its value in use. Significant judgement and estimate is required in
determining recoverable amount.
- Impairment of Trade Receivables and Contract asset
The Company uses the simplified approach to calculate expected credit losses for impairment on trade
receivables and contract asset. Judgement is involved in determining adjustments for forward looking
adjustments and time value of money.
- Revenue recognition for fixed-price contract
Revenue for fixed-price contracts is recognised over the period of time either using percentage-of-
completion method or over straight-line basis depending upon the contractual terms. The multiple
types of contracts with different terms requires significant judgement in determining whether to
recognise revenue on straight-line basis or percentage of completion basis, identification of milestone
(output) to measure the progress of work, determining accuracy of revenue to be recognised using
different types of outputs.
- Recognition of Intangible assets and its useful life
For an intangible asset to be recognized, it must meet criteria such as identifiability, control over the
resource, and expectation of future economic benefits. Judging whether these criteria are met requires
professional judgment. Estimating the fair value of intangible assets often involves significant
judgment, especially when market-based evidence is not readily available. This may require the use of
valuation techniques like discounted cash flow (DCF) models, which rely on subjective assumptions
about future cash flows, discount rates, and growth rates.
The Management reviews the estimated useful lives of intangible assets at the end of each reporting
period. Factors such as changes in the expected level of usage and technological developments could
significantly impact the economic useful lives of the asset, consequently leading to a change in the
future amortization charge.
vi. Cash and cash equivalents
Cash at banks, cash on hand and short-term deposits with an original maturity of three months or less
and which are subject to an insignificant risk of changes in value are classified as cash and cash
equivalents.
vii. Property, plant and equipment
Items of property, plant and equipment are measured at cost of acquisition or construction less
accumulated depreciation and/or accumulated impairment loss, if any. The cost of an item of property,
plant and equipment comprises its purchase price, including import duties, and other non-refundable
taxes or levies and any directly attributable cost of bringing the asset to its working condition for its
intended use; any trade discounts and rebates are deducted in arriving at the purchase price.
Borrowing costs such as interest expenses directly attributable to the construction of a qualifying asset
are capitalised as part of the cost.
Parts of an item of property, plant and equipment having different useful lives, (if any) are accounted
for as separate items (major components) of property, plant and equipment.
The cost of internally generated computer software developed for providing services by integrating it
with computer system is recognised as tangible asset. The cost of computer and computer software
for providing such services are grouped as 'Service Cell System'
Property, plant and equipment under construction are disclosed as capital work-in-progress.
Advances paid towards the acquisition of property, plant and equipment outstanding at each reporting
date are disclosed under "Other non-current assets".
• Subsequent costs
The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying
amount of the item if it is probable that the future economic benefits embodied within the part will
flow to the Company, and its cost can be measured reliably. The carrying amount of the replaced part
is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognised
in the statement of profit and loss as incurred.
• Disposal
An item of property, plant and equipment is derecognized upon disposal or when no future benefits
are expected from its use. Gains and losses on disposal of an item of property, plant and equipment
are determined by comparing the proceeds from disposal with the carrying amount of property, plant
and equipment, and are recognised net within other income/expenses in the statement of profit and
loss.
• Depreciation
Depreciation on property, plant and equipment is provided using the straight-line method based on the
useful lives of assets as estimated by the management. Depreciation is charged on pro-rata basis for assets
purchased/sold during the year.
Right to use assets are depreciated on straight line basis over the lease period or useful life of asset
whichever is lower. However, if the lease transfers ownership of the underlying asset to the Company by
the end of the lease term or if the cost of the right-of-use asset reflects that the Company will exercise a
purchase option, the Company depreciates the right-of-use asset from the commencement date to the end
of the useful life of the underlying asset.
viii. Intangible assets and amortization
• Recognition and measurement
Internally generated Intangible assets (mainly software) are recognised when the asset is identifiable,
is within the control of the Company, it is probable that the future economic benefits that are
attributable to the asset will flow to the Company and cost of the asset can be reliably measured.
Intangible assets acquired by the Company that have finite useful lives are measured at cost less
accumulated amortisation and any accumulated impairment losses.
• Research and development expenditure on new products:
Expenditure on research is expensed under respective heads of account in the period in which it is incurred.
Development expenditure on new products is capitalised as intangible asset, if all of the following can be
demonstrated:
1. the technical feasibility of completing the intangible asset so that it will be available for use or sale;
2. the Company has intention to complete the intangible asset and use or sell it;
3. the Company has ability to use or sell the intangible asset;
4. the manner in which the probable future economic benefits will be generated including the existence
of a market for output of the intangible asset or intangible asset itself or if it is to be used internally,
the usefulness of intangible assets;
5. the availability of adequate technical, financial and other resources to complete the development and
to use or sell the intangible asset; and
6. the Company has ability to reliably measure the expenditure attributable to the intangible asset during
its development.
Development expenditure that does not meet the above criteria is expensed in the period in which it is
incurred. Intangible assets not ready for the intended use on the date of the Balance Sheet are disclosed as
Intangible assets under development.
• Subsequent measurement
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied
in the specific asset to which it relates.
• Amortisation
Amortisation of the asset begins when development is complete and the asset is available for use. Internally
generated intangible assets are amortised on a straight line basis over their estimated useful life of 4 years,
and computer software are amortised on a straight line basis over their estimated useful life of five years.
The amortization period and the amortization method are reviewed at least at each financial year end. If
the expected useful life of the asset is significantly different from previous estimates, the amortization
period is changed accordingly. If there has been a significant change in the expected pattern of economic
benefits from the asset, the amortization method is changed to reflect the changed pattern.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between
the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of
profit and loss when the asset is derecognized.
ix. Inventories
Inventories comprise software licenses purchased for resale and are carried at the lower of cost and
net realizable value. Cost is determined using the FIFO method. Net realizable value is the estimated
selling price in the ordinary course of business less selling expenses.
x. Revenue recognition
Sale of Products and Rendering of services
1) Fixed-price contracts: Revenue for fixed-price contracts is recognised over the period of time using
percentage-of-completion method. The percentage of completion is determined by the company using
output method, which is measured by the number of units/plan approved by the customer, the number
of transactions processed from the software etc.
The fixed price revenue contracts of the Company are by their nature complex given the significant
judgements involved in estimation of efforts required to complete any particular project.
This estimate has a high inherent uncertainty as it requires consideration of progress of the contract,
efforts input till date and efforts required to complete the remaining contract performance
obligations, and the ability to deliver the contracts within planned timelines. The estimates involved
are reviewed by the management on periodic basis.
Changes in the estimates as contract progresses can result in material adjustments to revenue
recorded by the Company.
2) Operation and maintenance contract: Revenue related to these contracts is recognised based on
time elapsed mode and revenue is straight-lined over the period of performance.
3) Sale of licenses: Revenue from licenses where the customer obtains a "right to use "the licenses is
recognized at the time the license is made available to the customer. Revenue from licenses where the
customer obtains a "right to access" is recognized ove r the access period. Revenue from sale of traded
software licenses is recognised on delivery to the customer. Cost and earnings in excess of billings are
classified as unbilled revenue while billings in excess of cost and earnings are classified as unearned
revenue.
Due to the short nature of credit period given to customers, there is no material financing component
in the contract.
Other income
1) Interest income is recognized on a time proportion basis taking into account the amount outstanding
and the applicable interest rate. Interest income is included under the head "other income" in the
statement of profit and loss.
2) Dividend income is recognized when the right to receive the dividend is established.
xi. Finance costs
Finance costs are interest and other costs that an entity incurs in connection with the borrowing of funds.
It also includes exchange differences in relation to the foreign currency borrowings to the extent those are
regarded as an adjustment to the borrowing costs.
General and specific borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset are capitalised during the period of time that is required to complete and
prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial
period of time to get ready for their intended use or sale which is usually 12 months or more.
Investment income earned on the temporary investment of specific borrowings pending their expenditure
on qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are expensed in the period in which they are incurred.
xii. Foreign currencies transactions
The financial statements are presented in INR, which is also the company's functional and presentation
currency.
Transactions and balances
Transactions in foreign currencies are recorded at functional currency spot rates at the date the
transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional
currency spot rates of exchange at the reporting date. Differences arising on settlement or translation
of monetary items are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated
using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair
value in a foreign currency are translated using the exchange rates at the date when the fair value is
determined. The gain or loss arising on translation of non-monetary items measured at fair value is
treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e.,
translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are
also recognised in OCI or profit or loss, respectively).
xiii. Employee Benefits
Short Term Employee Benefits
All employee benefits payable wholly within twelve months of rendering the services are classified as short¬
term employee benefits. Benefits such as salaries, wages, expected cost of bonus, leave travel allowance
etc. are recognized in the period in which the employee renders the related service.
Post-Employment Benefits
Defined Contribution Plans
The Company's state governed provident fund scheme and employee state insurance scheme are defined
contribution plans. The contribution paid/payable under the scheme is recognized during the period in
which the employee renders the related service.
Defined Benefit Plans
The company operates only one defined benefit plans for its employees, viz., gratuity. The costs of
providing benefits under the plan are determined on the basis of actuarial valuation at each year-end.
Separate actuarial valuation is carried out for the plan using the projected unit credit method.
The obligation is measured at the present value of the estimated future cash flows. The discount rates used
for determining the present value of the obligation under defined benefit plans, is based on the market
yields on Government securities as at the balance sheet date, having maturity periods approximating to
the terms of related obligations.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding
amounts included in net interest on the net defined benefit liability and the return on plan assets
(excluding amounts included in net interest on the net defined benefit liability), are recognised
immediately in the balance sheet with a corresponding debit or credit to retained earnings through
OCI in the period in which they occur. Re-measurements are not reclassified to profit or loss in
subsequent periods.
Gains or losses on the curtailment or settlement of any defined benefit plan are recognized when the
curtailment or settlement occurs. Past service cost is recognized as expenses on a straight-line basis over
the average period until the benefits become vested. Net interest is calculated by applying the discount
rate to the net defined benefit liability or asset.
Long Term Employee Benefit
The company encourages all its employees to consume their Earned Leaves (EL) during the yearly cycle
itself. No earned leaves shall be carried forward or encashed w.e.f. 1st April, 2024, these should be
consumed with in the same financial year. Therefore no liability arises for compensated absences from the
current financial year.
Employee stock compensation cost
The stock options granted to employees in terms of the Company's Stock Options Schemes, are measured
at the fair value of the options at the grant date. The fair value of the options is treated as discount and
accounted as employee compensation cost over the vesting period on a straight-line basis. The amount
recognised as expense in each year is arrived at based on the number of grants expected to be vested. If a
grant lapses after the vesting period, the cumulative discount recognised as expense in respect of such
grant is transferred to the retained earnings. The share-based payment equivalent to the fair value as on
the date of grant of employee stock options granted to key managerial personnel is disclosed as a related
party transaction in the year of grant.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of
diluted earnings per share.
xiv. Taxes
Current income tax
Tax on income for the current period is determined based on taxable income after considering various
provisions of the Income Tax Act, 1961 and based on the enacted rate.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or
loss. Current tax items are recognised in correlation to the underlying transaction either in OCI or
directly in equity.
Deferred tax
Deferred tax is provided using the balance sheet method on temporary differences between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes at the
reporting date. Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of
unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it
is probable that taxable profit will be available against which the deductible temporary differences,
and the carry forward of unused tax credits and unused tax losses can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of
the deferred tax asset to be utilised. Unrecognized deferred tax assets are re-assessed at each
reporting date and are recognised to the extent that it has become probable that future taxable profits
will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year
when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss.
Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly
in equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off
current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity
and the same taxation authority.
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