1 SIGNIFICANT ACCOUNTING POLICIES

1.1 Basis of brparation of financial statements

The financial statements are brpared in accordance with Indian Generally Accepted Accounting Principles ("GAAP") under the historical cost convention on the accrual basis. GAAP comprises mandatory accounting standards as brscribed under section 133 of the Companies Act, 2013 ('the Act') read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). Accounting Policies have been consistently applied except where a newly-issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

1.2 Use of estimates

The brparation of financial statements in conformity with GAAP requires the management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent liabilities as on the date of the financial statements. The recognition, measurement, classification or disclosure of an item or information in the financial statements is made relying on these estimates. Any revision to these accounting estimates is recognized prospectively.

1.3 Revenue Recognition

a) Revenue from IT solutions:

Revenue from IT solutions comprises of revenue from the sale of software products, providing IT services and sale of hardware and third party software.

Revenue from Software Products is recognized on delivery/installation, as per the brdetermined/laid down policy across all geographies or a lower amount as considered appropriate in terms of the contract. Maintenance revenue in respect of products is deferred and recognized ratably over the period of the underlying maintenance agreement.

Revenue from IT Services is recognized either on time and material basis or fixed price basis or based on certain measurable criteria as per relevant contracts. Revenue on Time and Material Contracts is recognized as and when services are performed. Revenue on Fixed-Price Contracts is recognized on the percentage of completion method. Provisions for estimated losses, if any, on such uncompleted contracts are recorded in the period in which such losses become probable based on the current estimates.

Revenue from Supply of Hardware/Other Material and Sale of Third Party Software License/Term License/Other Materials incidental to the aforesaid services is recognized based on delivery/installation, as the case may be. Recovery of incidental expenses is added to respective revenue.

b) Revenue from Transaction Services:

Revenue from transaction services and other service contracts is recognized based on transactions processed or manpower deployed.

c) Interest / Dividend Income:

Interest income is recognised on time proportion basis taking into account the amount outstanding and rate applicable.

Dividend Income is recognized as and when right to receive the same is established.

1.4 Unbilled and unearned revenue

Revenue recognized over and above the billings on a customer is classified as "unbilled revenue" and advance billing to customer is classified as "advance from customer/unearned revenue" and included in other liabilities.

1.5 Fixed assets and debrciation/ amortization Tangible assets:

Fixed assets except leasehold building are stated at cost, which comprises the purchase consideration and other directly attributable costs of bringing an asset to its working condition for the intended use.

Leasehold Building has been revalued and is reinstated at updated revalued amount

Advances given towards acquisition of fixed assets are disclosed as capital advances under "Long Term Loans and Advances" and the costs incurred on assets not ready for use as at the balance sheet date are disclosed as "Capital work in progress".

Intangible assets:

"Software products (meant for sale)" are products licensed to customers. Costs that are directly associated with such products whether acquired or developed or upgraded in partnership with others, and have a probable economic benefit exceeding one year are recognized as software products (meant for sale).

Costs related to further development of existing "software products meant for sale" are capitalized only if the costs result in a software product, whose life and value in use is in excess of its originally assessed standard of performance, which can be measured reliably, technological feasibility thereof has been established, future economic benefits of each of such products are probable and the Company intends to complete development and to use the software.

Software Products-Others: Purchased software meant for in house consumption and significant upgrades thereof which have a probable economic benefit exceeding one year are capitalized at the acquisition price.

Business and Commercial Rights are capitalized at the acquisition price.

Debrciation/Amortization:

Leasehold land and Leasehold building and improvements thereon and other leased assets are amortized over the period of lease or its life, whichever is lower.

Business and Commercial Rights are amortized over their estimated useful life or ten years, whichever is lower while Software Products-Others are amortized over a period of five years.

Software Products (meant for sale) are amortized over a period of 10 years after taking into consideration the residual value.

Debrciation on other fixed assets is systematic allocation of the debrciable amount over its useful life. The debrciable amount of an asset is the cost of an asset or other amount substituted for cost, less its residual value. The useful life of an asset is the period over which an asset is expected to be available for use, or the number of production or similar units expected to be obtained from the asset.

Debrciation on Tangible assets is provided on Straight Line Method (SLM) over the useful lives of assets determined based on internal technical assessments which are as follows

1.6 Investments

Trade investments are the investments made to enhance the Company's business interest. Investments are either classified as current or long-term based on the management's intention at the time of purchase. Long-term investments are carried at cost and a provision is made to recognize any decline, other than temporary, in the value of such investments.

Current investments are carried at lower of the cost or fair value and a provision is made to recognize any decline in the carrying value.

Cost of overseas investments rebrsents the Indian Rupee equivalent of the consideration paid for the investment.

1.7 Accounting for Taxes on Income

Provision for current income tax is made on the basis of the estimated taxable income for the year in accordance with the Income Tax Act, 1961.

Minimum Alternate Tax (MAT) credit asset is recognized and carried forward only if there is a reasonable certainty of it being set off against regular tax payable within the stipulated statutory period.

Deferred tax resulting from timing differences between book and tax profits is accounted for under the liability method, at the current rate of tax, to the extent that the timing differences are expected to crystallize. Deferred tax assets are recognized and carried forward only if there is a virtual/reasonable certainty that they will be realized and are reviewed for the appropriateness of their respective carrying values at each balance sheet date.

1.8 Translation of Foreign Currency Items other than hedged transactions

Transactions in foreign currency are recorded at the rate of exchange in force on the date of the transaction. Exchange differences in respect of all current monetary assets and liabilities denominated in foreign currency are restated at the rates ruling at the year end and all exchange gains / losses arising there from are recognized in the Statement of Profit and Loss.

Exchange differences arising on reporting of long term foreign currency monetary items at rates different from those at which they were initially recorded during the period or reported in brvious financial statements, are accounted as below:

• In so far as they relate to the acquisition of debrciable capital assets, are added to or deducted from the cost of the asset and are debrciated over the balance life of the asset; and

• In other cases, the said exchange differences are accumulated in a Foreign Currency Monetary Item Translation Difference Account ('FCMITDA') and amortized over the balance period of such long term asset/liability.

Foreign operations carried out with a significant degree of autonomy are classified as ''non integral operations'' as per the provisions of AS 11 "Effects of changes in foreign exchange rates". All assets and liabilities, both monetary and non-monetary, are translated at the closing rate while the income and expenses are translated at the average rate for the year. The resulting exchange differences are accumulated in the "Foreign Currency Translation Reserve".

Foreign operations other than non-integral operations are classified as integral. All monetary assets and liabilities are translated at closing rates while non monetary assets are translated at historical rates and income and expenses are translated at the average rates for the year and the resulting exchange differences are accounted in the Statement of Profit and Loss.

1.9 Hedge Accounting

The Company enters into foreign currency and interest rate swap contracts to hedge its risks associated with foreign currency fluctuations relating to loan liabilities and highly probable forecast transactions. The Company designates these derivative instruments as hedges and records the gain or loss on effective cash flow hedges in the 'Hedging Reserve Account' until the forecasted transaction materializes. Gain or loss on the ineffective portion of cash flow hedges is recognized in the Statement of Profit and Loss.

1.10 Accounting of Employee Benefits Employee Benefits in India Gratuity

The Company provides for gratuity, a defined benefit retirement plan, which covers eligible employees and the liability under the plan is determined based on actuarial valuation done by an independent valuer using the projected unit credit method.

Superannuation

Certain employees of the Company are also participants in a defined superannuation contribution plan. The Company contributes to the scheme with Life Insurance Corporation of India on a monthly basis. The Company has no further obligations to the scheme beyond its monthly contributions.

Provident fund

Retirement benefit in the form of Provident Fund and 'Employer-Employee Scheme' are defined contribution schemes. The company's contributions paid/payable to the fund are charged to the Statement of Profit and Loss for the year when the contributions are due. The company has no obligation other than the contributions payable to the provident fund.

Leave entitlement

Liability for leave entitlement for employees is provided on the basis of actuarial valuation semi-annually and based on estimates for interim financial reporting.

Employee Benefits in Foreign Branch

In respect of employees in foreign branch, necessary provisions are made based on the applicable local laws. Gratuity and leave encashment/entitlement as applicable for employees in foreign branch are provided on the basis of actuarial valuation and based on estimates for interim financial reporting.

1.11 Provisions, contingent liabilities and contingent assets

Provisions involving substantial degree of estimation in measurement are recognized when there is a brsent obligation as a result of past events and it is probable that there will be outflow of resources.

Disclosures for a contingent liability is made, without a provision in books, when there is an obligation that may, but probably will not, require outflow of resources.

Contingent assets are neither recognized nor disclosed in the financial statements.

1.12 Borrowing costs

Borrowing costs directly attributable to acquisition, construction and production of qualifying assets are capitalized as a part of the cost of such asset upto the date of completion. Other borrowing costs are charged to the Statement of Profit and Loss.

1.13 Impairment of assets

In accordance with AS 28 on 'Impairment of Assets', where there is an indication of impairment of the Company's assets related to cash generating units, the carrying amounts of such assets are reviewed at each balance sheet date to determine whether there is any impairment. The recoverable amount of such assets is estimated as the higher of its net selling price and its value in use. An impairment loss is recognized in the Statement of Profit and Loss whenever the carrying amount of such assets exceeds its recoverable amount. If at the balance sheet date there is an indication that a brviously assessed impairment loss no longer exists, then such loss is reversed and the asset is restated to the extent of the carrying value of the asset that would have been determined (net of amortization/ debrciation) had no impairment loss been recognized.

1.14 Securities issue expenses

Securities issue expenses including expenses incurred on increase in authorized share capital are adjusted against Securities Premium Account.

1.15 Premium payable on redemption of Foreign Currency Convertible Bonds (FCCB)

Premium payable on redemption of FCCB is amortized proportionately till the date of redemption and is adjusted against the balance in Securities Premium account.

1.16 Lease

Finance leases, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease term at the lower of the fair value of the leased property and brsent value of minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized as finance costs in the Statement of Profit and Loss. Lease management fees, legal charges and other initial direct costs of lease are capitalized.

Leased assets are debrciated on a straight-line basis over the useful life of the asset or the useful life as brscribed under Part A in Schedule II of the Act, whichever is lower.

Leases, where the lessor effectively retain substantially all the risks and benefits incidental to ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the Statement of Profit and Loss.

1.17 Earnings per share

In determining earnings per share, the Company considers the net profit/loss after tax and the post tax effect of any extra-ordinary, exceptional items and discontinuing operations on earnings per share is shown separately. The number of equity shares considered in computing basic earnings per share is the weighted average number of equity shares outstanding during the year. The number of equity shares considered for computing diluted earnings per share is the aggregate of the weighted average number of equity shares used for deriving the basic earnings per share and the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares, which includes potential FCCB conversions and ESOS. The number of equity shares and potentially dilutive equity shares are adjusted for any stock splits and bonus shares issues.

1.18 Cash and cash equivalents

Cash and cash equivalents comprise cash and cash on deposit with banks and corporations. The Company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.

1.19 Cash Flow Statement

Cash Flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the company are segregated

2.25.2 Commitments:

(a) Capital Commitments

Capital commitments as at March 31, 2015 Rs. 0.09 crores (Rs. Nil as at March 31, 2014)

(b) Derivative Instruments:

During the financial year ended March 31, 2012, the Company had entered into a cross currency interest rate swap to the tune of USD 26 mn (Rs.115 crores). The Company designated this instrument as cash flow hedge against its forecasted foreign currency inflows. For hedge transactions, the Company identifies the hedged item (asset or liability) at the inception of the hedge itself. The effectiveness is assessed at the time of inception of the hedge and periodically thereafter.

For the year ended March 31, 2015, the Company recognized Rs. 22.60 crores (for the year ended March 31, 2014 Rs. 1.21 crores) in Cash flow hedging reserve account as effective fair value changes on derivative under cash flow hedge accounting.

The balance of the Cash flow Hedging Reserve account as at Mar 31, 2015 is Nil. (as at March 31, 2014 negative Rs. 22.60 crores).

As at March 31, 2015, the fair value of outstanding derivative designated under cash flow hedge accounting was Rs.Nil (as at March 31, 2014 Rs. 22.60 crores), of which Rs. Nil (as at March 31, 2014, Rs. 22.60 crores) is brsented under "Other current liabilities".

(c) Leases:

a. Operating Lease:

(i) The Company has acquired certain Land and Building under a lease arrangement for a period of sixty years at a brmium of Rs. 0.50 crores starting from December 4, 2000 for Land, Rs. 15.62 crores starting from March 13, 2000 and Rs. 5.05 crores March 1, 2003 for building and the same are being amortized over the lease period. All other lease arrangements in respect of properties from are renewable/ cancellable at the Company's and/or lessors' option as mutually agreed. The future lease rental payment committed is as under:

2.26.1 Going Concern:

During the financial year 2011-12, the Company undertook restructuring of its debts through CDR cell and also renegotiated with the FCCB holders with respect to its obligations. Post the debts restructuring, there have been substantial delays in repayments of Principal and payment of Interest in respect of CDR lenders as well as for the interest on FCCBs, which may be construed as Default as per the MRA and the terms of FCCB. The Company is negotiating with the aforesaid lenders as also with the lease financiers to restructure the debt and is reasonably certain to renegotiate and meet its financial obligations.

2.26.2 Impairment Analyses of Cash Generating Units (CGUs):

The Company, as per its Accounting Policy and in accordance with the requirements of the Accounting Standard (AS) 28 - 'Impairment of Assets' and Accounting Standard (AS) - 13 Accounting for Investments, specified under Section 133 of the Act, has carried out an impairment analysis of its Cash Generating Units / Long term Investments on a going concern basis, with the assistance of an independent expert valuer and accordingly provision for diminution in value of long term investments (subsidiaries) of Rs. 350 crores (Previous year Rs. Nil) has been made. Besides, the Company has provided loss of Rs. 305.79 crores on account of divestment of stake in step down subsidiaries during the year.

2.27 Employee Benefit Plans

The expected return on plan assets is based on market expectations at the beginning of the year for the returns over the entire life of the related obligations. The estimates for future salary increases considered take into account, inflation, seniority, promotion and other relevant factors.

The following table set out the status of the gratuity plan as required under AS 15 (Revised) and figures given below are as per actuarial valuation.

For and on behalf of the Board

Madhivanan Balakrishnan  

Executive Director - New Business Initiatives Strategy and Finance DIN No. 05323757

Charanjit Attra

Managing Director and Global CEO DIN No. 01426902

Padmanabhan Iyer

Chief Financial Officer

Ninad Kelkar

Company Secretary

Place: Mumbai

Date: May 28, 2015