* In India, substantial part of operations is carried from units in Special Economic Zones notified by the Government which also benefit from the tax exemptions. These units are eligible for the deduction of 100 percent of profits or gains derived from the export of services for the first five years from commencement of provision of services and 50 percent of such profits or gains for a further five years. 50 percent tax benefit is also availableforafurtherperiodoffiveyearssubjecttotheunit meeting defined conditionsof further investments.
Current income tax expense comprises of taxes on income from operations in India and foreign jurisdictions. In respect of certain jurisdictions, where the income tax year is different from the accounting year, provision for current tax is made on the basis ofincomeforthe respectiveaccounting year, which will beadjusted consideringthetotal assessable income forthetaxyear.
The company in an earlier year had applied to the competent authorities of US and India under Mutual Agreement Procedure for the corresponding adjustment to taxable profits in India for any potential addition to income in US subsidiary. Accordingly, the Company had accounted the potential tax relief in FY 2020 of Rs. 133 million in the statement of profit and loss for the FY 2018 to 2019 (for which MAP order was received). The Company continuestocarrythesameasat December31, 2024 pending completion oflimitationofperiod forassessments in US.
a) Deferred income tax assets have not been recognized on temporary differences as at December 31, 2024 aggregating Rs. 806 millions (Rs. 751 millions as at December 31, 2023) associated with investment in subsidiaries as it is probable that thetemporary differences will notreverse intheforeseeablefuture.
b) There are unused tax credits as at December 31,2024 aggregating Rs. 617 millions (Rs. 603 millions as at December 31, 2023) for which no deferred tax asset is recognized as it is not considered probable that there will be future taxable profits available. If these tax losses are not utilized they would expire on various dates starting from FY 2031.)
14.4 Rights, preferences and restrictions attached to equity shares
The Company has one class of equity shares having a par value of Rs. 1 each. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing annual general meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets ofthe Company after distribution ofall liabilities, in proportion to their shareholding.
14.7 Equityshare movement duringthe5years preceeding December 31, 2024
14.7.1 The Company, on October 19, 2020, received the final approval of the stock exchanges (BSE and NSE) and effective November 09, 2020 the shares were de-listed from the stockexchanges.
14.7.2 The Board of Directors of the Company at its meeting held on April 12, 2024, recommended the sub-division/split of 1 fully paid-up equity share having a face value of Rs. 2 each into 2 fully paid-up equity shares having a face value of Rs. 1 each by alteration of capital clause of the Memorandum of Association (MOA) subject to the approval of Members of the Company. The Members of the company approved the sub-division of 1 fully paid up equity share of Rs. 2 each into 2 fully paid up equity shares of Rs. 1 each in annual general meeting held on May 09, 2024 and the voting results were declared on May10,2024.
Further, the Board of Directors on May 17, 2024 approved the Record Date for Split/sub-division of equity shares as May 27, 2024.
Consequent to this, the authorised share capital comprises 1,050,000,000 equity shares of Rs. 1 each aggregating to Rs. 1,050 Mn. Earnings per share, dividend per share and number of shares/RSUs/options have been retrospectively restated togive effect of share split from the earliest period presented.
14.7.3 Shares reserved for issue under RSU's / options
The Company has granted employee restricted stock units (RSU's) / (options) under the ESOP 2008 and 2015 scheme. EachRSU / options entitlestheholdertooneequityshareofRs. 1 each. 247,424 RSU’s / options wereoutstanding ason December31, 2024 (1,092,370asonDecember31, 2023)
The Company has granted employee stock options under the ESOP 2024 scheme. Each option entitles the holder to one equityshareatRs. 1 each. 20,838,300options wereoutstanding ason December31, 2024
14.7.4 The interim dividend per share recognised as distribution to equity shareholders during the year ended December 31, 2024 wasRs. 8.75 pershare (yearended December 31, 2023 Rs. 8.75 pershare).
19.5 Cost to fulfill/obtain contract
The Company recognises contract fulfilment/obtaining cost as an asset if those costs specifically relate to a contract or to an anticipated contract, the costs generate or enhance resources that will be used in satisfying performance obligations in future; and the costs are expected to be recovered. The asset so recognised is amortised on a systematic basis consistent with the transfer of goods or services to customer to which the asset relates. The below table discloses the movement in contract fulfilmentcost
19.7 ContractAssetsareasfollows:
During theyearsended December31, 2024and 2023, Rs. 263 millions and Rs. 530 millions of contract assets pertaining to fixed-price development contracts have been reclassified to receivables on completion ofmilestones.
19.8 Transaction priceallocatedtothe remaining performanceobligations
The remaining performance obligations represents contracted revenue that has not yet been recognized, which includes contract liabilities and amounts that will be invoiced and recognized as revenue in future periods.
The Company has applied practical expedient and has not disclosed information about remaining performance obligations in contracts where the original contract duration is one year or less or where the entity has the right to consideration that corresponds directly with the value of entity's performance completed to date. The above revenue is subject to any changes in the transaction price.
1 Disclosure in accordance with S. 186 of Companies Act, 2013 - Corporate Guarantee given to Hexaware Technologies Inc. towards loan taken from bankfor the term of 3 years and in respect of deferred purchase consideration for the acguisition of Mobiguity Inc. for the term of 2 years.
2 During the year ended December 31, 202A, ESOP plan of Hexaware Global Limited is discontinued and replaced with ESOP plan issued by the company, hence cumulative liability on the date of replacement is transferred to share options outstanding account.
3 Transactions for the year ended December 31, 202A and Balance as at December 31, 202A represents expenses incurred in relation to IPO that are recoverable by the Company from the selling shareholder.
Notes:
1 Carrying amount of cash and cash equivalents, other bank balances, trade receivables, unbilled revenue, other financial assets, Investment in Non-Convertible Debentures, deferred consideration, trade payables, lease liabilities and other financial liabilities approximate the fair value because of their short-term nature. Difference between carrying amounts and fair values of other financial assets and liabilities subsequently measured at amortised cost is not significant in each of the period presented.
2 ~valuelessthanRs.0.5million.
(ii) Fairvaluehierarchy
Fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
(iii) Financial riskmanagement
The Company has identified the risks under verticals like Geographic and client concentration risk, credit risk, foreign currency fluctuation riskand liquidity risk. TheCompany hasformulated policies, proceduresandstrategiesfor managing riskswhich is affirmed bythe global CEO and CFO, after consultation with all business units, functions and department heads.
Geographic and client concentration risk
During the yearended December 31, 2024, Americascontributed 72 % (December31, 2023 - 69.1 %) oftheCompany’stotal revenue. The Company continues to expand its global footprint to diversify geographic concentration though Americas remains largest market for the IT industry. The Company's exposure to the US regions is in line with the global industry practices. The Company will continue to invest in the region. There are a number of other growth factors in Americas such as favour for capitalism, highest per capita income, innovation driven culture and focus to retain high end work that allow us to identify and address the pockets of inefficiencies in the most optimum way.
During the year ended December 31,2024, 46.21 % of the revenue for the year is generated from top 10 clients (December 31, 2023 - 47.76 %). Any loss or major downsizing by these clients may impact Company’s profitability. Further, excessive exposure to particular clients will limit Company's negotiating capacity and expose us to higher credit risk.
TheCompany is able to maintain a diversified high quality client roster that can be accessed through the depth of relationships with existing clients.
The Company's growth strategy involves a mix of new client addition and mining the accounts of existing clients. As the Company adds more clients and grow revenues from the existing clients, it reduces dependence on the large clients. Moreover, large clients allow quick scaling up of revenues and they come with higher margins due to lower associated cost and higher cost predictability.
Credit Risk
Since most of Companys transactions are done on credit, the Company is exposed to credit risk on accounts receivable. Any delay, default or inability on the part of the client to pay on time will expose the Company to credit risk and can impact profitability. Company’s maximum credit exposure is in respect of trade receivables of Rs. 8810 million and Rs. 8452 million as at December 31, 2024 and December 31, 2023, respectively, unbilled receivables of Rs. 4403 miillionand Rs. 2836 million as at December 31, 2024 and December 31, 2023, respectively and contract assets of Rs. 1069 million and Rs. 263 million as at December 31, 2024and December31, 2023, respectively.
The Company has adopted an effective receivable management system to control the Days’ Sales Outstanding (DSO). Refer to note 12 for the age wise analysis of trade receivables that are not due as well as past due and allowance for the doubtful receivables.
Top 10 customer dues contribute 46 % of the total outstanding as at December 31, 2024 (55%asat December 31, 2023).
Cash and cash equivalents and mutual funds are neither past due nor impaired. Cash and cash equivalents include deposits with banks and financial institution with high credit-ratings assigned by credit-rating agencies. The investment in liquid mutual fund units are measured at fair value through profit and loss.
(iv) Foreign Currencyfluctuations Risk
Foreign exchange fluctuations is one of the key risks impacting our business. The offshore part of the revenue remains exposed to the risk of Rupee appreciation which is functional currency of the Company vis-a-vis the US Dollar, the Euro and other foreign currencies, as largely, the costs incurred are in Indian Rupees and the revenue/ inflows are in foreign currencies. The contracts we enter into with our customers tend to run across several years and many of these contracts are at fixed rates, thereforeany appreciation inthe Indian rupee vis-a-vis foreign currencies will affectour margins.
The Foreign Exchange Risk Management Policy authorized by the of the Board who takes these circumstances into account and authorizes hedging on a systematic basis. These risks have been effectively addressed by the processes and controls laid out in the Foreign Exchange Risk Management Policy. The hedge ratio assigned to the exposures depends on the time horizon in which they fall, the near term exposures get a higher ratio whereas the farther exposures get a lower ratio. This graded approach ensures that hedges are spread across the hedge horizon in a tapered down manner. The exposure as indicated below is net of derivative contracts entered into by the Company.
The following table analyses foreign currency riskfrom financial instruments as at December31, 2024 & 2023:
The Company uses derivative financial instruments such as foreign exchange forward contracts to mitigate the riskof changes in foreign exchange rates on trade receivables and forecasted cash flows denominated in certain foreign currencies. The Company had outstanding hedging instrument in the form of foreign currency forward contracts as at:
The weighted average forward rate for the hedges outstanding as at December 31, 2024 is Rs. 86.37, Rs. 95.29 and Rs. 109.09 (Asat December 31, 2023 - Rs. 84.70, Rs. 93.23 and Rs. 105.54) for USD, Euro and GBP, respectively. Thehedgesmatureoverthe eight quarters.
10% depreciation/appreciation of the respective foreign currencies with respect to closing exchange rate would result in the increase/ decrease inCompany’s othercomprehensive income approximate by Rs. 565 millionsand Rs. 422 millionsfortheyear ended December31, 2024andDecember31, 2023 respectively.
The movement in accumulated other comprehensive income on account of derivatives designated as cash flow hedges is as under:
Therewerenomaterial hedge ineffectivenessfortheyearended December31, 2024and 2023.
Liquidity risk
The Company needs continuous access to funds to meet short and long-term strategic investments. The Company's inability to meet such requirements in stipulated period may hamper growth plan and even ongoing operations. Further, the Company’s inability to quickly convert assets into cash without incurring any material loss will expose it to liquidity risks.
Over the years, the Company has increased its liquidity position by managing its DSO and maintaining high cash/bank balance and investments.
As at December 31, 2024 the Company had total cash, bank balance and current investments of Rs. 8,325 millions (December31, 2023: Rs. 11,617 millions) whichconstitutesapproximately 12% (December31, 2023: 28 %) oftotal assets.
The tables below provide details ofthe contractual maturities of significant financial liabilities as at:
Interest rate risk
The Company does not have any debt. The balances with banks is in the form of fixed interest rate deposits. Accordingly, the Company is not exposed to significant interest rate risk.
Capital management
The Company’s objective for capital management is to maximize shareholder value, safeguard business continuity and support the growth of the Company. The Company determines the capital requirement based on annual operating plans and long-term and other strategic investment plans. The Company is not subject to any externally imposed capital requirements.
a) The Nomination and Remuneration Committee ('Committee') of the Company administers the stock options plans viz. ESOP 2008, 2015 and 202A plan. Under the plans, the employees of the holding Company as well as its subsidiaries are granted options/ Restricted Stock Units (RSUs) entitling them to one equity share of face value of Re. 1 each for each option/RSU granted. Exercise price is the price determined by the Committee. The options/RSUs vest over a period of 1 to 6 years from the date of grant which could be time based, performance based or event based. The maximum time available to exercise upon vesting is 3 years.
(i) During the year ended December 31, 2023, the Company modified the restricted stock unit (RSU) scheme and provided a one-time option in respect of certain grants for RSU holder to surrender RSU against a cash payment of Rs. 381.5/- per RSU ('offer price'). Total of 501,524 RSUs were surrendered by the employees. Total cash payout / payable by the Company is Rs. 190 million.
1. Incremental cost recorded in the statement of profit and loss of Rs. 47 million, for excess of offer price of Rs. 381.5/-over fair value on date of modification.
2. Fair value on the modification date has been considered as cost of re-purchase of option and difference between this fair value and grant date fair value amounting to Rs. 34 million was recorded in the eguity.
The fair value on the date of modification was based on an valuers report prepared taking into consideration recenttransaction adjusted for estimate for control premium and marketability by reference to public available information."
f) The Ultimate Holding company Hexaware Global Limited (earlier known as CACampine Limited) has granted ESOP to employees of the Company. The said grants allows eligible employee to opt for one share of Hexaware Global Limited for each option held uponvesting which could be time based, performance based or eventbased. Theexercise price fortheoption is USD 7 per share, weighted average estimated fair value is approximately USD 1.10 per option and remaining weighted average life is approximately 50 months.
The Company has recognized Rs. 74 million as estimated cost for such ESOPs granted in the statement of profit and loss duringtheyearended December31, 2024, Rs. 157 million during theyearended December31, 2023.
lnMay’24, Hexaware Global Limited’s ESOP plan was cancelled and was replaced by granting options of Hexaware Technologies Limited. The said grants will allow eligible employee to opt for one share of Hexaware Technologies Limited for each option held upon vesting which could be time based, performance based or event based. Refer note 28 (b) to 28 (e) for details.
i) Provident Fund, Superannuation Fund and other similar funds
Both the employees and the Company make monthly contributions to the Provident Fund Plan egual to a specified percentage of the covered employee's salary. In respect of the Company's employees enrolled with the Hexaware Technologies Limited Employees Provided Fund Trust (the 'Trust'), the Company pays a part of the contributions to the Trust. The remaining portion of Company's contribution in respect of such employees and entire contribution in respect of other employees is contributed to the Government administered Employee Provident and Pension Fund.
The interest rate payable by the Trust to the beneficiaries every year is being notified by the Government. The Company has an obligation to make good the short fall, if any, between the return from the investments of the trust and the notified interest rate.
During the year ended December 31,2024, the company has Tied application for surrender of the trust. Entire amount payable towards Provident fund including interest has been paid to EPFO. The closure application is under process. From March'24 onwards, in respect of all employees contribution is being made to the Government administered Employee Provident and Pension Fund.
Certain employees of the Company are entitled to benefits under the superannuation plan, a defined contribution plan. The Company makes guarterly voluntary contributions under the superannuation plan to LIC based on a specified percentage of each covered employees salary and recognises such contributions as an expense when incurred and has no further obligation to the plan beyond such contributions.
During the year, the Company has recognized expenses towards contributions to provident fund and other funds and superannuation funds of Rs. 1,265 million (previous year Rs. 1,074 millions ) and Rs. 65 million (previous year Rs. 71 Million), respectively.
ii) GratuityPlan
The Company makes annual contribution to the Employee’s Company Gratuity Assurance Scheme, administered by the Life Insurance Corporation of India ('LIC') and Aditya Birla Sunlife Insurance Company Ltd, a funded defined benefit plan for qualifying employees. The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment based on completed years of service or part thereof in excess of six months. Vesting occurs on completion of five years of service.
The following table sets out the status of the gratuity plan:
(1) Current ratio has been declined due recognition of deferred consideration for acquitition of Sofycrylic LLC.
(2) The debt-equity ratio has increased due to the addition of lease property, which in turns increases the lease liabilities.
(3) The net capital turnover ratio has been improved due to increase in revenue for the current year.
A The Company has a process whereby periodically all long-term contracts (including derivative contracts) are assessed for material foreseeable losses. At the end of the reporting period end, the Company has reviewed and ensured that adequate provision as required under any law / accounting standards for material foreseeable losses on such long-term contracts (including derivative contracts) has been made in the books of account.
B No funds have been advanced / loaned / invested (from borrowed funds or from share premium or from any other sources / kind of funds) by the Company to any other person(s) or entity(ies), including foreign entities (Intermediaries), with the understanding (whether recorded in writing or otherwise) that the Intermediary shall (i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries) or (ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.
No funds have been received by the Company from any person(s) or entity(ies), including foreign entities (Funding Parties), with the understanding (whether recorded in writing or otherwise) that the Company shall (i) directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or (ii) provideany guarantee, security orthe likeon behalfoftheUltimate Beneficiaries.
C The Indian Parliament has approved the Code on Social Security, 2020 which would impact the contributions by the company towards Provident Fund and Gratuity. The Ministry of Labour and Employment has released draft rules for the Code on Social Security, 2020 on November 13,2020, and has invited suggestions from stake holders which are under active consideration by the Ministry. The Company will assess the impact and its evaluation once the subject rules are notified and will give appropriate impact in its financial statements in the period in which, the Code becomes effective and the related rules to determine the financial impact are published.
D InitialPublicOffer
Subseguentto December31, 2024, the Company has completed an Initial PublicOffer (""IPO"") of 123,720,440 eguityshares of face value of Re. 1 each aggregating to Rs. 87,500 million asanoffer for salebyselling shareholder. The eguity shares ofthe Company were listed on National Stock Exchange of India Limited (""NSE"") and BSE Limited (""BSE"") on February 19, 2025. The Company has not received any proceeds from the Offer and all such proceeds (net of any Offer related expenses which are borne by Selling Shareholder have gone to the Selling Shareholder). The Offer has been authorised by a resolution by our Board of Directors dated September 06, 2024.
E Material events after Balance Sheet date:
There is no significant event after reporting date which requires amendments or disclosure to these standalone financial statements.
F Approval ofthefinancial statements:
The Standalone financial statements were approved for issue by the Board of Directors on March 06, 2025.
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