ECLERX Notes to Accounts

1. EARNINGS PER SHARE (EPS)


The basic earnings per equity share are computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding during the reporting period. The number of shares used in computing diluted earnings per share comprises the weighted average number of equity shares considered for deriving basic earnings per share, and also the weighted average number of equity shares, which would be issued on the conversion of all dilutive potential shares into equity shares, unless the results would be anti-dilutive.


2. GRATUITY BENEFIT PLANS


The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, the employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member’s length of service and salary at retirement age. The gratuity scheme is managed by a trust which regularly contributes to insurance service provider which manages the funds of the trust. The fund’s investments are managed by certain insurance companies as per the mandate provided to them by the trustees and the asset allocation is within the permissible limits prescribed in the insurance regulations. The Company recognizes actuarial gains and losses immediately in other comprehensive income, net of taxes.


The following tables summaries the components of net benefit expense recognized in the statement of profit or loss and the funded status and amounts recognized in the balance sheet:


The sensitivity analyses above have been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period.


The average duration of the defined benefit plan obligation at the end of the reporting period is 10 years (March 31, 2016: 10 years).


3. SHARE-BASED PAYMENTS Employee Stock Option Plan


Under the employee stock option plan, the Company, grants options to senior executive employees of the Company and its subsidiaries as approved by the Nomination and Remuneration Committee. Vesting period is three years from the date of grant. Further, vesting of certain portion of the stock options is dependent on the Compounded Annual Growth Rate of the organic operating revenues of the Company. The fair value of the stock options is estimated at the grant date using a Black and Scholes model, taking into account the terms and conditions upon which the share options were granted. The contractual term of each option granted is six years. There are no cash settlement alternatives. The Company does not have a past practice of cash settlement of these options.


ESOP 2008 scheme:


The Company instituted ESOP 2008 scheme under which 1,000,000 stock options have been allocated for grant to the employees. The scheme was approved by the shareholders by way of postal ballot, the result of which was declared on May 19, 2008. The Scheme was subsequently amended to increase the number of options to 1,600,000 stock options vide resolution passed at Ninth Annual General Meeting held on August 26, 2009. Pursuant to bonus issue by the Company on July 29, 2010, the number of options available under the scheme accordingly increased to 2,400,000 pursuant to relevant SEBI regulations. During the year ended March 31, 2016, the Nomination and Remuneration Committee approved that no further options will be granted under ESOP 2008 Scheme, however active options there under would continue to vest as per the respective terms.


Movements during the year


The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year:


*During the previous year ended March 31, 2016, the Company has issued bonus shares in the ratio of 1:3 on December 18, 2015. The effect on the weighted average exercise price due to bonus issue has been consequently adjusted.


The weighted average share price at the date of exercise of these options was Rs. 1,465 per share (March 31, 2016: Rs. 1,613.31)


The weighted average remaining contractual life for the share options outstanding as at March 31, 2017 was 0.01 years (March 31, 2016: 0.96 years).


The exercise prices for options outstanding at the end of the year was Rs. 517.70 (March 31, 2016: Rs. 257.50 to Rs. 517.70). The average vesting period is 2.83 years and exercise period is 3 years.


ESOP 2011 scheme:


The Company instituted ESOP 2011 scheme under which 1,600,000 stock options have been allocated for grant to the employees. The scheme was approved by the shareholders at the Eleventh Annual General Meeting held on August 24, 2011. The Scheme was subsequently amended to increase the number of options to 2,600,000 stock options vide resolution passed at Thirteenth Annual General Meeting held on August 22, 2013.


Movements during the year


The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year:


*During the previous year ended March 31, 2016, the Company has issued bonus shares in the ratio of 1:3 on December 18, 2015. The effect on the weighted average exercise price due to bonus issue has been consequently adjusted.


The weighted average share price at the date of exercise of these options was Rs. 1,444 per share. (March 31, 2016: Rs. 1,523.70) The weighted average remaining contractual life for the share options outstanding as at March 31, 2017 was 2.68 years (March 31, 2016: 3.98 years).


The range of exercise prices for options outstanding at the end of the year was Rs. 463.91 to Rs. 1,196.25 (March 31, 2016: Rs. 463.91 to Rs.1,196.25).


There were no grants given in current year under this scheme. The weighted average fair value of options granted during the previous year was Rs. 676.34.


The expected life of the share options is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.


ESOP 2015 scheme:


Pursuant to the applicable requirements of the erstwhile Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (''''the SEBI guidelines’), the Company had framed and instituted Employee Stock Option Plan 2015 (''''ESOP 2015’) to attract, retain, motivate and reward its employees and to enable them to participate in the growth, development and success of the Company. ESOP 2015 envisages an ESOP trust which is authorized for secondary acquisition and accordingly during the year under review, ESOP Trust has bought 75,113 shares from open market.


Movements during the year


The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year under ESOP 2015 scheme:


These options are not yet vested as of March 31, 2017.


The weighted average remaining contractual life for the share options outstanding as at March 31, 2017 was 5 years The exercise prices for options outstanding at the end of the year was Rs. 1,379.15 The weighted average fair value of options granted during the year was Rs. 462.43 The average vesting period is 2.86 years and exercise period is 3 years.


Notes:


(a) The guarantee is for usage of Amex cards by subsidiaries of the Company. Amex cards are issued to employees of foreign subsidiaries which are used by them to incur expenses on travel, business promotion and other office expenses. These have been cancelled in current year.


These guarantees have been given in the normal course of the Company’s operations and are not expected to result in any loss to the Company on the basis of the beneficiaries fulfilling their ordinary commercial obligations.


(b) The Company has received favorable orders from ITAT against the demand raised by the Assessing Officers amounting to Rs. 13.20 Million for Financial Years 2004-05 and 2006-07. The department has preferred appeal to High Court for Financial Years 2004-05 and 2006-07 and filed Special Leave Petition with Supreme Court for Financial Years 2006-07 and 2007-08.The Company has received demand amounting to Rs. 17.17 Million for Financial Year 2010-11 against which Company has filed appeal with Income tax appellate tribunal.


The Company’s subsidiary Agilyst Consulting Private Limited, which has been merged with effect from April 1, 2015 with the Company, has received demand amounting to Rs. 48.35 Million for Financial Years 2009-10, 2010-11, 2011-12 and 2012-13 against which the Company’s subsidiary has filed appeals with Commissioner of Income Tax (Appeals) and Income tax appellate tribunal..


(c) Tax Refund claims for the period July 2014 till December 2015 to the extent rejected by the Services Tax Department for Rs.9.58 Million is pending in appeal before the Commissioner of Central Excise (Appeals)


The amounts represent best possible estimates arrived at on the basis of available information. The uncertainties and possible reimbursements are dependent on the outcome of the different legal processes which have been invoked by the Company or the claimants as the case may be and therefore cannot be predicted accurately. The Company engages reputed professional advisors to protect its interest and has been advised that it has strong legal positions against each of such disputes. Hence, no provision has been made in the financial statements for these disputes.


4. RELATED PARTY TRANSACTIONS


A. Related Parties and Key Management Personnel Name of related party and related party relationship


Related party under Ind AS 24 - Related Party Disclosures and as per Companies Act, 2013


(a) Where control exists:


1. eClerx Limited (wholly owned subsidiary)


2. eClerx LLC (wholly owned subsidiary)


3. eClerx Investments Limited (wholly owned subsidiary, liquidated w.e.f March 28, 2017)


4. eClerx Private Limited (wholly owned subsidiary)


5. Agilyst Inc (100% subsidiary of eClerx Investments Limited, merged with eClerx LLC w.e.f. January 1, 2017)


6. Agilyst Consulting Private Limited (100% subsidiary of Agilyst Inc., merged with eClerx Services Limited w.e.f. April 1, 2015)


7. eClerx Investments (UK) Limited (wholly owned subsidiary)


8. CLX Europe S.P.A. (100% subsidiary of eClerx Investments (UK) Limited)


9. Sintetik S.R.L. (100% subsidiary of CLX Europe S.P.A.)


10. CLX Europe Media Solution GmbH (100% subsidiary of CLX Europe S.P.A.)


11. CLX Europe Media Solution Limited (100% subsidiary of CLX Europe Media Solutions GmbH)


12. CLX Thai Company Limited (49% holding of CLX Europe S.P.A.)


13. eClerx Employee Welfare Trust (Entity under control of the Company)


14. eClerx Canada Limited (wholly owned subsidiary of eClerx Investments (UK) Limited w.e.f September 27, 2016)


(b) Related party under Indian Accounting Standard 24 - Related Party Disclosures and as per Companies Act, 2013 with whom transactions have taken place during the year


(I) Enterprises where Key Managerial Personnel and / or relative of such personnel have significant influence:


1. Duncan Stratton & Company Limited


(II) Key Management Personnel:


1. V.K. Mundhra ((Non-Executive Director - Chairman)


2. PD Mundhra (Executive Director)


3. Anjan Malik ((Non-Executive Director)


4. Rohitash Gupta (Chief Financial Officer)


5. Gaurav Tongia (Company Secretary)


6. Biren Gabhawala (Non-Executive Independent Director)


7. Anish Ghoshal (Non-Executive Independent Director)


8. Vikram Limaye (Non-Executive Independent Director)


9. Pradeep Kapoor (Non-Executive Independent Director)


10. Alok Goyal (Non-Executive Independent Director)


11. Deepa Kapoor (Non-Executive Independent Director)


12. Shailesh Kekre (Non-Executive Independent Director)


Terms and conditions of transactions with related parties


The transactions with related parties are made on terms equivalent to those that prevail in arm’s length transactions. There have been no guarantees provided or received for any related party receivables or payables. Outstanding balances at the yearend are unsecured and interest free and settlement occurs through banks.


Loan to Related parties


The loan granted to eClerx Employee Welfare Trust is intended to finance purchase of shares for allotment to employees under the stock option schemes. The loan is unsecured and repayable in full. The interest rate charged is 16.05%. The loan has been utilized for the purpose it was granted.


Note: The remuneration to the key management personnel does not include the provisions made for gratuity and leave benefits, as they are determined on an actuarial basis for the Company as a whole.


The amounts disclosed in the table are the amounts recognized as an expense during the reporting period related to key management personnel.


5. SEGMENT INFORMATION


The Board of Directors i.e. Chief Operating Decision Maker (''''CODM’) evaluates the Company’s performance and allocates resources based on an analysis of various performance indicators by reportable segments. The Company operates under a single reportable segment which is data management, analytics solutions and process outsourcing services. Further the risks and rewards under various geographies where the Company operates are similar in nature.


Note: Non - current operating assets for this purpose consists of property plant and equipment, capital work in progress, other intangibles and other non - current assets.


6. HEDGING ACTIVITIES AND DERIVATIVES Cash Flow Hedges Foreign currency risk


Foreign exchange forward contracts measured at fair value through OCI are designated as hedging instruments in cash flow hedges of forecast sales in US Dollars and EUROs. These forecast transactions are highly probable, and they comprise about 72.64% of the Company’s total expected sales. The foreign exchange forward contract balances vary with the level of expected foreign currency sales and changes in the foreign exchange forward rate. The terms of foreign currency forward contracts match the terms of the expected highly probable forecast transactions. As a result, no hedge ineffectiveness arises requiring recognition through profit or loss.


The cash flow hedges of the expected future sales during the year ended March 31, 2017 were assessed to be highly effective and a net unrealized gain of Rs. 642.27 Million, with a deferred tax liability of Rs.133.42 Million relating to the hedging instruments, is included in OCI. Comparatively, the cash flow hedges of the expected future sales during the year ended March 31, 2016 were assessed to be highly effective and an unrealized gain of Rs 149.03 Million was included in OCI in respect of these contracts.


The amounts removed from OCI during the year and included in the carrying amount of the hedging items as a basis of adjustment for the year ended March 31, 2017, totaling Rs. 115.07 Million (March 31, 2016: Rs. 257.71 Million). The amounts retained in OCI at March 31, 2017 are expected to mature and affect the statement of profit and loss during the year ended March 31, 2018.


7. FAIR VALUES


Set out below, is a comparison by class of the carrying amounts and fair value of the Company’s financial instruments, other than those with carrying amounts that are reasonable approximations of fair values:


The management assessed that cash and cash equivalents, trade receivables, other financial assets, trade payables and other financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.


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:


Trade receivables are evaluated by the Company based on specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables.


The fair values of the FVTPNL (Fair value through profit and loss) financial assets are derived from quoted market prices in active markets.


The Company enters into derivative financial instruments with various counterparties. Foreign exchange forward contracts are valued using valuation techniques, which employs the use of market observable inputs. The valuation techniques include forward pricing using present value calculations. The model incorporates various inputs including the foreign exchange spot and forward rates, yield curves of the respective currencies, currency basis spreads between the respective currencies, interest rate curves and forward rate curves of the underlying currency. As at March 31, 2017, the marked-to-market value of derivative asset positions should be net of credit valuation adjustment attributable to derivative counterparty default risk. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships recognized at fair value.


The fair value of security deposit that carries no interest is measured at the present value by discounting using the prevailing market rate of interest for a similar instrument with a similar credit rating.


378. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES


The Company’s principal financial liabilities, other than derivatives comprises trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include trade and other receivables, and cash and cash equivalents that derive directly from its operations. The Company also holds FVTPNL investments and enters into derivative transactions.


The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. The Company’s senior management provides assurance to the Board of Directors that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company’s policy that no trading in derivatives for speculative purposes may be undertaken which is consistent with the Company’s foreign risk management policy. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized below.


Market risk


Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk mainly comprises of currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include deposits, FVTPNL investments and derivative financial instruments.


The sensitivity analysis in the following sections relate to the position as at March 31, 2017 and March 31, 2016.


The sensitivity analysis have been prepared on the basis that the derivatives and the proportion of financial instruments in foreign currencies are all constant and on the basis of hedge designations in place at March 31, 2017.


The analysis exclude the impact of movements in market variables on: the carrying values of gratuity and other post- retirement obligations; provisions; and the non-financial assets and liabilities of foreign operations.


The following assumptions have been made in calculating the sensitivity analysis:


- The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2017 and March 31, 2016 including the effect of hedge accounting.


- The sensitivity of equity is calculated by considering the effect of any associated cash flow hedges at March 31, 2016 and March 31, 2017 for the effects of the assumed changes of the underlying risk.


Foreign currency risk


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 exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense is denominated in a foreign currency) and the Company’s net investment in foreign subsidiaries.


The Company manages its foreign currency risk by hedging transactions that are expected to occur within a maximum 24-month period for hedges of forecasted sales.


When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure with forecasted sales.


At March 31, 2017, the Company hedged 73% (March 31, 2016: 76%, April 1, 2015: 80%) of its expected foreign currency sales. Those hedged sales were highly probable at the reporting date. This foreign currency risk is hedged by using foreign currency forward contracts.


Foreign currency sensitivity


The Company operates internationally and portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk through its sales and services in overseas.


The Company evaluates exchange rate exposure arising from foreign currency transactions and the Company follows established risk management policies, including the use of derivatives like foreign exchange forward contracts to hedge exposure to foreign currency risk.


The following table demonstrate the sensitivity to a reasonably possible change in USD and EUR exchange rates, with all other variables held constant. The impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities. The impact on Company’s pre-tax equity is due to changes in the fair value of forward exchange contracts designated as cash flow hedges.


Equity price risk


The Company’s equity price risk is minimal due to no investment in listed securities and immaterial investment in non-listed equity securities.


At the reporting date, the exposure to unlisted equity securities was Rs. 2.4 Million. No sensitivity analysis done since amount is immaterial.


Credit risk


Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.


Trade receivables


Customer credit risk is managed by each business unit subject to the Company’s established policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are regularly monitored and followed up.


Trade receivables are evaluated by the Company based on specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables. The impairment is Nil as of March 31, 2017, Rs 0.04 Million as of March 31, 2016 and Nil as of April 1, 2015.


Financial instruments and cash deposits


Credit risk from balances with banks and financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Company’s treasury department on a periodic basis as per the Board of Directors approved Investment policy. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments.


The Company’s maximum exposure relating to financial guarantees and financial derivative instruments is noted in note 35. Liquidity risk


Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company consistently generated sufficient cash flows from operations to meet its financial obligations as and when they fall due.


The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments.


Excessive risk concentration


Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Company’s performance to developments affecting a particular industry. In order to avoid excessive concentrations of risk, the Company’s policies and procedures include specific guidelines to focus on the maintenance of a diversified portfolio.


9. CAPITAL MANAGEMENT


For the purpose of the Company’s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Company’s capital management is to maximize the shareholder value.


The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt.


No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2017 and March 31, 2016.


10. FIRST-TIME ADOPTION OF IND AS


The Company has prepared its financial statements to comply with Ind AS for the year ending March 31, 2017, together with comparative information for the year ended March 31, 2016. In preparing these financial statements, the Company’s opening balance sheet was prepared as at April 1, 2015, the Company’s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at April 1, 2015 and the financial statements as at and for the year ended March 31, 2016.


Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:


A. Exemptions availed : Business Combinations


Ind AS 101 provides the option to apply Ind AS 103 prospectively from the transition date or from a specific date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date. The Company elected to apply Ind AS 103 prospectively to business combinations occurring after its transition date.


Deemed cost


Ind AS 101 allows a first time adopter to continue with the carrying value for all its Property, Plant and Equipment and Intangible Assets as recognized in its previous GAAP financials on the date of transition. The Company has opted for this exemption and decided to carry its Property, Plant and Equipment and Intangible assets at Carrying value as per Indian GAAP on the date of transition i.e. April 1, 2015.


Investment in subsidiaries and associates


Ind AS 101 allows a First time adopter to account for its Investments in Subsidiaries, Joint Ventures and Associates either at cost or in accordance with Ind AS 109. The Company has elected to account for its investments in subsidiary at cost, which is equal to the deemed cost as per the previous GAAP on the date of transition.


Share based payment


Ind AS 102 Share-based Payment has not been applied to equity instruments in share-based payment transactions that vested before April 1, 2015.


B. Mandatory Exemptions


The following mandatory exceptions have been applied in accordance with Ind AS 101 in preparing the financial statements. Hedge Accounting


Hedge accounting can only be applied prospectively from the transition date to transaction that satisfy the hedge accounting criteria in Ind AS 109, at that date. Hedging relationships cannot be designated retrospectively, and the supporting documentation cannot be created retrospectively. As a result, only hedging relationships that satisfied the hedge accounting criteria as of April 1, 2015 are reflected as hedges in the Company’s results under Ind AS. The Company has designated various hedging relationships as cash flow hedges under the previous GAAP On date of transition to Ind AS, the Company had assessed that all the designated hedging relationship qualifies for hedge accounting as per Ind AS 109. Consequently the Company continues to apply hedge accounting on and after the date of transition to Ind AS.


Estimates


The estimates at April 1, 2015 and at March 31, 2016 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies) apart from the following items where application of Indian GAAP did not require estimation:


- Impairment of financial assets based on expected credit loss model


The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at April 1, 2015, the date of transition to Ind AS and as of March 31, 2016.


Footnotes to the reconciliation of equity as at April 1, 2015 and March 31, 2016 and profit or loss for the year ended March 31, 2016 1. Proposed dividend


Under Indian GAAP, proposed dividends and dividend distribution tax are recognized as a liability in the period to which they relate, irrespective of when they are declared. Under Ind - AS, a proposed dividend is recognized as a liability in the period in which it is declared by the Company (i.e. when approved by shareholders in a general meeting) or paid.


In case of the Company, the declaration of dividend occurs after period end. Therefore, the liability of Rs. 1,284.56 Million for the year ended March 31, 2015 recorded for dividend has been derecognized against retained earnings on April 1, 2015. The proposed dividend for the year ended March 31, 2016 of Rs. 49.09 Million recognized under Indian GAAP was reduced from other payables and with a corresponding impact in retained earnings. The net impact on retained earnings as on March 31, 2016 was Rs. 49.09 Million.


2. Fair Value through Profit and Loss (FVTPNL) financial assets


Under Indian GAAP investment in mutual funds are carried at lower of cost and fair value. Under Ind-AS, the Company designated such investments as FVTPNL investments. Ind-AS required FVTPNL investments to be measured at fair value. At the date of transition to Ind-AS, deference between the instruments fair value and Indian GAAP carrying amount has been recognized in retained earnings. This has resulted in increase in retained earnings of Rs. 0.42 Million and Rs. 0.07 Million as on March 31, 2016 and April 1, 2015 respectively and a increase in net profit by Rs. 0.35 Million for year ended March 31, 2016.


3. Defined benefit obligation


Under Ind AS, re-measurements, i.e., actuarial gains and losses, the return on plan assets excluding amounts included in net interest on the net defined benefit liability are recognized in Other Comprehensive Income instead of Statements of Profit and Loss. Thus the employee benefit cost is reduced by Rs. 19.21 Million and remeasurement gains/losses on defined benefit plans has been recognized in the OCI.


4. Share - based payments


Under the Indian GAAP the cost of equity settled employee share based programs were recognized using the intrinsic value method. Under Ind AS the same needs to be recognized based on the fair value of options on the grant date. Share options expense totaling to Rs. 151.25 Million, which were granted before and still unvested as at April 1, 2015, have been recognized as a separate component of equity against retained earnings. An additional expense of Rs. 42.93 Million has been recognized in the profit or loss for the year ended March 31, 2016 and cross charge to the subsidiaries has been accounted in investment in subsidiaries.


Consequently expenses of Rs. 45.19 Million of Agilyst Consulting Private Limited had to be accounted in eClerx Services Limited books for year ended March 31, 2016.


5. Loans and Advances


Under Indian GAAP the Company recognized interest free rent deposit at transaction value, however under Ind AS the security deposits are required to be fair valued. This difference between the present value and the principal amount of the deposit paid at inception to be accounted for as prepaid lease payments, to be recognized as an expense on a straight line basis over the lease term. Correspondingly, there will be interest income accrued on the discounted value of deposits. Other deposits (utility deposit and Staff travel / accommodation deposit) are payable on demand and have no contractual period. Hence there are no GAAP differences for these demand deposits.


An additional income of Rs. 11.92 Million and expense of Rs. 13.92 Million has been recognized in the statement of profit and loss for the year ended March 31, 2016 with a net impact of Rs. 2.00 Million. The net impact on retained earnings was Rs. 8.59 Million and Rs. 6.59 Million as on March 31, 2016 and April 1, 2015 respectively.


6. Adjustment items due to merger


The Hon’ble High Court of Bombay vide its order dated July 1, 2016 had sanctioned the Scheme of Amalgamation of Agilyst Consulting Private Limited with the Company with an appointed date of April 1, 2015. The Scheme has been given effect to in the books of accounts of the Company with effect from April 1, 2015 resulting in addition to net worth by Rs. 263.54 Million as on March 31, 2016. The Company consequently reviewed the carrying value of investments in eClerx Investments Limited which was the holding company of the Agilyst group and made a provision for diminution in value of these investments of Rs. 266.12 Million on April 1, 2015. Consequently the expenses of Rs. 45.19 Million of Agilyst Consulting Private Limited has to be accounted in the books of eClerx Services Limited for the year ended March 31, 2016


7. Other comprehensive income


Under Indian GAAP the Company has not personated other comprehensive income (OCI) separately. Hence, it has reconciled Indian GAAP profit or loss to profit or loss as per Ind AS. Further, Indian GAAP profit or loss is reconciled to total comprehensive income as per Ind AS.


41. SCHEME OF AMALGAMATION


1. The Board of Directors of the Company in their meeting held on September 11, 2015 have approved the Scheme of Amalgamation between Agilyst Consulting Private Limited (the wholly owned step down subsidiary, hereinafter referred to as ''''ACPL’) and the Company and their respective shareholders (collectively referred to as the Scheme) which provides for the amalgamation of ACPL with the Company under sections 391 to 394 and other applicable provisions, if any, of Companies Act, 1956 and the other relevant provisions of Companies Act, 2013. The Appointed date of the Scheme is April


1, 2015.


2. The Hon’ble High Court vide its order July 1, 2016 approved the Scheme.


3. The Company has accounted for the amalgamation of ACPL in its books of account with effect from the appointed date as per the ''''Pooling of Interests Method’ prescribed under the''''Ind AS 103’ Business Combination.


4. In accordance with the Scheme;


(a) All assets, liabilities and reserves in the books of ACPL has been transferred to the Company at their respective carrying values as on the Appointed Date.


(b) The excess, in the value of net assets and reserves to be vested in the Company, has been credited to the ''''Capital Reserve Account’.


All the shares of Agilyst Consulting Private Limited were held by Agilyst Inc., which was a step down subsidiary of eClerx Services Limited. As per the scheme, there was no payment of consideration/issue of shares by eClerx Services Limited to any person and the equity shares held by Agilyst Inc. in Agilyst Consulting Private Limited were cancelled in accordance with the scheme. Refer note 43(b) and 44 of consolidated financial statement.


Note for merger of Agilyst, Inc. with eClerx LLC -


Agilyst Inc, a wholly owned subsidiary of eClerx Investments Limited, has been merged with eClerx LLC w.e.f January 1, 2017. All assets, liabilities and reserves in the books of Agilyst Inc. have been transferred to the eClerx LLC., at their respective carrying values w.e.f. January 1, 2017. As per the agreement and plan of merger, the share capital of Agilyst Inc. has been adjusted against capital reserve. Consequently carrying value of investment in eClerx Investments Limited has been transferred to investment in eClerx LLC.


Note for winding up of eClerx Investments Limited -


eClerx Investments Limited, a wholly owned subsidiary of the Company, has been wound up on March 28, 2017 for administrative convenience and maintaining a lean corporate structure.


12. BUYBACK OF SHARES


The Board of Directors vide their meeting dated August 29, 2016 approved, subject to shareholders’ approval, buyback of equity shares of the Company. The shareholders approval was procured vide postal ballot results of which were announced on October 14, 2016. The Company concluded the said buyback of 1,170,000 Equity Shares of Rs. 10 each, at a buyback price of Rs. 2,000 per share and total buyback amount of Rs. 2,340 Million. The settlement date for the said buyback was December 19, 2016. The shares so bought back were extinguished and the issued and paid-up capital stands amended accordingly.


13. TRANSFER PRICING


The Company has a comprehensive system of maintenance of information and documents as required by the transfer pricing legislation under sections 92-92F of the Income Tax Act, 1961. Since the law requires existence of such information and documentation to be contemporaneous in nature, the Company appoints independent consultants for conducting a Transfer Pricing Study to determine whether the transactions with associate enterprises are undertaken, during the financial year, on an ''''arm’s length basis’. Adjustments, if any, arising from the transfer pricing study in the respective jurisdictions shall be accounted for as and when the study is completed for the current financial year. However the management is of the opinion that its international transactions are at arms’ length so that the aforesaid legislation will not have any impact on the financial statements.


14. STANDARDS ISSUED BUT NOT YET EFFECTIVE


In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, ''''Statement of Cash Flows’ and Ind AS 102, ''''Share-based Payment.’ The amendments are applicable to the Company from April 1, 2017.


Amendment to Ind AS 7:


The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.


The Company is evaluating the requirements of the amendment and the effect on the standalone financial statements.


Amendment to Ind AS 102:


The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes.


The Company does not have any cash-settled awards as at March 31, 2017. eClerx Services Limited Annual Report 2016-17

CIN: U67190WB2003PTC096617. Trading in Commodities is done through our Group Company Dynamic Commodities Pvt. Ltd. The company is also engaged in Proprietory Trading apart from Client Business.
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Disclaimer: There is no guarantee of profits or no exceptions from losses. The investment advice provided are solely the personal views of the research team. You are advised to rely on your own judgment while making investment / Trading decisions. Past performance is not an indicator of future returns. Investment is subject to market risks. You should read and understand the Risk Disclosure Documents before trading/Investing.

Disclosure: We, Dynamic Equities Private Limited are also engaged in Proprietory Trading apart from Client Business. In case of any complaints/grievances, clients may write to us at compliance@dynamiclevels.com

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