Impairment test of Goodwill
Goodwill is tested for impairment at each reporting date. The recoverable amount of a CGU is the higher of its fair value less cost of disposal and its value-in-use. The recoverable amount of the CGUs was determined based on its value-in-use. The value-in-use is determined based on cash flow projections over a period of five years and terminal growth rate thereafter. The key assumptions used in the estimation of the value-in-use are set out below. The values assigned to revenue and EBITDA growth rates are based on management's assessment of future trends in the relevant businesses and are also based on historical data from both internal and external sources. Terminal growth rates (beyond 5 years) and the discount rate for goodwill impairment purposes have been estimated based on macroeconomic conditions and business factors.
The projections cover a period of five years, as management believes this to be the most appropriate timescale over which to review and consider annual performances, before applying a fixed terminal growth rate to the final year cash flows. The growth rates used to estimate future performance (revenue, cost of services, operating expenses, etc) are based on the reasonable estimates considering past performance.
The discount rate is a post tax measure and based on the Weighted Average Cost of Capital ('WACC') which represents the weighted average return attributable to all the assets of the CGU. These estimates are likely to differ from future actual results of operations and cash flows. Management believes that any reasonably possible changes in the key assumptions mentioned above would not cause the carrying amount to exceed the recoverable amount of the CGU's as at 31 March 2024 and 31 March 2023.
Recoverable amount of the CGU's exceeded their carrying amounts, and hence no impairment losses were recognized during the years ended 31 March 2024 and 31 March 2023.
A On 26 March 2024 and 28 March 2024, SIL entered into a Share Purchase Agreement ('SPA') with Sagility B.V., (SIL's immediate holding company), to acquire 100% of the equity shares of Sagility P.H. B.V. (including its branch in Philippines) and Sagility (US) Holdings Inc. (along with its downstream subsidiaries) for a purchase consideration of USD 175.04 million (Rs. 14,590.24 million) and USD 628.5 million (Rs. 52,388.86 million) respectively. The purchase consideration for the acquisitions was discharged by issuing 2,366,610,429 shares of SIL, valued at Rs. 28.3 per share. The face value of the shares issued amounting to Rs 23,666.1 million was recorded as equity share capital and the differential, amounting to Rs. 43,312.99 million was recorded in securities premium.
In order to discharge the agreed purchase consideration, SIL increased the authorised share capital from Rs. 19,303.98 million to Rs. 100,000 million during the year ended 31 March 2024.
* The ultimate holding of the Company was Baring Private Equity Asia incorporated in Cayman islands up to 17 October 2022 and with effect from 18 October 2022, EQT AB incorporated in Sweden is the ultimate holding company of the Company.
As per records of the Company, including its register of shareholders/ members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.
A 1 share is held by Sagility Philippines B.V. as nominee on behalf of Sagility B.V.
d) Terms/ rights attached to equity shares:
The Company has only one class of equity shares having a par value of Rs 10 per share. Each holder of equity shares, as reflected in the records of the Company as of the date of the shareholders meeting, is entitled to one vote in respect of each share held for all matters submitted to vote in the shareholders meeting. The equity shares are entitled to receive dividend as declared from time to time subject to approval of the shareholders at the ensuing Annual General Meeting.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company after distribution of all preferential amounts, if any. The distribution will be in the proportion to the number of equity shares held by the shareholders.
e) Aggregate number of shares issued for consideration other than cash:
The Company has not made any buy-back, nor there has been an issue of shares by way of bonus shares during the period from incorporation up to 31 March 2024. As explained above, 2,366,610,429 shares of Rs. 10 each along with a premium of Rs. 18.3 each were issued for consideration other than cash.
f) No shares are reserved for issue under options.
* Share issue expenses of Rs. 71.98 million (31 March 2023 : Rs. Nil) has been adjusted against securities premium as these are qualifying costs attributable to an equity transaction.
Pursuant to the requirements of Division II to Schedule III, below is the nature and purpose of each reserve:
Sr.No Nature & purpose of reserves
(i) Effective portion of cashflow hedge
Cumulative changes in the fair value of financial instruments designated and effective as a hedge are recognized in this reserve through OCI (net of taxes). Amounts recognized in the Effective portion of cashflow hedge are reclassified to the standalone statement of profit and loss when the underlying transaction occurs.
(ii) Securities premium
Securities premium is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of Section 52 of the Companies Act, 2013.
(iii) Retained earnings
Retained earnings comprises of prior and current year undistributed earnings / (losses) after tax.
By virtue of agreements entered into between Sagility B.V. (the immediate holding company) and a consortium of bankers for certain borrowing arrangements entered into amongst them, all of the assets in the standalone balance sheet of the Company, including but not limited to investments in subsidiaries have been offered as a security.
Note:
A. (i) On 4 January 2022, the Company allotted 13,000 Non-convertible bonds ("NCB") at a face value of Rs. 10,00,000 each to Sagility B.V. ( the immediate holding company)
(ii) The term of the NCB is 60 (Sixty) months from contractual agreed drawdown date. i.e. 04 January 2022.
(iii) The NCB's are entitled to a fixed coupon rate of interest at 8% per annum.
(iv) The NCB's can be fully or partially repaid before the contractual repayment dates, subject to compliance with applicable regulations in India
A) Disaggregation of revenue information
a) In the following table, revenues from contracts with customers is disaggregated by major service lines and contract type. The Company believes that this disaggregation best depicts how the nature, amount, timing and uncertainty of our revenues and cashflows are effected by industry, market and other economic factors.
E) The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as revenue 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.
The aggregate value of performance obligations that are completely or partially unsatisfied as of 31 March 2024 is Nil (31 March 2023 Nil).
34 Earnings per share ("EPS")
Basic EPS amounts are calculated by dividing the profit/ (loss) for the year attributable to equity holders of the Company by the weighted average number of equity shares outstanding during the year. Diluted EPS amounts are calculated by dividing the profit/(loss) attributable to the equity holders of the Company by the weighted average number of equity shares outstanding during the year plus the weighted average number of equity shares that would be issued on conversion of all the dilutive potential equity shares into equity shares.
35 Segment information
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.
Major Customers greater than 10% of total revenue
Revenue from two customers (31 March 2023 : two ) cumulatively accounted for 100% of the revenue from operations.
37 Employee benefits a) Defined contribution plans:
The contributions paid/ payable to Employee Provident Fund, Employees State Insurance Scheme and other funds, are determined under the relevant approved schemes and statutes are recognised as an expense in the standalone statement of profit and loss during the year in which the employee renders the related service. There are no further obligations other than the contributions payable to the appropriate authorities by the Company.
b) Compensated absences:
The leave obligation pertains to the Company's liability towards compensated absences.
The entire amount of the provision of Rs. 293.86 millions (31 March 2023 : Rs. 231.15 millions) for compensated absences is presented as a current liability, as the Company does not have an unconditional right to defer its settlement beyond 12 months from the reporting date.
c) Defined benefit plans - Gratuity in India
The Company has a defined benefit gratuity plan in accordance with The Payment of Gratuity Act, 1972. The plan entitles an employee who has rendered atleast five years of continuous service to receive 15 days salary for every completed year of service or part thereof in excess of six months based on the rate of last drawn salary (basic plus dearness allowance) by the employee concerned. The Company's liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial gains/ (losses) are recognised under other comprehensive income in the standalone statement of profit and loss.
The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period ) has been applied as when calculating the defined benefit liability recognised in the financial statement.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior year .
Sensitivities due to mortality and withdrawals are not material and hence impact of change was not calculated.
The fair value of cash and cash equivalents, trade receivables (including unbilled receivables), trade payables and accrued expenses, other financial assets and liabilities approximate the carrying amount thereof as at 31 March 2024 and 31 March 2023 largely due to the short-term nature of these instruments.
* The fair value of derivative financial instruments is determined based on observable market inputs including currency spot and forward rates, and currency volatility.
# Discounted cash flows: The valuation model considers the present value of expected payments, discounted using a risk-adjusted discount rate. The own non-performance risk was assessed to be insignificant.
(a) Fair value hierarchy
The section explains the judgements and estimates made in determining the fair value of the financial instruments that are:
a) recognised and measured at fair value.
b) measured at amortised cost and for which fair values are disclosed in the financial statement.
To provide an indication of the reliability of the inputs used in determining fair value, the Company has classified its financial instruments into three levels as mentioned under Indian Accounting Standards.
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).
There were no changes in fair value hierarchy during the previous year.
Valuation techniques and significant unobservable inputs
Level 2:
Forward exchange contracts: The fair value is determined using quoted forward exchange rates at the reporting date and present value calculations based on yield curves in the respective currencies.
39 Financial instruments - risk management
The Company has exposure to the following risks arising from financial instruments: credit risk (refer note (b) below); liquidity risk (refer note (c) below); market risk (refer note (d) below).
(a) Risk management framework
The Company's Board of Directors have the overall responsibility for the establishment and oversight of the risk management framework. The risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company's activities.
The Company’s Board oversees how management monitors compliance with the Company's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Board is assisted in its oversight role by internal audit. Internal audit undertakes both regular and adhoc reviews of risk management controls and procedures, the results of which are reported to the Board and appropriate corrective actions are taken as required.
(b) Credit risk
Credit risk is the risk of financial loss to the Company if a customer or a counterparty to any other financial instrument fails to meet its contractual obligations. 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 derivative financial instruments and security deposits.
Financial assets that are neither past due nor impaired
The Company has an established process to evaluate the creditworthiness of its customers to minimise potential credit risk. Credit evaluations are performed by the Company before agreements to render services are entered into with prospective customers. Outstanding customer receivables are regularly monitored. Two customers individually accounted for more than 10% of the outstanding trade receivable as at 31 March 2024 (31 March 2023 : Two)
The Company’s credit period generally ranges 60 to 90 days. The amounts outstanding in the balance sheet represent the maximum exposure to credit risk. The concentration risk with respect to trade receivables is high since these are receivables from two customers and one group.
The Company establishes an allowance account for impairment that represents its estimate of losses in respect of trade and other receivables. The allowance account is used to provide for impairment losses. Subsequently when the Company is satisfied that no recovery of such losses is possible, the financial asset is considered irrecoverable and the amount charged to the allowance account is then written off against the carrying amount of the impaired financial asset.
The Company generate revenue from two of its subsidiaries which contribute more than 10% of total revenue of the Company, individually and 100% of the Company's revenue, collectively.
Financial instruments and deposits with banks
Credit risk is limited as the Company generally invests in deposits with banks with high credit ratings assigned by international and domestic credit rating agencies. 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.
(c) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no significant liquidity risk is perceived.
(i) Maturities of financial liabilities
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted contractual cash flows, and include contractual interest payments and exclude the impact of netting agreements.
As of 31 March 2024, the Company had a working capital of Rs. 4,346.42 million (31 March 2023: Rs. 6,536.72 million) including cash and cash equivalents of Rs. 209.31 million (31
March 2023: Rs.382.29 million and receivables of Rs. 8,343.99 million (31 March 2023: Rs.8,111.28 million).
(d) Market risk
Market risk is the risk that changes in market prices which is mainly foreign exchange rates affect the Companys' income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
(b) Impact of hedging activities
The Company's hedging policy only allows for effective hedge relationships to be established. Hedge effectiveness is determined at the inception of the hedge relationship and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. The Company enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item.
As the critical terms of the hedging instruments and their corresponding hedged items are the same, the Company performs a qualitative assessment of effectiveness and it is expected that the value of the hedging instruments and the value of the corresponding hedged items will systematically change in opposite direction in response to movements in the underlying exchange rates.
The Company monitors the aforesaid critical terms on a regular basis to assess if the heding relationship remains highly effective. Hedge ineffectiveness is recognised on a cash flow hedge in the standalone statement of profit and loss. Ineffectiveness represents remaining portion of gain or loss on the hedging instrument that cannot be offset with the change in the fair value of the hedged item.
40 Capital management
For the purpose of the Company's capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company's capital management is to maximise the shareholder value.
The Company's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Company's capital structure includes debt and is influenced by the changes in regulatory framework, government policies, available options of financing and the impact of the same on the liquidity position.
The Company monitors capital using a ratio of'adjusted net debt' to 'adjusted equity'. For this purpose, adjusted net debt is defined as total liabilities, including interest-bearing loans and borrowings less cash and cash equivalents and other bank balances. Adjusted equity comprises all components of equity except hedge reserve.
The Company's adjusted net debt to equity ratio is analysed as follows:
The above information regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. The same has been relied upon by the auditors
42 Contingent Liabilities
There are no contingent liabilities as at 31 March 2024 and 31 March 2023.
43 Capital and other commitments Capital commitments
Estimated amount of contracts remaining to be executed on capital account and not provided (net of advances) for Rs. 110.23 millions (31 March 2023: Rs 0.96 million).
44 Transfer pricing
The Finance Act, 2001 has introduced, with effect from assessment year 2002-03 (effective 1 April 2001), detailed transfer pricing regulations for computing the taxable income and expenditure from 'international transactions' between 'associated enterprises' on 'arm's length' basis. These regulations, inter alia, also require the maintenance of prescribed documents and information including furnishing a report from an Accountant within the due date of filing return of income. The Company has undertaken necessary steps to comply with the Transfer Pricing regulations and the prescribed certificate from the accountant will be obtained for the year ended 31 March 2024 within the due date. The management is of the opinion that the international transactions are at arm's length , and hence the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of the provision for taxation.
46 Additional Regulatory Information reauired under Schedule III (i) Utilisation of borrowed funds and share premium
I The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:
(a) 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
(b) provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries
II The Company has not received funds from any person(s) or entit(ies), including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall :
(a) directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Parties (“Ultimate Beneficiaries”) or
(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
47 Corporate Social Responsibility ("CSR")
Pursuant to the provisions of section 135(5) of the Companies Act, 2013 (the Act), the Company has formed its Corporate Social Responsibility (CSR) Committee. The CSR committee of the Company provides an oversight of CSR policy execution to ensure that CSR objectives of the Company are met.
48 Code on 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 and its Indian subsidiaries. The Ministry of Labour and Employment (‘Ministry’) has released draft rules for the Code on 13 November 2020 and has invited suggestions from stake holders. The suggestions received are under consideration by the Ministry. 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.
49 Subsequent event
Subsequent to the reporting date, SIPL was converted into a public limited company w.e.f 20 June 2024. Consequent to the conversion, the name of the Company has been changed to “Sagility India Limited”
Vide an agreement entered into on 31 May 2024, Sagility (US) Inc. a wholly owned subsidiary converted its outstanding promissory notes ason31 March 2024 into equity. As part of this transaction, the Company’s wholly owned subsidiary, Sagility (US) Holdings Inc. issued 32,906.02 shares to Sagility B.V. as consideration for conversion of the outstanding debt into equity. Contemporaneously, SILissued 262,976,580 shares to Sagility B.V. as consideration to acquire the shares issued by Sagility (US) Inc. as consideration for the conversion of debt into equity. Pursuant to the above, the Group continues to retain full ownership of Sagility (US) Inc. and its downstream subsidiaries.
Subsequent to the reporting date, Sagility (US) Holdings Inc. raised an amount of USD 44.48 million (Rs. 3,707.73 million) against issue of shares to Sagility B.V. 16,393.83 shares were issued at a per share value of USD 2,713.47 (Rs. 226,166.44 per share). Such funds received were utilized by Sagility (US) Holdings Inc. to settle the deferred consideration payable to HGS International Mauritius . Contemporaneously, SIL issued 131,015,338 shares to Sagility B.V. as consideration to acquire the shares issued by Sagility (US) Inc in this regard.
|