1 During the year, the Company had, based on the estimates, determined that future taxable profit will be available against which the deductible temporary differences and unused tax losses / unused tax credits can be utilized and hence has recognized net deferred tax asset as above including the credit pertaining to earlier years.
2 During the year, the Company had, based on the estimates, determined that future economic benefits in the form of adjustment against the discharge of the normal tax liability within the specified period in which the MAT is allowed to be utilized, will be available and hence has recognized MAT credit entitlement as above including the credit pertaining to earlier years.
3. First time adoption of Ind AS
These are the Company’s f rst financial statements prepared in accordance with Ind AS.
The accounting policies set out in these financial statements have been applied in preparing the financial statements for the year ended 31 March 2017, the comparative information presented in these financial statements for the year ended 31 March 2016 and in the preparation of an opening Ind AS Balance Sheet at 01 April 2015 (The Company’s date of transition). In preparing its opening Ind AS Balance Sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP). The Balance Sheet as on the date of transition has been prepared in accordance with Ind AS 101 - First time adoption of Indian Accounting Standards. All applicable Ind AS were applied consistently and retrospectively in preparation of the first Ind AS Financial Statements with certain mandatory exceptions and voluntary exemptions for the specific cases as provided under Ind AS 101. An explanation / reconciliation of how the transition from previous GAAP to Ind AS has affected the Company’s financial position, financial performance is set out in note no. 32.1.
Set out below are the applicable Ind AS 101 mandatory exceptions and optional exemptions applied in the transition from previous GAAP to Ind aS.
4. Ind AS mandatory exceptions
The estimates at 01 April 2015 and at 31 March 2016 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to refect any differences in accounting policies) apart from the following items where application of Indian GAAP did not require estimation:
- Fair valuation of derivative instruments
- 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 01 April 2015, the date of transition to Ind AS and as of 31 March 2016.
6 De-recognition of financial assets and liabilities
The Company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS.
7 Hedge accounting
The Company has measured derivatives at fair value eliminating all gains and losses arising on derivatives and does not have any hedging relationship as on the transition date.
8 Classification and measurement of financial assets
The Company has evaluated the facts and circumstances existing on the date of transition to Ind AS for the purpose of classification and measurement of financial assets and classified accordingly.
9 Impairment of financial assets
The Company has applied the impairment requirement under Ind AS 109 retrospectively based on the reasonable and supportable information that is available on transition date without undue cost or effort.
10. Ind AS optional exemptions
11 Share based payments
The Company has elected to apply Ind AS 102 share based payment to equity instruments in respect of the unvested options as on the transition date.
12 Deemed cost
The Company has elected to continue with the carrying value for all of its property, plant and equipment and intangible assets as recognized in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and used that as its deemed cost as at the date of transition.
13 Investment in subsidiaries
The Company has opted to measure its investments in subsidiaries as per the previous GAAP carrying amount as at the date of transition.
The following reconciliations provide the effect of transition to Ind AS from Indian GAAP in accordance with Ind AS 101.
15. Equity as at 01 April 2015 and 31 March 2016
16. Net profit for the year ended 31 March 2016
17. Imputed interest in respect of customer contracts having extended credit periods
Imputed interest in respect of customer contracts having extended credit period was not earlier segregated as interest income, but was shown as part of the revenue from operations. The same has been worked out and dealt with as below:
18.a. Imputed net interest of Rs.6.74 Mln. in respect of revenues accrued till 01 April 2015 has been reduced from the opening retained earnings on transition date. The net interest of Rs.2.27 Mln. for the year 2015-16 has been reduced from the revenue from operations which resulted in cumulative reduction of Rs.9.01 Mln. from retained earnings as at 31 March 2016.
19.b. Imputed interest of Rs.5.62 Mln. in respect of revenues accrued in the financial year 2015-16 has been reduced from revenue from operations. The imputed interest amounting to Rs.3.34 Mln., attributable to the financial year 2015-16 has been accrued and shown under finance income.
20. Share based payments
The Company has issued various stock option schemes to the option grantees. As required under Ind AS the unvested stock options have now been fair valued, instead of intrinsic value accounting made under the previous Indian GaAp. The difference has been dealt with as below:
The differential cost of fair value amounting to Rs.96.70 Mln. has been reduced from the opening retained earnings on transition date. The differential cost of fair value for the financial year 2015-16 amounting to Rs.100.77 Mln. has been added to employee benefits expense which resulted in cumulative reduction of Rs.197.47 Mln. from retained earnings as at 31 March 2016. During the financial year 2015-16 Rs.14.73 Mln., has been transferred to securities premium account from stock options outstanding account relating to the stock options exercised by the option grantees.
21. Other comprehensive income
Under Indian GAAP, the Company has not presented other comprehensive income (OCI) separately. The following reclassifications have been now made:
22.a. Foreign exchange fluctuation expense of Rs.1.28 Mln. for the financial year 2015-16 pertaining to foreign branches, earlier considered understatement of profit and loss has now been grouped under OCI, on account of change in functional currency of foreign operation and shown as currency translations reserve in the Balance Sheet.
23.b. Under Indian GAAP including actuarial gains and losses relating to defined benefit obligations were charged to statement of profit and loss. Under Ind AS, remeasurement gains and losses are recognized under OCI. Thus the employee benefits expense cost has been reduced by Rs.4.80 Mln. and recognized in the OCI during the financial year 2015-16.
24. Recovery of expenses from customers
Under Indian GAAP, the recovery of expenses from customers were presented under other income. Under Ind AS, the same is required to be netted off with the relevant expenditure. Thus Rs.20.57 Mln. has been reduced from other income and netted off with other expenses during the financial year 2015-16.
For the purposes of this clause, the term “Specified Bank Notes” shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407(E), dated the 08 November 2016.
35. Related party transactions
2nformation on names of related parties and nature of relationship as required by Ind AS 24 on related party disclosures are given below:
a. Subsidiary companies
1. Ramco Systems Corporation, USA 7. Ramco Systems FZ-LLC, Dubai
2. Ramco Systems Ltd., Switzerland 8. RSL Software Company Limited, Sudan
3. Ramco Systems Pte Ltd., Singapore 9. Ramco Systems Australia Pty Ltd., Australia
4. Ramco Systems Sdn Bhd., Malaysia 10. Ramco System Inc., Philippines
5. RSL Enterprise Solutions (Pty) Ltd., South Africa
6. Ramco Systems Canada Inc., Canada (wholly owned subsidiary of Ramco Systems Corporation, USA)
b. Key managerial personnel (KMP), including KMP under Companies Act, 2013
1. P R Ramasubrahmaneya Rajha, Chairman
2. P R Venketrama Raja, Vice Chairman & Managing Director
3. Virender Aggarwal, Chief Executive Officer
4. R Ravi Kula Chandran, Chief Financial Offer
5. G Karthikeyan, Company Secretary (was on employment till 05 December 2016)
6. M M Venkatachalam, Independent Director
7. V Jagadisan, Independent Director
8. A V Dharmakrishnan, Non-Executive, Non Independent Director
9. R S Agarwal, Independent Director
10. Soundara Kumar, Independent Director
c. Relatives of KMP
1. P R Venketrama Raja, Son of P R Ramasubrahmaneya Rajha
2. R Sudarsanam, Spouse of P R Ramasubrahmaneya Rajha
3. S Saradha Deepa, Daughter of P R Ramasubrahmaneya Rajha
4. R Nalina Ramalakshmi, Daughter of P R Ramasubrahmaneya Rajha
5. P V Nirmala, Spouse of P R Venketrama Raja
6. B Srisandhya Raju, Daughter of P R Venketrama Raja
7. P V Abinav Ramasubramaniam Raja, Son of P R Venketrama Raja
d. Enterprises over which the above persons exercise significant influence and with which the Company has transactions during the year
1. Rajapalayam Mills Limited 14. Sudarsanam Estate
2. The Ramco Cements Limited 15. Shri Abhinava Vidya Theertha Seva Trust
3. Ramco Industries Limited 16. Smt. Lingammal Ramaraju Shastra Prathista Trust
4. The Ramaraju Surgical Cotton Mills Limited 17. The Ramco Cements L imited Educational and
5. Sri Vishnu Shankar Mills Limited Charitable Trust
6. Sandhya Spinning Mill Limited 18. Gowrihouse Metal Works
7. Thanjavur Spinning Mill Limited 19. JKR Enterprises Limited
8. Rajapalayam Spintex (A division of 20 Gowrishankar Screws Rajapalayam Mills Ltd) 2 1 i P.A . C.R Sethuramammal Charity Trust
9. Sri Harini Textiles Limited 22. P.A.C.R. Sethuramammal Charities
10. Swarna Boomi Estate 23. Rajapalayam Spinners Limited
11. Thanga Vilas Estate 24. Ontime Industrial Services Limited
12. Rajapalayam Textile Limited 25. Madurai Trans Carrier Limited
13. Shri Harini Media Limited 26. Ramco Welfare Trust
a) Details of corporate guarantee / Undertaking given by the Company are given in the note no.38.
b) The above figures include Service Tax / Vat / CST as applicable.
c) Represents conversion of loan of Rs.346.65 Mln.SGD 7.45 Mln. to equity.
d) The transactions with related parties are at arm’s length basis. The outstanding balances are unsecured and interest free, except loan transactions. The Company has not recorded any impairment of receivables owed by related parties. Payment terms for related party transactions are 30 to 60 days, except in the case of overseas subsidiaries, from whom the receivables are realized within the prescribed period.
e) Remuneration to P R Venketrama Raja represents Basic pay and other allowances / perquisites amounting to Rs.1.08 Mln. and retrial contribution Rs.0.09 Mln. during the current and previous year.
f) Details of corporate guarantees availed from related parties are given in note nos.16 and 19.
g) 2,500 options granted during the year under employees stock option scheme to G Karthikeyan.
36. The fair values of financial assets and liabilities are determined 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. Fair value of cash and short-term deposits, trade and other short term receivables, trade payables, other current liabilities, short term loans from banks and other financial instruments approximate their carrying amounts largely due to their short term maturities of these instruments.
27. Capital management
For the purpose of the Company''''s capital management, capital means the Total Equity as per the Balance Sheet. The primary objective of the Company''''s capital management is to maximize the Shareholder’s wealth.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. The Company monitors capital using a gearing ratio, which is Net Debt divided the Total Equity.
28. Financial risk management objectives and policies
The Board of Directors has overall responsibility for the establishment and oversight of the Company''''s risk management framework and thus established a risk management policy to identify and analyze the risks faced by the Company. The risk management systems are reviewed periodically. The Audit Committee of the Board overseas the compliance with the policy. The Internal Audit reviews the risk management controls and procedures and reports to the Audit Committee.
The Company''''s financial risks comprise of market risk, credit risk and liquidity risk.
A. 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 comprises two types of risk: interest rate risk and currency risk.
A.1 Interest rate risk
The Company has borrowed debt at variable rates to finance its operations, which exposes it to interest rate risk. The Company''''s interest rate risk management planning includes achieving the lowest possible cost of debt financing, while managing volatility of interest rates, applying a prudent mix of fixed and floating debt, either directly or through the use of derivative financial instruments affecting a shift in interest rate exposures between fixed and floating.
B. Credit risk
Credit risk is the risk of financial loss to the Company, if the customer or counter party to the financial instruments fail to meet its contractual obligations and arises principally from the Company''''s receivables, treasury operations and other operations that are in the nature of lease.
Customer credit risk is managed by Company’s established policy, procedures and control relating to customer credit risk management. Outstanding customer receivables and unbilled revenues are regularly monitored.
B.1 Trade receivables
Trade receivable of the Company include dues from its overseas subsidiaries which are risk free and other customer receivables are exposed to credit risk. The number of other customers and percentage out of total other customers who owed more than Rs.5.00 Mln. as at 31 March 2017: 13 customers accounted for 43%, as at 31 March 2016: 24 customers accounted for 63% and as at 01 April 2015: 23 customers accounted for 63% accordingly.
Trade receivables are written off when there is no reasonable expectation of recovery, such as a debtor declaring bankruptcy or failing to engage in a repayment plan with the Company and where there is a probability of default. The Company creates a provision based on Expected Credit Loss for trade receivables at the rate of 3% on out standings more than 365 days.
B.2 Unbilled Revenue
Unbilled Revenue of the Company are also exposed to risk in the event of the inability to bill the customer. The Company creates a provision based on Expected Credit Loss at the rate of 3% on the outstanding more than 365 days.
B.3 Financial instruments and cash deposits
Credit risk from balances with banks and financial institutions is managed in accordance with the Company’s policy. Investments of surplus funds are made only with approved counterparties. The Company is presently exposed to counter party risk relating to deposits and investments made in mutual funds. The Company places its cash equivalents based on the creditworthiness of the financial institutions.
C. Liquidity risk
Liquidity Risks are those risk that the Company will not be able to settle or meet its obligations on time or at reasonable price. In the management of liquidity risk, the Company monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the company''''s operations and to mitigate the effects of fluctuations in cash flows. Due to the dynamic nature of the underlying business, the Company aims at maintaining flexibility in funding by keeping both committed and uncommitted credit lines available.
29. The Company has only one operating segment, viz., Software Solutions & Services and hence the segment reporting required under Ind AS 108 does not apply.
30. The Company’s shares are listed on BSE Limited and The National Stock Exchange of India Limited. In line with the provisions of the listing agreement with the stock exchanges, the listing fee for the financial year 2016-17 have been paid to the BSE Limited and The National Exchange of India Limited.
31. Figures for the previous year(s) have been regrouped / restated wherever necessary to make them comparable with the figures for the current year.
32. The figures in Rupees have been rounded off to the million in current and previous years.