2.12 Provisions and contingent liabilities
A provision is recognized when an enterprise has a present obligation (legal or constructive) as result of past event and it is probable that
an outflow embodying economic benefits of resources will be required to settle the obligation. Provisions are determined based on best
estimates required to settle each obligation at the balance sheet date. If the effect of the time value of money is material, provisions are
discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the
increase in the provision due to the passage of time is recognised as a finance cost.
Provisions for onerous contracts are recognized when the expected benefits to be derived by the Company from a contract are lower than the
expected net cost of continuing with the contract, which is determined based on the incremental costs of fulfilling the obligation under the
contract and an allocation of other costs directly related to fulfilling the contract. Before a provision is established, the Company recognizes
any impairment loss on the assets associated with that contract.
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non¬
occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because
it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases
where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent
liability but discloses its existence in the standalone financial statements.
2.13 Earnings per share
The basic earnings per share is computed by dividing the net profit attributable to the Company’s owners for the year by the weighted
average number of equity shares outstanding during the year adjusted for treasury shares held.
The number of shares used in computing diluted earnings per share comprises the weighted average shares considered for deriving basic
earnings per share, and the weighted average number of equity shares which could be issued on the conversion of all dilutive potential equity
shares. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless they have been issued at a later date.
2.14 Cash dividend to the equity holders of the Company
The Company recognises a liability to make cash distributions to equity holders of the Company when the distribution is authorised, and the
distribution is no longer at the discretion of the Company. Final dividends on shares is recorded as a liability on the date of approval by the
shareholders and interim dividends are recorded as a liability on the date of declaration by the Company’s Board of Directors.
Recent pronouncements
Ministry of Corporate Affairs (“MCA”) notifies new standards or amendments to the existing standards under Companies (Indian Accounting
Standards) Rules as issued from time to time. As at 31 March 2025, MCA has not notified any new standards or amendments to the existing
standards which are applicable to the Company.
Dividend on equity shares paid during the year ended 31 March 2025
The Board of Directors, at its meeting held on 25 April 2024 had proposed the final dividend of ' 55 per share for the year ended 31 March
2024 which was approved by the shareholders at the Annual General meeting held on 25 July 2024. This resulted in a cash outflow of
' 10,400.91 million.
Dividend on equity shares paid during the year ended 31 March 2024
The Board of Directors, at its meeting held on 27 April 2023 had proposed the final dividend of ' 50 per share for the year ended 31 March
2023 which was approved by the shareholders at the Annual General meeting held on 20 July 2023. This resulted in a cash outflow of
' 9,427.14 million.
Employee Stock Option Plans - Equity settled.
Employees Stock Option Plan 1998 (the 1998 Plan)
The Company instituted the 1998 Plan for all eligible employees in pursuance of the special resolution approved by the shareholders in
the Annual General Meeting held on 31 July 1998. The 1998 Plan provides for the issuance of 3,720,000 options to eligible employees as
recommended by the ESOP Committee constituted for this purpose. In accordance with the 1998 Plan, the Committee has formulated 1998
Plan - (Version I) and 1998 Plan - (Version II) during the years 1998 - 1999 and 1999 - 2000 respectively.
1998 Plan - (Version I): Each option granted under the 1998 Plan - (Version I), entitles the holder thereof with an option to apply for and
be issued one equity share of the Company at an exercise price of ' 34.38 per share. The equity shares covered under these options vest
at various dates over a period ranging from six to sixty-six months from the date of grant based on the length of service completed by the
employee to the date of grant. The options are exercisable any time after their vesting period irrespective of continued employment with the
Company and its subsidiaries.
Employees Stock Option Plan - 2016 (the 2016 Plan)
Effective 4 November 2016, the Company instituted the 2016 Plan. The Board of Directors of the Company and shareholders approved the
2016 Plan at its meeting held on 27 September 2016 and 4 November 2016 respectively. The 2016 plan provides for the issue of options
to certain employees of the Company and its subsidiaries.
The 2016 Plan is administered by the Mphasis Employees Equity Reward Trust. As per the ESOP 2016 Plan, the stock options are granted at
the market price subject to a discount up to twenty per cent (20%) as may be determined by the Compensation Committee at the time of
Grant. The equity shares covered under these options vest over 60 months from the date of grant. The exercise period is sixty months from
the respective date of vesting or within six months from the resignation of employee whichever is earlier.
Expected volatility has been based on an evaluation of the historical volatility of the Company’s share price. The expected term of the
instruments has been based on historical experience and general option holder behaviour.
Total employee compensation cost pertaining to 2016 Plan during the year is ' 47.64 million, (31 March 2024: ' 68.18 million) net of cross
charge to subsidiaries.
During the current year, the Company granted 20,000 options (31 March 2024: 15,000) to key management personnel under 2016 plan.
Restricted Stock Unit Plan-2021 (“RSU Plan-2021”)
Effective 22 October 2021, the Company instituted the Restricted Stock Unit Plan-2021. The Board and the shareholders of the Company
approved RSU Plan-2021 on 22 October 2021. The RSU Plan-2021 provides for the issue of restricted units to employees and directors of
the Company and its subsidiaries.
The RSU Plan-2021 is administered by the Mphasis Employees Equity Reward Trust. Each unit, granted under the RSU Plan-2021, entitles
the holder thereof with an option to apply for and be issued one equity share of the Company at an exercise price of ' 10.00 per share. A total
of 3,000,000 RSUs can be granted to the eligible employees of the Company and its subsidiaries. The equity shares covered under this plan
vest over a period ranging from twelve to sixty months from the date of grant. The exercise period is sixty months from the respective date of
vesting or within six months from the resignation of the employee whichever is earlier.
For periods upto 31 March 2024
The Company has units at Bengaluru, Hyderabad, Chennai and Pune registered as Special Economic Zone (‘SEZ’) units which are entitled to
a tax holiday under Section 10AA of the Income Tax Act, 1961. The Group also has STPI units at Bengaluru, Pune and other locations which
are registered as a 100 percent Export Oriented Unit, which were earlier entitled to a tax holiday under Section 10B / 10A of the Income Tax
Act, 1961.
A portion of the profits of the Company’s India operations are exempt from Indian income taxes being profits attributable to export
operations from undertakings situated in an SEZ. Under the Special Economic Zone Act, 2005, units in designated special economic zones
providing service on or after 1 April 2005 will be eligible for a 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 and gains for a further five years. The tax
benefits are also available for a further five years post initial ten years subject to the creation of SEZ Reinvestment Reserve which is required
to be spent within 3 financial years in accordance with the requirements of the tax regulations in India.
21. TAXES (Continued)
The Company is liable to pay Minimum Alternate Tax (‘MAT’) in the tax holiday period if the tax payable under normal provisions is less than
tax payable under MAT. Excess tax paid under MAT over tax under normal provision paid can be carried forward for a period of 15 years and
can be set off against the future tax liabilities.
The interest / dividend income from certain category of investments is exempt from tax. The difference between the reported income
tax expense and income tax computed at statutory tax rate is primarily attributable to income exempt from tax, reversal of tax expense
pertaining to previous years (net), tax effect on allowances / disallowances (net) and tax differentials on income from capital gains and tax
effect of rate differentials on account of expected shift to New Tax Regime under Section 115BAA and tax expense recognised on unutilised
SEZ reinvestment reserves.
For periods beginning 1 April 2024
The Company has transitioned to the concessional tax rate of 22% plus surcharge and cess (totalling to 25.168%) under Section 115BAA
of the Income Tax Act, 1961. Under this taxation regime, the Company is no longer entitled to the tax benefits / exemptions it previously
availed.
The difference between the reported income tax expense and income tax computed at statutory tax rate is primarily attributable to reversal
of tax expenses pertaining to previous years (net), tax effect on disallowances (net) and tax differentials on income from capital gains and tax
expense recognised on SEZ reinvestment reserve considered improbable of being utilized.
The Company is also subject to tax on income attributable to its permanent establishment in certain foreign jurisdictions due to operation
of its foreign branches .
Mphasis Limited has entered into international with its associated enterprises within the meaning of Section 92B of the Income Tax Act,
1961. The regulations require maintenance of prescribed documents and/or furnishing the certificate by the management or an external
accountant within the specified due date under the regulations to support the arm’s length outcome determination by the Company. Based
on these guidelines, the management is of the opinion that the related party transactions are at arm’s length and does not warrant any
adjustment, on the part of the management, on the amount of tax expense and tax provision reported in the Standalone Financial Statements.
Deferred tax for the year ended 31 March 2025 and 31 March 2024 relates to origination and reversal of temporary differences.
Reconciliation of taxes to the amount computed by applying the statutory income tax rate to the income before taxes is summarized below:
B. Remaining performance obligations
The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as revenue as
at the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue. Unsatisfied
or partially satisfied Performance obligations are subject to variability due to several factors such as termination, changes in contract scope,
re-validation of estimates and economic factors.
Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation related
disclosures for contracts where the revenue recognized corresponds directly with the value transferred to the customer, typically those
contracts where invoicing is on time and material, unit price basis and fixed monthly billing.
The aggregate value of performance obligations that are completely or partially unsatisfied as of 31 March 2025 is ' 9,458.00 million
(31 March 2024: ' 14,559.00 million). Out of this, the Company expects to recognize revenue of around 38% (31 March 2024: 29%) within
the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty
since, based on current assessment, the occurrence of the same is expected to be remote.
Invoices are usually payable within 30-60 days. Certain contracts contain provision for volume discounts and cash discounts on account of
early payment of invoices.
29. CONTINGENT LIABILITIES AND COMMITMENTS
a. The Company has disputes with income tax authorities in India and other jurisdictions where they operate. The ongoing disputes
pertain to various assessment years from 2005-06 to 2022-23. The matters under dispute pertain to transfer pricing, tax treatment of
certain expenses claimed as deductions, or allowances, characterization of fees for services paid and applicability of withholding taxes.
Claims against the Company in relation to direct taxes, transfer pricing matters not acknowledged as debts amount to ' 24,623.14
million (31 March 2024: ' 17,532.22 million). Claims against the Company in relation to indirect tax matters not acknowledged as
debts amount to ' 203.17 million (31 March 2024: ' 180.15 million).
In relation to other tax demands not included above, the Company has furnished bank guarantees amounting to ' 6,180.63 million (31
March 2024: ' 5,637.21 million). These demands are being contested by the Company based on management evaluation, advice of tax
consultants and legal advice obtained. No provision has been made in the books of accounts. The Company has filed appeals against
such orders with the appropriate authorities.
The above amounts are quantified based on orders received from statutory authorities.
The Company has received notices and inquiries from income tax authorities related to the Company’s operations in the jurisdictions
it operates in. The Company has evaluated these notices, responded appropriately, and believes there are no financial statement
implications as on date.
29. CONTINGENT LIABILITIES AND COMMITMENTS (Continued)
b. Other outstanding bank guarantees as at 31 March 2025: ' 25.48 million (31 March 2024: ' 148.09 million) pertains to guarantees
issued on behalf of the Company to regulatory authorities.
c. The Company has given a financial guarantee amounting to ' 10,304.55 million (31 March 2024: ' 4,170.25 million) in relation to a
working capital loan availed by a wholly owned subsidiary.
d. The Company has given letters of comfort to banks for credit facilities availed by its wholly owned subsidiary. As per the terms of the
letters of comfort, the Company has undertaken to a) maintain its ownership interests in the wholly owned subsidiary, and not permit
any lien or other encumbrance to be placed or imposed on such ownership interest b) to ensure that the wholly owned subsidiary will
pay or perform, as applicable, all of its obligations when due under each Facility Document c) not to take any action which could result
in the wholly owned subsidiary being unable to fulfill its obligations under any Facility Document.
e. In addition to the above matters, the Company has other claims not acknowledged as debts amounting to ' 64.56 million (31 March
2024: ' 489.82 million).
f. Estimated amounts of contracts remaining to be executed on capital account (net of advances) and not provided for as at 31 March
2025: ' 70.31 million (31 March 2024: ' 249.62 million).
30. RELATED PARTY TRANSACTIONS (Continued)
Marble II Pte Ltd. (‘Marble’) (being the erstwhile Promoter of the Company) has covered certain identified employees of the Company under
an Exit Return Incentive Plan (‘the ERI Plan’) of Marble, under which Marble could make direct payments upon satisfaction of specified
conditions therein, at Marble’s discretion. The ERI Plan was approved by the Board of Directors of the Company on 25 May 2017 and the
shareholders of the Company at the Annual General Meeting held on 26 July 2017, as required under Regulation 26(6) of the Securities and
Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. There is no financial impact / burden to the
Company for the payments to be made pursuant to the ERI Plan by Marble. During the previous year Marble has, since its exit as a shareholder
of the Company, made payments of ' 41.30 million in aggregate under the ERI Plan to the key management personnel of the Company.
BCP Topco IX Pte. Ltd. (‘Topco’) being the holding Company and the promoter of the Company, through its related entities -BCP Asia (SG)
Mirror Holding Pte Ltd and BCP Asia Mirror CYM Ltd ("Cayco”), has covered certain identified employees of the Company under the Exit
Return Incentive Plan, 2021 (‘ERI 2021’), under which direct payments will be made upon satisfaction of specified conditions therein, at
their discretion. The ERI 2021 Plan was approved by the Board of Directors of the Company on 31 August 2021 and the shareholders of the
Company at the Annual General Meeting held on 29 September 2021, as required under Regulation 26(6) the Securities and Exchange Board
of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. There is no financial impact / burden to the Company for the
payments to be made pursuant to ERI 2021.
31. SEGMENT REpORTING
The Company publishes the standalone financial statements along with the consolidated financial statements. In accordance with Ind AS
108, Operating segments, the Company has disclosed the segment information in the consolidated financial statements and is exempt from
disclosing segment information in the standalone financial statements.
32. DISAGGREGATION OF REvENUE
Effective 1 April 2023, the Company re-organized the grouping of certain customers amongst operating segments in line with the go-to
market strategy, as reviewed by the Chief Operating Decision Maker ("CODM”).
b. Provident Fund
In accordance with Indian law, all eligible employees of the Company in India are entitled to receive benefits under the provident fund
plan in which both the employee and employer (at a determined rate) contribute monthly to a Trust set up by the Company to manage the
investments and distribute the amounts entitled to employees. This plan is a defined benefit plan as the Company is obligated to provide
its members a rate of return which should, at the minimum, meet the interest rate declared by Government administered provident fund.
A part of the Company’s contribution is transferred to Government administered pension fund. The contributions made by the Company
and the shortfall of interest, if any, are recognised as an expense in the statement of profit or loss under employee benefit expenses. In
accordance with an actuarial valuation of provident fund liabilities on the basis of guidance issued by Actuarial Society of India and based
on the assumptions as mentioned below, there is no shortfall in the interest obligations as the present value of the expected future earnings
of the fund is greater than the expected amount to be credited to the individual members based on the expected guaranteed rate of interest
of Government administered provident fund.
The Company has carried out actuarial valuation only for defined benefit plan as at 31 March 2025. The actuary has provided a valuation
for provident fund liabilities and based on the assumptions mentioned below, there is no shortfall in plan assets as at 31 March 2025 and
31 March 2024.
34. EMPLOYEE BENEFITS (Continued)
c. Social Security
The Code on Social Security 2020 (‘Code’), which received the Presidential Assent on 28 September 2020, subsumes nine regulations relating
to social security, retirement, and employee benefits. The Code will have an impact on the contributions towards gratuity and provident fund
made by the Company. The effective date of the Code has not yet been notified and the related rules to ascertain the financial impact are
yet to be finalized and notified. The Company will assess the impact 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.
The Company has a risk management policy/ framework which covers risks associated with the financial assets and liabilities. The risk
management policy/ framework is approved by the Treasury Committee. The focus of such framework is to assess the unpredictability of the
financial environment and to mitigate potential adverse effects on the financial performance of the Company.
CREDIT RISK
Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract leading to a financial
loss. Credit risk encompasses both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks.
The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its investing activities including
deposits with banks and financial institutions, investments, derivative financial instruments and other financial instruments.
The Company is also exposed to credit risk on account of financial guarantee given on behalf on of its subsidiaries [Refer note 29(c)]
Trade receivables
Credit risk is managed by each business unit subject to the Company’s established policies, procedures and controls relating to customer
credit risk management. Outstanding customer receivables are regularly monitored. One customer group individually accounted for more
than 10% of the trade receivable for the years ended 31 March 2025 (31 March 2024: Two customer groups).
Investments, financial instruments and deposits with banks
Credit risk is limited as the Company generally invest in deposits with banks and financial institutions with high credit ratings assigned by
international and domestic credit rating agencies. Investments primarily include investments in liquid mutual fund units, State Development
Loans, deposits and bonds issued by Government owned entities and highly rated financial institutions. Counterparty credit limits are
reviewed by the Company periodically and the limits are set to minimise the concentration of risks and therefore mitigate financial loss
through counterparty’s potential failure to make payments. One bank individually accounted for more than 10% of the Company’s deposits
and bank balances for the year ended 31 March 2025 (31 March 2024: Two banks).
INTEREST RATE RISK
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest
rates. The Company’s exposure to the risk of changes in interest rates relates primarily to the Company’s debt obligations with floating
interest rates. The Company’s borrowings are short term / working capital in nature. The Company’s investments are primarily in fixed rate
interest bearing investments. Hence, the Company is not significantly exposed to interest rate risk on its investments.
FOREIGN CURRENCY EXCHANGE RATE RISK
The fluctuation in foreign currency exchange rates may have a potential impact on the standalone statement of profit and loss and other
comprehensive income, where transactions are denominated in a currency other than functional currency. Considering the countries and
economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those
countries.
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange
rates. The Company’s exchange risk arises from its foreign operations, foreign currency revenues and expenses, (primarily in United States
Dollars (‘USD’). The Company also has exposures to Great Britain Pound (‘GBP’) and Euros (‘EUR”)). The Company’s exposure to the risk of
changes in foreign exchange rates relates primarily to the Company’s operating activities and financing activities (when revenue or expense
is denominated in a foreign currency).
The Company uses derivative financial instruments, such as foreign exchange forward contracts, to mitigate the risk of changes in foreign
currency exchange rates in respect of its forecasted cash flows and trade receivables.
b. OTHERS
The Company invested ' 6,664.09 million into a wholly owned subsidiary as consideration for equity shares issued to the Company. The
subsidiary used such amounts received from the Company to repay outstanding loans to a bank.
Other than above there are no funds that have been advanced or loaned or invested (either from borrowed funds or share premium or any
other sources or kind of funds) by the Company to or in any other persons or entities, including foreign entities (“Intermediaries”), with the
understanding, whether recorded in writing or otherwise, that the Intermediary shall 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 provide any guarantee, security or
the like on behalf of the Ultimate Beneficiaries.
37. ADDITIONAL REGULATORY INFORMATION (Continued)
There have been no funds that have been received by the Company from any persons or entities, including foreign entities (“Funding Parties”),
with the understanding, whether recorded in writing or otherwise, that the Company shall 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 provide any guarantee,
security or the like on behalf of the Ultimate Beneficiaries.
38. FAIR vALUES
Financial instruments carried at amortised cost such as cash and cash equivalents, other bank balances, trade receivables, loans, other
financial assets, unbilled revenue, borrowings, trade payables and other financial liabilities are considered to be same as their fair values, due
to the short-term nature of these instruments.
For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate
the fair values:
• The fair values of the quoted investments are based on price quotations at the reporting date:
• The Company holds derivative financial instruments such as foreign exchange forward to mitigate the risk of changes in exchange
rates on foreign currency exposures. The counterparty for these contracts is generally a bank. Foreign exchange forward contracts &
non-convertible debentures are valued using valuation techniques, which employs the use of market observable inputs. The models
incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates. The changes in
counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships
and other financial instruments recognized at fair value.
39. HEDGING ACTIvITIES AND DERIvATIvES
The Company’s revenue is denominated in various foreign currencies given the nature of business, a large part of the costs are denominated in
INR. This exposes the Company to currency fluctuations. The counterparty, for all derivative financial instruments is a bank.
During the years ended 31 March 2025 and 31 March 2024, the Company has designated certain foreign exchange forward as cash flow
hedges to mitigate the risk of foreign exchange exposure on highly probable cashflow forecast transactions. The related hedge transactions for
balance in cash flow hedge reserve as at March 31, 2025 are expected to occur and reclassified to statement of profit and loss within 2 years.
The Company determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency,
amount and timing of its forecasted cash flows. While determining the appropriate hedge ratio, the company takes into consideration the
prevailing macroeconomic conditions, the availability and liquidity of the hedging instruments, tolerance levels for hedge ineffectiveness and
the costs of hedging. Hedge effectiveness is determined at the inception of hedge relationship, and through periodic prospective effectiveness
assessments to ensure than an economic relationship exists between the hedged item and hedging instrument, including whether the hedging
instrument is expected to offset changes in cash flows of hedged items. Designated cash flow hedges are measured at FVTOCI. Other
derivatives which are not designated as hedge are measured at FVTPL.
41. SUBSEQUENT EVENTS
The Board of Directors in their meeting held on 24 April 2025 have proposed a final dividend of ' 57 per equity share for the year ended 31
March 2025 which is subject to the approval of shareholders at the ensuing Annual General Meeting and if approved, would result in a cash
outflow of approximately ' 10,835.46 million.
As per our report of even date attached.
for B S R & Co. LLP for and on behalf of the Board of Directors
Chartered Accountants
ICAI Firm registration number:
101248W/W-100022
Arjun Ramesh Nitin Rakesh Maureen Anne Erasmus
Partner Chief Executive Officer & Managing Director Director
Membership No. 218495 DIN: 00042261 DIN: 09419036
New York London
Aravind Viswanathan Sivaramakrishnan
Chief Financial Officer Puranam
Bengaluru Senior Vice President &
24 April 2025 New York Company Secretary
24 April 2025 Bengaluru
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