1 General Information Hinduja Global Solutions Limited (“HGS”), is engaged in Business Process Management. HGS with its subsidiaries offer voice and non-voice based services such as contact centre solutions and back office transaction processing across North America, Europe, Asia and Middle East. HGS is a public limited company, listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in India. 2 Significant Accounting Policies 2.1 Basis of brparation These financial statements have been brpared in accordance with the generally accepted accounting principles in India under the 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 standards of accounting or any addendum thereto are brscribed by Central Government in 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. 2.2 Use of Estimates The brparation of the financial statements in conformity with the Generally Accepted Accounting Principles in India requires Management to make estimates and assumptions considered in the reported amount of assets and liabilities (including contingent liabilities) and the reported Income and Expenses during the year. The Management believes that the estimates used in brparation of financial statements are prudent and reasonable. Future results could defer than these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known/ materialise. 2.3 Fixed Assets a) Tangible Assets Tangible Assets are stated at cost of acquisition less accumulated debrciation/ impairment losses, if any. Cost comprises of cost of acquisition, cost of improvements and any attributable cost of bringing the asset to its working condition for intended use. Subsequent expenditures related to an item of tangible assets are added to its book value only if they increase the future benefits from the existing assets beyond its brviously assessed standard of performance. Losses arising from the retirement of, and gains or losses arising from disposal of tangible assets which are carried at cost are recognised in the Statement of Profit and Loss. Debrciation is provided on a straight line method on pro-rata basis at the rates brscribed under Schedule II to the Companies Act, 2013, except for computers, which is debrciated over six years based on technical valuation of its useful life. The leasehold land, leasehold building and leasehold improvements are amortised over the lease term or its useful life, whichever is shorter. Assets given to employees on contractual obligations are debrciated to the extent of 50% of the value over a period of four years, at the end of which these assets are transferred to the respective employees at the residual book value. b) Intangible Assets Intangible Assets are stated at cost of acquisition less accumulated amortisation/ impairment losses, if any on a straight line basis. Computer Software having benefit of more than one year is capitalised and amortised on a straight line basis over a period of 3 to 6 years. Non-compete fees is amortised over a period of non-compete agreement (i.e. five years). Gains or Losses arising from the retirement or disposal of intangible assets are determined as the difference between the net disposal proceeds and the carrying amount of asset and recognised as income or expense in the Statement of Profit and Loss. 2.4 Borrowing Costs General and specific borrowing costs directly attributable to the acquisition, construction, or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in Statement of Profit and Loss in the period in which they are incurred 2.5 Impairment of Assets 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. Assessment is also done at each Balance Sheet date as to whether there is any indication that an impairment loss recognised for an asset in prior accounting periods may no longer exist or may have decreased. 2.6 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. 2.7 Foreign Currency Translations Initial Recognition 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. Subsequent Recognition 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. All non-monetary items, which are carried at fair value or other similar valuation, denominated in a foreign currency are reported using the exchange rates that existed when the values were determined. All foreign currency monetary assets and liabilities as at Balance Sheet date are translated at the exchange rate brvailing on the Balance Sheet date. With respect to foreign exchange difference on long-term foreign currency monetary items, the Company has adopted the following policy from April 1, 2011 onwards: a. Foreign exchange difference relating to the acquisition of a debrciable asset is adjusted in the cost of the debrciable asset, which would be debrciated over the balance life of the asset. A monetary asset or liability is termed as a long-term foreign currency monetary item, if the asset or liability is exbrssed in a foreign currency and has a term of 12 months or more at the date of origination of the asset or liability. Exchange differences on restatement of all other monetary items are recognised in the Statement of Profit and Loss. Translation of foreign operations Foreign operations are classified as either ‘integral’ or ‘non-integral’ operation. Exchange differences arising on a monetary item that, in substance, forms part of an enterprise’s net investment in a non-integral foreign operation are accumulated in the Cumulative Foreign Currency Translation Reserve until the disposal of the net investment, at which time they are recognised as income or as expenses. In case of integral foreign operations, all revenue and expense transaction reflected in the Statement of Profit and Loss have been translated into Indian Rupees at an average exchange rate. Monetary assets and liabilities are translated at the exchange rate brvailing on the Balance Sheet date. The non-monetary assets and liabilities are translated at the rate brvailing on the date of the transaction. The net foreign exchange gain/ loss are recognised in Statement of Profit and Loss. Forward Exchange Contracts The brmium or discount arising at the inception of forward exchange contracts entered into to hedge an existing asset/liability, is amortised as expense or income over the life of the contract. Exchange differences on such a contract are recognised in the Statement of Profit and Loss in the reporting period in which the exchange rates change. Any profit or losses arising on cancellation or renewal of such a forward exchange contract are recognised as income or as expense for the period. In accordance with its risk management policies and procedures, the Company uses derivative instruments such as foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to highly probable forecasted transactions. The derivatives that qualify for hedge accounting and designated as cash flow hedges are initially measured at fair value and are re-measured at a subsequent reporting date and the changes in the fair value of the derivatives i.e. gain or loss is recognised directly in Shareholders’ Funds under hedging reserve account to the extent considered highly effective. Gain or loss on derivative instruments that either does not qualify for hedge accounting or not designated as cash flow hedges or designated cash flow hedges to the extent considered ineffective are recognised in Statement of Profit and Loss. Hedge accounting is discontinued when the hedging instrument expires, sold, terminated, or exercised, or no longer qualifies for hedge accounting. The cumulative gain or loss on the hedging instrument recognised in Shareholders’ Funds under hedging reserve account is retained there until the forecasted transaction occurs subsequent to which the same is adjusted against the related transaction in the Statement of Profit and Loss. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in Shareholders’ Funds is transferred to the Statement of Profit and Loss in the same period. 2.8 Revenue Recognition a. In Contact Centre Activity, revenue is recognised as the related services are performed, based on actual utilisation or minimum utilisation level, as appropriate, specified in the agreements. In Claim Processing Activity, revenue is recognised based on number of claims processed, at contractual rates and terms as specified in the agreements. In respect of other services, revenue for services rendered is recognised as per the terms of specific contracts. In cases where services are rendered to customers during the year but invoices are yet to be raised at the year end, revenue is accrued and classified under ‘Other Current Assets – Note 18’. b. Interest income is accounted on accrual basis and dividend income is accounted on right to receipt basis. c. In respect of other heads of income, the Company follows the practice of accounting of such income on accrual basis. 2.9 Employee Benefits (i) Defined Contribution Plan The Company has Defined Contribution plans for post employment benefits namely Provident Fund, Superannuation Fund and other funds. Under the Provident Fund Plan, the Company contributes to a Government administered provident fund on behalf of its employees and has no further obligation beyond making its contribution. The Superannuation Fund applicable to certain employees, constitutes an insured benefit, which is classified as a defined contribution plan as the Company makes contributions to an insurance company and has no further obligation beyond making the payment to the insurance company. The Company makes contributions to State plans namely Employee’s State Insurance Fund and Employee’s Pension Scheme 1995 and has no further obligation beyond making the payment to them. There are contributory plans at certain overseas branches of the Company and contributions are made as per their policies/ local regulations. The Company’s contributions to the above funds are charged to revenue every year. (ii) Defined Benefit Plan The Company provides for retirement benefits in the form of gratuity for all its employees in India and pension benefit plan at a foreign branch. The gratuity scheme is funded through Group Gratuity Policy with Life Insurance Corporation of India (‘LIC’). The pension benefit plan at the foreign branch is funded for employees through payment in trustee administered funds as determined by periodic actuarial calculation. The liability for the defined benefit plan of Gratuity and Pension is determined on the basis of an actuarial valuation carried out by an independent actuary at the year-end using Projected Unit Credit Method. Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions and are recognised immediately in the Statement of Profit and Loss as income or expense. (iii) Other Employee Benefits 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 the expected cost of accumulating 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 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. (iv) Termination benefits Termination benefits in the nature of voluntary retirement benefits are recognised in the Statement of Profit and Loss as and when incurred. 2.10 Taxation a. Provision for Income Tax is made after considering exemptions and deductions available under the Income Tax Act, 1961, of India and legal advice from time to time. Provisions for Income Tax in respect of overseas branches are made as per the tax laws applicable to the relevant country. b. Minimum Alternative Tax (‘MAT’) credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period. c. Deferred tax is recognised for all the timing differences, subject to the consideration of prudence in respect of deferred tax assets. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are recognised and carried forward only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the Company has unabsorbed debrciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits. 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 assets and deferred tax liabilities are offset when there is legally enforcable right to set off assets against liabilities rebrsenting current tax and where the deferred tax assets and deferred tax liabilities relate to taxes on income levied by the same governing taxation laws. 2.11 Provisions and Contingent Liabilities Provisions: Provisions are recognised when there is a brsent obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the brsent obligation at the Balance sheet date and are not discounted to its brsent value. Contingent Liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company or a brsent obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made. 2.12 Leases As Lessee: Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the Statement of Profit and Loss on a straight-line basis over the period of the lease. The Company leases certain tangible and intangible assets and such leases where the Company has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased asset and the brsent value of the minimum lease payments. Each lease payment is apportioned between the finance charge and the reduction of the outstanding liability. The outstanding liability is included in other short/ long-term borrowings. The finance charge is charged to the Statement of Profit and Loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. 2.13 Accounting for Employee Stock Options Stock options granted to employees under the Employee Stock Option Scheme are accounted as per the accounting treatment brscribed by Employee stock option scheme and Employee stock purchase Guidelines, 1999, issued by Securities and Exchange Board of India (‘SEBI’) and Guidance Note on Accounting for Employee Share-based Payments issued by the Institute of Chartered Accountants of India. 2.14 Cash and Cash Equivalents In the cash flow statement, cash and cash equivalents include cash in hand, demand deposits with banks, other short-term highly liquid investments with maturities of three months or less. 3. Pursuant to Schedule II of the Companies Act, 2013 (w.e.f. April 1, 2014), debrciation charge for the year ended March 31, 2015 is higher by R 939.71 lacs , and written down value aggreggating R 1,612.64 lacs (net of deferred tax of R 572.62 lacs) for fixed assets with no residual life as at April 1, 2014 having being charged off to retained earnings. 4. Current tax includes provision for tax of R 362.68 Lacs (Previous Year: R 338.70 Lacs) pertaining to overseas branches which is determined as per the laws applicable in the relevant country. 5. As per Section 135 of the Companies Act, 2013, a CSR committee has been formed by the company. The areas for CSR activities are eradication of tuberculosis, promoting education, art and culture, healthcare, and rehabilitation and rural development projects. These contributions by the Company were spent on activities, which are specified in Schedule VII of the Companies Act, 2013. 6. Previous Year’s figures have been regrouped/ rearranged, wherever considered necessary, to conform to current year’s classification. For Price Waterhouse For and on behalf of the Board Firm Registration No: 301112E Chartered Accountants Jeetendra Mirchandani Partha DeSarkar Ramkrishan P. Hinduja Partner Chief Executive Officer and Manager Chairman DIN: 00278711 Membership No: 048125 Rangan Mohan Srinivas Palakodeti Director Chief Financial Officer DIN: 01116821 Makarand Dinkar Dewal Company Secretary Place : Mumbai Date : May 20, 2015 |