1. General Information

Zensar Technologies Limited (the "Company") along with its wholly owned and controlled subsidiaries Zensar Technologies Inc., Zensar Technologies (UK) Limited, Zensar Technologies (Singapore) Pte. Limited, Zensar Technologies (Shanghai) Company Limited, PSI Holding Group Inc., Zensar Technologies IM Inc., Zensar Technologies IM B.V., Aquila Technology Corp., Zensar (Africa) Holdings Pty Limited and Zensar (South Africa) Pty Limited and Professional Access Limited (effective from August 14, 2014) is engaged in providing a complete range of IT Services and Solutions. The Company's industry expertise spans across Manufacturing, Retail, Media, Banking, Insurance, Healthcare and Utilities. The Company is public limited company and is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

2. Summary of significant accounting policies

a. Basis of brparation

These Financial Statements of the Company have been brpared in accordance with the generally accepted accounting principles in India under historical cost convention on accrual basis. Pursuant to section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014, till the standards of accounting or any addendum thereto are p r e s c r i b e d b y C e n t r a l G o v e r n m e n t i n consultation and recommendation of the National Financial Reporting Authority, the existing Accounting Standards notified under the Companies Act, 1956 shall continue to apply. Consequently, these financial statements have been brpared to comply in all material aspects with the accounting standards notified under Section 211(3C) [Companies (Accounting Standards) Rules, 2006, as amended] and other relevant provisions of the Companies Act, 2013. The Ministry of Corporate Affairs( MCA) has notified the Companies (Accounting Standards) Amendment Rules, 2016 vide its notification dated 30 March 2016. The said notification read with Rule 3(2) of the Companies (Accounting Standards) Rules, 2006 is applicable to accounting period commencing on or after the date of notification i.e. 1 April 2016 and has therefore not been considered for year ended March 31, 2016.

All assets and liabilities have been classified as current or non-current as per the Company's operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products and services and their realisation in cash and cash equivalents, the Company has ascertained its operating cycles as 12 months for the purpose of current -non current classification of assets and liabilities.

b. Use of estimates

The brparation of financial statements in conformity with Indian GAAP, requires M a n a g e m e n t t o m a k e e s t i m a t e s a n d assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the period.

Actual results could differ from these estimates. Any revision to accounting estimates is recognised prospectively in the current and future periods.

c. Revenue Recognition

R e v e n u e f r o m s o f t w a r e m a i n t e n a n c e , development and allied services comprises of revenues earned from time and material and fixed price contracts. Revenue from time and material contracts is recognised as the related services are performed. Revenue from fixed price contracts are recognised using the proportionate completion method. The cumulative impact of any revision in estimates of the stage of completion is reflected in the period in which the change becomes known. Provisions for estimated losses on such engagements are made during the period in which such losses become probable and can be reasonably estimated. Amounts included in the financial statements, which relate to recoverable costs and accrued profits not yet billed on contracts, are included in other current assets as Accrued Income (Unbilled Services). Billings on incomplete contracts in excess of accrued costs and accrued profits are included in other current liabilities as Deferred Revenue. Revenue from the sale of user licenses for software applications is recognised on transfer of title in the user license.

d. Other Income

(i) Profit on sale of investments is recorded on transfer of title from the Company and is determined as the difference between the sale price and the then carrying amount of the investment.

(ii) Dividend income is recognised when the Company’s right to receive dividend is established.

(iii) Interest income on time deposits is recognised using the time proportion basis taking into account the amount outstanding and applicable interest rates.

e. Leases

Finance Lease

As a lessee:

A s s e t s a c q u i r e d u n d e r fi n a n c e l e a s e agreements are capitalised at the inception of lease, at lower of the fair value and brsent value of minimum lease payments, and a liability is created for an equivalent amount. Lease rentals are allocated between the liability and the Finance cost, so as to obtain a uniform periodic rate of interest on the outstanding liability for each period. The outstanding liability is included in borrowings. The Finance cost is charged to the Statement of Profit and Loss over the lease period.

Operating Lease

As a lessee:

Lease arrangements under which all risks and rewards of ownership are effectively retained by the lessor are classified as operating lease. Payments made under operating leases are charged to the Statement of Profit and Loss on straight line basis over the period of lease.

f. Tangible Assets

Tangible assets are stated at acquisition cost less accumulated debrciation. Cost of tangible assets comprises purchase price, duties, levies and any directly attributable costs of bringing the asset to its working condition for the intended use, net of refundable taxes.

Subsequent expenditures related to an item of fixed asset are added to its book value only if they increase the future benefits from the existing asset beyond its brviously assessed standard of performance.

Items of fixed assets that have been retired from active use and are held for disposal are stated at the lower of their net book value and net realisable value and are shown separately in the financial statements. Any expected loss is recognised immediately in the Statement of Profit and Loss.

Losses arising from the retirement of, and gains or losses arising from disposal of fixed assets which are carried at cost are recognised in the Statement of Profit and Loss.

g. Intangible Assets

I n t a n g i b l e a s s e t s a r e r e c o r d e d a t t h e consideration paid for acquisition. Internally generated intangible asset arising from development activity is recognised at cost on demonstration of its technical feasibility, the intention and ability of the Company to complete, use or sell it, only if, it is probable that the asset would generate future economic benefit and the expenditure attributable to the said assets during its development can be measured reliably.

Intangible assets are carried at cost less accumulated amortization. Goodwill arising on acquisition of business is brsented as an intangible asset. Goodwill comprises the excess of purchase consideration over the carrying value of the net assets of the acquired business.

h. Debrciation and Amortisation

Debrciation on fixed assets is computed on a straight-line method as per the useful lives brscribed under Schedule II of the Companies Act, 2013 except in respect of the following assets (based on technical evaluation):

i. Impairment

The assessment is done at each Balance Sheet date as to whether there is any indication that an asset (tangible and intangible) may be impaired. For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets, is considered as a cash generating unit. If any such indication exists, an estimate of the recoverable amount of the asset/cash generating unit is made. Assets whose carrying value exceeds their recoverable amount are written down to the recoverable amount. Recoverable amount is higher of an asset's or cash generating unit's net selling price and its value in use. Value in use is the brsent value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.

j. Investments

Investments that are readily realisable and are intended to be held for not more than one year from the date, on which such investments are made, are classified as current investments. All other investments are classified as long term investments. Current investments are carried at cost or fair value, whichever is lower. Long-term investments are carried at cost. However, provision for diminution is made to recognise a decline, other than temporary, in the value of the investments, such reduction being determined and made for each investment individually.

k. Employee Retirement Benefits

i. Provident Fund:

Provident Fund contributions are made to a Trust administered by the Company. The Company's liability is actuarially determined (using the Projected Unit Credit method) at the end of the year. Actuarial losses/ gains are recognised in the Statement of Profit and Loss in the year in which they arise.

The contributions made to the trust are recognised as plan assets. The defined benefit obligation recognised in the balance sheet rebrsents the brsent value of the defined benefit obligation as reduced by the fair value of plan assets.

ii. Gratuity:

The Company provides for gratuity, a defined benefit plan (the “Gratuity Plan”) covering eligible employees in accordance with the Scheme. The Gratuity Plan provides a lump sum payment to vested employees at r e t i r e m e n t d e a t h , i n c a p a c i t a t i o n o r termination of employment, of an amount based on the respective employee's salary and the tenure of employment. The Company's liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses/ gains are recognised in the Statement of Profit and Loss in the year in which they arise. The retirement benefit obligation recognised in the Balance Sheet rebrsents the brsent value of the defined benefit obligation as adjusted for unrecognised past service cost, and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to the brsent value of available refunds and reductions in future contributions to the scheme.

iii. Superannuation:

The Company has Defined Contribution Plans for Post-employment benefits for e l i g i b l e e m p l o y e e s i n t h e f o r m o f Superannuation Fund administered by the Life Insurance Corporation of India.

The Company has Defined Contribution Plans for Post-employment benefits for all employees in the form of Family Pension Fund administered by Regional Provident

Fund Commissioner.

These funds are classified as defined contribution plans as the Company has no further obligation beyond making the contributions. The Company's contributions to Defined Contribution Plans are charged to the Statement of Profit and Loss as and when incurred.

iv. Compensated Absences:

Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year are treated as short term employee benefits. The obligation towards the same is measured at t h e e x p e c t e d c o s t o f a c c u m u l a t i n g compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end.

Accumulated compensated absences, which are expected to be availed or encashed beyond 12 months from the end of the year are treated as other long term employee benefits. The Company's liability is actuarially determined (using the Projected Unit Credit method) at the end of each year. Actuarial losses/ gains are recognised in the Statement of Profit and Loss in the year in which they arise.

l. Foreign Currency Transactions

i) On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

ii) As at the reporting date, non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.

iii) Monetary assets and monetary liabilities denominated in foreign currency at the yearend are translated at the year-end exchange rates, and the resulting exchange differences are recognised in the Statement of Profit and Loss, except for the exchange differences arising on monetary items that, in substance, form a part of the Company's net investment in non-integral foreign operation, which are accumulated in a Foreign Currency Translation Reserve until the disposal of net investment.

iv) Foreign operations are classified as either 'integral' or 'non-integral' operations. Exchange differences arising on a monetary items that, in substance, form part of an enterprise's net investment in a non-integral foreign operation are accumulated in the Foreign Currency Translation Reserve until the disposal of the net investment, at which time they are recognised as income or as expenses. The Financial statements of an integral foreign operation are translated using the principles and procedures as if the translations of the foreign operation are those of the Company itself.

m. Financial Instruments

The Company early adopted Accounting Standard (AS) 30 “Financial Instruments: Recognition and Measurement” issued by the Institute of Chartered Accountants of India, along with the consequent limited revisions to other accounting standards, except so far as they are in conflict with other mandatory accounting standards and other regulatory requirements

Derivative Financial Instruments

The Company uses foreign exchange forward contracts to hedge its exposure to movements in foreign exchange rates. The use of these foreign exchange forward contracts reduces the risk or cost to the Company and the Company does not use the foreign exchange forward contracts for trading or speculation purposes. Forwrd contracts are fair valued at each reporting date. Changes in the fair values of forward contracts designated as cash flow hedges are recognized directly in the Hedging Reserve Account and reclassified into the Statement of Profit and Loss upon the occurrence of the hedged transaction. Changes in fair value relating to the ineffective portion of the hedges and derivatives not designated as hedges are recognised in the Statement of Profit and Loss as they arise.

Non-Derivative Financial Instruments A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets of the Company mainly include cash and bank balances, trade receivables, accrued income (unbilled services), employee travel and other advances, other loans and advances and derivative financial instruments with a positive fair value. Financial liabilities of the Company mainly comprise trade payables, accrued expenses, bank borrowings and derivative financial instruments with a negative fair value. Financial assets / liabilities are recognized on the Balance Sheet when the Company becomes a party to the contractual provisions of the instrument.

The Company assesses at each Balance Sheet date whether there is any objective evidence that a financial asset or group of financial assets is impaired. If any such indication exists, the Company estimates the amount of impairment loss as the difference between the assets carrying amount and undiscounted amount of future cash flows, which is recognised in the Statement of Profit and Loss.

The Company measures the short–term payables with no stated rate of interest at original invoice amount, if the effect of discounting is immaterial.

n. Employee Stock Option Schemes

Stock options granted to employees under Employee Stock Option 2002 Scheme and Employee Stock Option 2006 Scheme are accounted as per the accounting treatment brscribed by the Guidance Notes on Employee Share-based Payments issued by Institute of Chartered Accountants of India as required by the SEBI (Share Based Employee Benefits) Regulations, 2014. Accordingly, the intrinsic value of the option being the excess of the market value of the stock options as on the date of the grant over the exercise price of the options i s r e c o g n i s e d a s d e f e r r e d e m p l o y e e compensation and is charged to Statement of Profit and Loss over the vesting period. In the case of graded vesting, the vesting period is determined separately for each portion of the option. The unamortised portion of the cost is shown under “Reserves and Surplus”.

o. Taxation

Current Tax

Current tax is measured at the amount expected to be paid to the tax authorities in accordance with the taxation laws brvailing in the respective jurisdictions. Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis.

Deferred Tax

Deferred tax for timing differences between the book profits and tax profits is accounted for using the tax rates and laws that have been enacted or substantively enacted as of the Balance Sheet date. Deferred tax assets arising from the timing differences are recognised to the extent there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets are recognised for tax loss and debrciation carried forward to the extent that the realisation of the related tax benefit through the future taxable profits is virtually certain and is supported by convincing evidence that sufficient future taxable profits can be realised. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities rebrsenting current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws.

Minimum Alternative Tax (MAT)

Minimum Alternative Tax (MAT) credit is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay income tax higher than that computed under MAT, during the period that MAT is permitted to be set off under the Income Tax Act, 1961 (specified period). In the year, in which the MAT credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in the guidance note issued by the ICAI, the said asset is created by way of a credit to the Statement of Profit and Loss and shown as MAT credit entitlement. The Company reviews the same at each Balance Sheet date and writes down the carrying amount of MAT credit entitlement to the extent there is no longer convincing evidence to the effect that the Company will pay income tax higher than MAT during the specified period.

p. Provisions and contingent liabilities

Provisions are recognised when the Company has a brsent obligation as a result of a past event and, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Provisions are determined based on best estimate required to settle the brsent obligation at the balance sheet date. Provisions are reviewed at each Balance Sheet date and adjusted to reflect current best estimates. A disclosure for a contingent liability is made where there is a possible obligation or a brsent obligation that may, but probably will not, require an outflow of resources.

q. Earnings per share

The basic earnings per share is computed by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. The number of shares used in computing diluted earnings per share comprises the weighted average shares considered for deriving basic earnings per share and also the weighted average number of equity shares which would have been 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.

r. Cash and Cash Equivalents

In the cash flow statement, cash and cash equivalents includes cash in hand, demand deposits with banks, other short-term highly liquid investments with original maturities of three months or less

2. Dues to Micro, Small and Medium enterprises

The Company has compiled this information based on the current information in its possession. As at 31st March 2016, no supplier has intimated the Company about its status as a Micro or Small Enterprise or its registration with the appropriate authority under the Micro, Small and Medium Enterprises Development Act, 2006.

3. Research & Development

The Department of Scientific and Industrial Research had accorded the recognition as In-House R&D unit to the Company. The Company has incurred revenue expenditure amounting to Rs. NIL (Previous year : Rs. 0.41 lakhs) on development activities during the year.

4. Lease Obligations

(A) Operating leases

The Company has taken on lease certain facilities and equipment under operating lease arrangements that expire over the next five years. Rental expense incurred by the Company under operating lease agreements totalled approximately Rs. 3,349.73 lakhs (Previous year Rs. 3,202.59 lakhs

5. Segment Information

Where a financial report contains both consolidated financial statements and separate financial statements of the parent, segment information needs to be brsented only in case of consolidated financial statements. Accordingly, segment information has been provided only in the consolidated financial statements.

6. The Company vide a Board resolution dated October 22, 2013 had resolved to liquidate its subsidiary company in Japan, Zensar Advanced Technologies Limited (ZATL), with effect from March 31, 2014. Accordingly, the subsidiary had ceased its operations effective March, 31 2014 and completed the liquidation as per the laws of Japan. The outstanding receivable amounts from ZATL and the company’s investment in ZATL have been fully provided for. The Company has filed an application with RBI and is awaiting it's approval for writing off the investments from the books of account.

7. Tax Expense for the year ended March 31, 2016 and March 31, 2015 is net of excess provision for earlier years written back - Rs. 779 lakhs and Rs. 169 lakhs respectively.

8. Business Acquisition

On August 14, 2014, the Company had entered into a Business Undertaking Transfer Agreement for the purchase of business from Professional Access Software Development Private Limited, an Oracle Platinum partner. The financial statements for the year ended March 31, 2015 include the results of this acquired business for the period August, 14 2014 to March 31, 2015 (Income from Operations of Rs. 8,987.12 lakhs and Profit before taxation of Rs. 3,445.81 lakhs) and are therefore not comparable.

9. Previous Year Figures

Previous Year Figures have been reclassified to conform to this year's classification For Price Waterhouse

Firm Registration Number: 301112

E Zensar Technologies Limited

Chartered Accountants  

Amit Borkar

Partner  

Membership No. 109846

Place: Pune  

Date: April 22, 2016  

For and on behalf of the Board of Directors of

H.V. Goenka Chairman  DIN: 00026726

Sandeep Kishore Managing Director & CEO DIN: 07393680

S. Balasubramaniam Chief Financial Officer

Nilesh Limaye Company Secretary

Place: Mumbai

Date: April 22, 2016