004,304,600 Options (Option Plan I): 3/5th of the options vest at the end of one year from the date of grant. The remaining 2/5th vests at the end of every half year during second and third years from the date of grant in four equal instalments6,612,700 Options (Option Plan II): 2/5th of the options vest at the end of one year from the date of grant. The remaining 3/5th vests at the end of every half year during second, third and fourth years in six equal instalments4,052,800 Options (Option Plan III): 2/5th of the options vest at the end of two years from the date of grant. The remaining 3/5th vests at the end of every half year during third, fourth and fifth years in six equal instalments.falseFYSIFY TECHNOLOGIES LTD0001094324Trade receivables as of March 31, 2023 and March 31, 2022 are stated net of allowance for doubtful receivables. The Group maintains an allowance for doubtful receivables based on expected credit loss model. The Group’s exposure to credit and currency risks and impairment losses related to trade and other receivables, excluding construction work in progress is disclosed in note 34.Of the above, facilities amounting to ₹ 2,804 Million (Previous Year : ₹ Nil) by the Company is primarily secured by way of pari-passu charge on the project Receivables and charge on movable fixed assets disbursed under Rabale T5 DC Project.Of total term loan balance ₹ 3,867 Million (previous year ₹ 4,282 Million) is primarily secured by charge on movable fixed assets funded by term loan and also secured by project receivables. Of the total term loan balance, an amount of ₹ 306 Million (previous year ₹ 721 Million) including current maturity is primarily secured against the specific project receivables of the company and ₹ 2,509 Million (previous year ₹ 331 Million) is secured by moveable fixed assets funded out of Term Loan.
Of the total term loan balance, an amount of ₹ 1,000 Million (previous year ₹ Nil) is also primarily secured by the charge on immovable fixed assets, both present and future (except the assets exclusively charged to other lenders) with Second pari-passu charge on entire current assets of the Borrower, including trade/ bills receivables, book debts, etc. both present & future, excluding the Cash margin lien marked or Current Assets specifically funded by other lenders.The above facilities amounting to ₹ 732 Million (previous year ₹ 591 Million), availed by the Company are primarily secured by way of pari-passu charge on the entire current assets of the Company to all working capital bankers under consortium.Of the above, facilities amounting to ₹ 1,635 Million (Previous Year : ₹ Nil) by the Company is primarily secured by way of pari-passu charge on the project Receivables and charge on movable fixed assets disbursed under Noida DC Project.Of the above, facilities amounting to ₹ 747 Million (Previous Year : ₹ Nil) by the Company is primarily secured by way of pari-passu charge on the project Receivables and charge on movable fixed assets disbursed under Chennai DC Project.These bear interest rate ranging from 8.3%p.a to 10.50%p.a (Previous Year: 8.3%p.a to 10.50%p.a) and repayable over a period of 12 to 60 months on equated monthly / quarterly instalments.Of the above, facilities amounting to ₹ 1,659 Million (Previous Year : ₹ 1,655 Million), availed by the Company are primarily secured by way of pari-passu charge on the entire current assets of the Company to all working capital bankers under consortium.The Company has adjusted the processing charges paid with respect to borrowings from borrowings from banks ₹ 185 Million (Previous year ₹ 114 Million)The loans in the nature of Buyers Credit bear interest rate 0.67%p.a to 1.10%p.a (previous year 0.79%p.a to 1.73%p.a).In addition to the above, out of these loans repayable on demand from banks,
(i) exposure amounting to ₹ 2,586 Million (previous year ₹ 2,222 Million) is secured collaterally by way of pari-passu charge on the unencumbered movable fixed assets of the Company, both present and future.
(ii) exposure amounting to ₹ 1,334 Million (previous year ₹ 1,072) is secured collaterally by way of equitable mortgage over the properties at Tidel Park, Chennai, Vashi 6th floor, Vile Parle at Mumbai.
(iii) exposure amounting to ₹ 470 Million (previous year ₹ 680 Million) is collaterally secured by equitable mortgage over the land and building at Noida and also covered by WDV of specific movable fixed assets funded out of their Term loan (since closed) at Noida Data Center, Uttar Pradesh.
(iv) the exposure amounting to ₹ 876 Million (previous year ₹ 950 Million) is collaterally secured by equitable mortgage over the Vashi 5th floor property at Mumbai.Of fhe above, facilities amounting to ₹ Nil (previous year ₹ 250 Million) are primarily secured by way of pari-passu charge on current assets of the Company, both present and future.Of the above, facilities amounting to ₹ 374 Million (previous year ₹ 400 Million) are secured by way of pari-passu charge on current assets. Out of which ₹ 25 Million (previous year ₹ 400 Million) has first pari-passu charge on unencumbered movable fixed assets of the Company.These working capital facilities bear interest ranging from5.4% p.a. to 9.30%p.a. [Previous year: 5.4% p.a. to 9.45% p.a.] and these facilities are subject to renewal annually.During the financial year 2021-22, Kotak Special Situations Fund (KSSF) subscribed to 2,00,00,000 (two crore) Series 1 Compulsorily Convertible Debentures (CCDs) with face value of ₹ 100 each amounting to ₹ 2,000 Million and 1% of 2,00,00,000 (two crore) Series 2 Compulsorily Convertible Debentures (CCD) with face value of ₹ 100 each amounting to ₹ 200.
During the year under review, Kotak Special Situations Fund (KSSF) subscribed to additional 1,98,00,000 Series 2 Compulsorily Convertible Debentures (CCD) with face value of ₹100 each amounting to ₹ 1,980 Million. Further, the Company has the option and right to require KSSF to acquire additional compulsory convertible debentures of the Company (“Additional CCDs”) in one or more tranches during FY 2023, FY 2024, FY 2025 or by October 1, 2026 for up to an aggregate subscription amount of ₹ 6,000 Million. The CCDs are secured by secondary charge over identified movable assets of Data Center facility.
These CCD's carry a coupon rate of 6%p.a payable half-yearly.
The Tranche - I, CCDs shall be fully, mandatorily and compulsorily converted into equity shares by October 1, 2031 and the conversion ratio is decided based on the equity valuation as at March 31, 2023 as 0.8135.
Since the fixed to fixed test is satisfied as per Ind AS 32 the above CCDs are presented as Equity (refer note 16a)The company has entered into External Commercial Borrowing (ECB) facility agreement for $ 5 Million and drawn down $ 5 Million out of sanctioned loan and repaid $ 0.05 Million in FY 2021-22 and $ 0.1 Million in FY 2022-23. The Company has also entered into agreement for currency swap (from USD to INR) to fully hedge foreign currency exposure towards principal repayment and interest rate swap from floating to fixed.The term loans bear interest rate ranging from 7.20%p.a to 10.84%p.a repayable in quarterly instalments within a tenor of 3 to 6 years after moratorium period ranging from 6 months to 2 years in certain cases.Bank charges of ₹ 147,089 ($ 1,789) has been allocated to respective segments in operating expensesRepresents salaries and other benefits of Key Management Personnel comprising of Mr. Kamal Nath - Chief Executive Officer (Sify Technologies Limited), Mr. M P Vijay Kumar – Whole Time Director and Chief Financial Officer and Mr. C R Rao - Chief Operating Officer.During the year 2011-12, the Group had entered into a lease agreement with M/s Raju Vegesna Infotech and Industries Private Limited, the holding Group, to lease the premises owned by it for a period of three years effective February 1, 2012 on a rent of ₹ 0.75 (Rupees Seventy Five Thousand) per month. Subsequently, the Group entered into an amendment agreement with effect from April 1, 2013, providing for automatic renewal for a further period of two blocks of 3 years with an escalation of 15% on the last paid rent after the end of every three years. Subsequently on account of expiry of the said agreement, the Group entered into a fresh agreement for a period of three years effective February 01, 2021 on a rent of ₹ 1.14 (Rupees One Lakh Fourteen Thousand Only) per month.
₹ 500 million towards Cumulative Non-convertible Redeemable preference shares issued by Print house (India) Private limited to Ramanand Developers private limited with the tenure of 20 years from the date of allotment which will carry a preferential dividend of 9% per annum, payable till redemption.
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I
tem 4A. Unresolved Staff Comments
Operating and Financial Review and Prospects
The financial statements of the Company included in this Annual Report on Form 20-F have been prepared in accordance with the English version of International Financial Reporting Standards as issued by International Accounting Standards Board. The information set forth in Operating and Financial Review and Prospects is also for the Company's three most recent fiscal years. The discussion, analysis and information presented in this section should be read in conjunction with our financial statements included herein and the notes thereto. See Note Regarding Forward-Looking Statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including, but not limited to, those described below and elsewhere in this annual report, particularly in the risk factors described in “Part I — Item 3 Key Information - Risk Factors.”
This information is set forth under the caption entitled 'Management's Discussion and Analysis of Financial Condition and Results of Operations' below. Further, information relating to any Governmental, economic policies or other factors which have materially affected, or could materially affect, directly or indirectly, the Company’s operations is set forth under the caption entitled ‘Risk Factors’ above.
Liquidity and Capital Resources
This information is set forth under the caption entitled 'Management's Discussion and Analysis of Financial Condition and Results of Operations' below.
This information is set forth under the caption entitled 'Management's Discussion and Analysis of Financial Condition and Results of Operations' below.
This information is set forth under the caption entitled 'Management's Discussion and Analysis of Financial Condition and Results of Operations' below.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(
₹ in million, except share data and where otherwise stated)
We are among the largest integrated ICT Solutions and Services companies in India, offering end-to-end solutions with a comprehensive range of products delivered over a common data network infrastructure reaching more than 1600 cities and towns in India. This network also connects 53 Data Centers across India including Sify’s 11 concurrently maintainable Data Centers across the cities of Chennai, Mumbai, Kolkata, Delhi, Bengaluru and Hyderabad and customer Data Centers.
Our mission is building a world in which our converged ICT ecosystem and our ‘bring it on’ attitude will be the competitive advantage to our customers. Our 7 core values which
are
called ‘The Sify way’ are 1) Put customers’ needs first, 2) Be accountable, 3) Treat others with dignity, 4) Be action oriented, 5) Have the courage to confront issues, 6) Always remember that you are a part of Sify’s team, 7) Protect Sify’s interest always.
Our primary geographic market are India and Rest of the world. Our revenue is derived from services to enterprise customers, comprising Network services, Data Center services, Cloud and Managed services, Technology Integration services and Applications Integration services.
We were incorporated on December 12, 1995 in Andhra Pradesh, India as Satyam Infoway Private Limited, a Company under the Indian Companies Act, 1956 to develop and offer connectivity-based corporate services in India. We shifted our registered office to Chennai, Tamil Nadu from April 1, 2003. We completed our initial public offering of ADSs in the United States in October 1999. We listed our ADS on the NASDAQ Global Market on October 19, 1999. In February 2000, we completed our secondary offering of ADS in the United States.
Digital revolution is driving our customers and prospective customers to transformation in every aspect of their businesses, which would include the entire spectrum of ICT from network, storage, virtualization, network integration, analytics and applications on the cloud. We aim to keep our customers ahead in this journey of digital future with our innovative products and solutions.
Our strategy is driven by the theme “digital@core” which enhances the landscape of our current capabilities to provide advanced solutions that help our customers to embrace their digital transformation journey with ease. This strategy is natural expansion of our cloud@core strategy where we helped customers transition to their digital transformation journey with cloud migration, adoption and scalable infrastructure being the core pitch
These primarily include revenue from connectivity services, NLD/ILD services and to a lesser extent, revenues from the installation of the connectivity link. In certain cases, these elements are sold as a package consisting of all or some of the elements. We sell hardware and software purchased from third party vendors to our high value corporate clients. Our connectivity services include IPVPN services, Internet connectivity and last mile connectivity (predominantly through wireless). We provide these services for a fixed period of time at a fixed rate regardless of usage, with the rate for the services determined based on the type of service and capacity provided, scope of the engagement and the Service Level Agreement, or SLA. We provide NLD (National Long Distance) and ILD (International Long Distance) services and carry voice traffic for Inter-connect Operators. Revenue is recognized based upon metered call units of voice traffic terminated on our network. The Company offers services in the retail voice market in partnership with Skype Communications, S.a.r.l. The Company realized revenue from the sale of voice credits and subscriptions of Skype.
Revenue from Data Center services includes revenue from co-location of space and racks on usage of power from large contracts. The contracts are mainly fixed rate for a period of time based on the space or the racks used, and usage revenue is based on consumption of power on large contracts.
Revenue from Cloud and Managed services are primarily from “Cloud and on demand storage”, “Domestic managed services and “International managed services”. Contracts from Cloud and on demand storage, are primarily fixed and for a period of time. Revenues from Domestic and International managed services comprise of value-added services, operations and maintenance of projects and from remote infrastructure management. Contracts from this segment are fixed and could also be based on a time and material basis (T&M)
.
Revenues from Technology Integration Services (TIS) comprises of Data Centre build services and security services. Contracts under TIS are based on completion of projects and could also be based on T & M.
Revenue from Applications Integration Services (AIS) comprises of Online Assessment, Web development, supply chain solutions, content management, sale of Digital certificates and sale, implementation and maintenance of Industry Specific applications like SAP, Oracle and Microsoft. Contracts are primarily fixed in nature for a period of time and also could be based on T & M.
Cost of goods sold and services rendered
Cost of goods sold and services rendered for the corporate network/data services division consists of telecommunications costs necessary to provide services and cost of goods in respect of communication hardware and security services sold, commission paid to franchisees and cable television operators, the cost of voice termination for voice and VoIP services and other direct costs. Telecommunications costs include the costs of international bandwidth procured from Telcos and are required for access to the Internet, providing leased lines to our points of presence, the costs of using third-party networks pursuant to service agreements, leased line costs and costs towards spectrum fees payable to the Wireless Planning Commission (WPC) for provision of spectrum to enable connectivity to be provided on the wireless mode for the last mile. Other costs include cost incurred towards annual maintenance contract and the cost of installation in the connectivity business. In addition, the Government levies an annual license fee of 8% of the adjusted gross revenue generated from IP-VPN services and Voice services under the Unified License.
Cost of goods sold and services rendered for the Data Center services consists of cost of electrical power consumed, cost of rental servers offered to customers and cost of licenses used to provide services.
Cost of goods sold and services rendered for the Cloud and Managed services consists of cost of licenses in providing services, cost of billable resources in case of Infrastructure Managed services, third party professionals engaged in providing services, associate costs of the delivery teams and cost of operations of Data Center build and build-operate-transfer BOT projects.
Cost of goods sold and services for TIS consists of cost of hardware and software supplied for Data Center build projects, cost of security hardware and software supplied and cost of hardware and software procured for System integration projects.
Cost of goods sold and services for AIS consists of professional charges payable to domain specialists and subject matter experts, cost of billable associates of e-learning business, cost of operating in third party facility for online assessment including invigilator costs and cost of procuring and managing content for the websites, cost of digital certificates and platform usage and other direct costs for the revenue streams.
Selling, general and administrative expenses
Selling, general and administrative expenses consist of salaries and commissions for sales and marketing personnel, salaries and related costs for executive, financial and administrative personnel, advertising and other brand building costs, travel costs, and occupancy and overhead costs.
Depreciation and amortization
We depreciate our tangible assets on a straight-line basis over the useful life of assets, ranging from three to eight years and, in the case of buildings, 28 years. Undersea cable capacity is amortised over a period of 12 years and other intangible assets with finite lives are amortised over three to five years.
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination. Corporate assets for the purpose of impairment testing are allocated to the cash generating units on a reasonable and consistent basis.
An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit or group of units on a pro rata basis
.
Inventories comprising traded hardware and software are measured at the lower of cost (determined using first-in first-out principle) and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and associates to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill, as the same is not deductible for tax purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
Deferred tax arising on investments in subsidiaries and associates is recognized except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Stock compensation expense
A total of 25 million equity shares are reserved for issuance under our Associate Stock Option Plans (ASOPs). Our ASOP 2014 was adopted at the Eighteenth Annual General Meeting held on July 28, 2014. As of March 31, 2023, we had an aggregate outstanding of 6.97 million options under our ASOP with a weighted average exercise price equal to approximately ₹ 92.60 ($1.13) per equity share. Unamortized stock compensation expense as of March 31, 2023 on these options is ₹ 9.70 million ($ 0.12 million).
The following table sets forth certain financial information as a percentage of revenues:
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Results of year ended March 31, 2023 compared to year ended March 31, 2022
The growth in our revenues in fiscal 2023 from fiscal 2022 is given below:
Year 2022-23 had a 24% growth with an increase in revenues of ₹ 6,378 million ($77.58 million) contributed largely by Data center service with a revenue growth of ₹ 2,631million ($32.00 million), Digital Services with ₹ 2,468 million ($30.01 million), Network-
Centric
Services with ₹ 1,279 million ($15.56 million).
The revenue by operating segments is as follows:
Revenue from Data Center services has increased by ₹2,631 Million ($32.00 Million) on account of new contracts and higher capacity
utilization
by existing customers.
Revenue from Digital Services has increased by ₹ 2,468 Million ($30.02 Million) due to (i) increase in revenue from Technology Integration Service by ₹ 1,638 Million ($19.92 Million) on account of revenue from new projects, (ii) increase in revenue from Cloud and Managed Services by ₹ 640 Million ($7.78 Million), contributed by new customer engagements and (iii) increase in revenue from Applications Integration Services by ₹190 Million ($2.31 Million) majorly from sale of licenses and eLearning services
The change in other income is as follows:
Other income is in line and comparable with previous year.
Cost of goods sold and services rendered (COGS)
Our cost of goods sold and services rendered in each of the business segment is set forth in the following table:
The cost of goods sold has increased by 33% on an overall basis and the movement in COGS by nature of expense is explained in detail below:
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Cost of Hardware / Software | | | | | | | | | | | | | | | | |
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Network costs comprises cost of Bandwidth leased out from TELCOS, Inter connect charges and IP termination costs payable to carriers. Bandwidth cost increased by ₹306 Million ($3.72 Million) due to capacity increase and increase in links, and IP termination costs increased by ₹583 Million ($7.09 Million) on account of increase in minutes.
Revenue share cost comprises of revenue share payable to DOT on ILD, NLD and other services. Increase in revenue share is on account of increase in revenue from licensed services.
The increase in cost of hardware and software expenses is on account of new projects in systems integration and security services.
Power cost include electricity charges incurred for our Data Center operations. Power cost increased by ₹1,353 million ($16.46 million) due to increase in occupancy of newly commissioned Data Centers and also increase in consumption in existing Data Centers and increased power tariff.
Direct resources costs are comprised of (i) the cost of resources deployed on the network infrastructure delivery (ii) resources involved in delivery of application services (iii) cost of billable resources associated with the eLearning and infrastructure managed services. There is an increase in the resource costs by ₹582 Million ($7.08 Million).
Other direct costs are comprised of link implementation and maintenance charges for the Network services, onetime costs for data center services for on boarding new customers, platform costs for Cloud storage, direct cost of application services, digital certificate platform costs, content costs, delivery costs of application services, subject matter experts for international business. There is a marginal increase in other direct costs by ₹ 15 Million ($0.18 Million).
General and Administrative expenses
Selling, General and Administrative expenses of the Company by nature of expenses are set forth as follows:
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Selling and Marketing Expenses | | | | | | | | | | | | | | | | |
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Allowance for doubtful receivables/advances | | | | | | | | | | | | | | | | |
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Operating costs includes rental, repairs and maintenance charges of our network operating centers, base stations and other co-location sites including the rent and maintenance for our Data Centers. Operating costs increased by ₹320 million ($3.89 million) on account of increase in repairs and maintenance and network operating cost.
Selling and Marketing expenses consist of, selling commission payable to sales partners, incentive to salesmen and, marketing and promotion costs. The Selling and Marketing expenses increased by ₹35 million ($0.43 million).
Associate expenses consist of cost of the employees who are part of the Sales and marketing, Business development, General Management and support services. Associate expenses increased by ₹125 million ($1.52 million) due to increase in employees head count and salary revision.
Other indirect expense consists of, rental and electricity cost of office, travel cost, legal charges, professional charges, communication, and others. During the year Other Indirect costs have increased by ₹ 372 million ($4.52 million).
Allowance for doubtful receivables/advances consists of the charge on account of the provisions created during the year against doubtful receivables/advances. Allowance for doubtful receivables/advances decreased by ₹62 million ($0.75 million) on account of prudent provisioning of debtors.
Forex (gain) / Loss incurred is Nil.
Depreciation and amortization
Depreciation and amortization are set forth in the table below:
| | | | | | | | | | | | |
Depreciation and amortization | | | | | | | | | | | | | | | | |
As a percentage of carrying value | | | | | | | | | | | | | | | | |
The Depreciation and amortization expenses has been increased by ₹674 million ($8.20 million), the increase is on account of capitalization of new assets during the year.
Profit from operating activities
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
As a percentage of revenue | | | | | | | | | | | | | | | | |
Operating profit has decreased over the previous year due to higher utilization of assets and mix of revenue.
Finance income / (expense)
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Net finance income / (expense) | | | | | | | | | | | | | | | | |
Finance income:
The finance income primarily consists of interest received from bank deposits of ₹ 64 million ($ 0.78 million), and interest income on income tax refund of ₹ 85 million ($ 1.03 million).
Finance expense:
The finance expenses is increased by ₹ 555 Million ($ 6.75 Million) the increase is primarily on account of increase in interest on borrowings by ₹ 508 Million ($ 6.18 Million), interest on lease liability on account of IFRS 16 – Leases by ₹ 7 Million ($ 0.08 Million) and increase in bank charges by ₹ 40 Million ($ 0.49 Million).
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
As a percentage of revenue | | | | | | | | | | | | | | | | |
Results of year ended March 31, 2023 compared to year ended March 31, 2022
Refer to the section ‘Results of year ended March 31, 2023 compared to year ended March 31, 2022 ’ under ‘Management's Discussion and Analysis of Financial Condition and Results of Operations’ of Item 5 in our Annual Report on Form 20-F, for fiscal year 2022, filed with the U.S. Securities and Exchange Commission on June 10, 2022, for analysis of our results for fiscal year 2022 in comparison with fiscal year 2021.
Foreign Exchange Fluctuations and Forwards
We enter into foreign exchange derivative contracts to mitigate the risk of changes in foreign exchange rates on cash flows denominated in U.S. dollars. We enter into forward contracts where the counter party is a bank. Forward contracts generally mature between one to six months. These contracts do not qualify for hedge accounting under IFRS. These contracts are marked to market as at the balance sheet date and recognized in the consolidated income statement.
Liquidity and capital resources
We have financed our operations largely through cash generated from operations, equity issuance and bank borrowings. Our liquidity requirements are for meeting working capital needs and capital expenditures required to upgrade and maintain our existing infrastructure.
The following table summarizes our cash flows for periods presented:
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Net cash from / (used in) operating activities | | | | | | | | | | | | | | | | |
Net cash from / (used in) investing activities | | | | | | | | | | | | | | | | |
Net cash from / (used in) financing activities | | | | | | | | | | | | | | | | |
Effect of exchange rate changes on cash and cash equivalents | | | | | | | | | | | | | | | | |
Net increase / (decrease) in cash and cash equivalents | | | | | | | | | | | | | | | | |
As of March 31, 2023, 2022 and 2021 we had working capital (current asset – current liabilities) of ₹ 259 million, ₹ 902 million, and ₹ 287 million which includes cash and cash equivalents of ₹ 3,894 million, ₹ 4,202 million and ₹ 5,378 million. We believe that cash from operations and existing lines of credit are sufficient to meet our liquidity requirements.
Our short-term borrowings to finance working capital requirements are primarily financed by cash credit facilities with banks. Borrowings for capital expenditures are financed through capital leases and long-term loans.
We have borrowings of ₹ 22,931 million (including Lease Liability to the extent of ₹ 2,451 million) as of March 31, 2023 out of which ₹ 7,247 million will be repaid within a period of 12 months. Interest outflow on existing borrowings for next year is expected to be ₹ 811 million. We have utilized working capital facility of ₹ 3,920 million out of limit of ₹ 5,390 million during fiscal 2023. We have unutilized non fund limit of ₹ 1,900 million as of March 31, 2023.
Our ongoing working capital requirements are significantly affected by the profitability of our operations and we continue to periodically evaluate existing and new sources of liquidity and financing. We are taking steps to improve the cash position to meet our currently known requirements at least over the next twelve months. In light of the highly dynamic nature of our business, however, we cannot assure you that our capital requirements and sources will not change significantly in the future.
The Group has opted transition to SOFR (
Secured Overnight Financing Rate) from LIBOR
.
During the year under review, the Group entered into Interest Rate Swaps in order to hedge the cash flows arising out of the Interest payments of the underlying External commercial borrowing. The period of the swap contract is co terminus with the period of the underlying External commercial borrowing. As per the terms of the arrangement, the Company shall pay fixed rate of interest (8.9%) and receive variable rate of interest equal to LIBOR + 2.5% on notional amount.
Compulsorily Convertible Debentures:
During the fiscal year 2021-22, Sify Infinit Spaces Limited, a wholly owned subsidiary of Sify, in the business of providing data center services, has entered into compulsorily convertible debentures subscription agreement with Kotak Special Situations Fund (“KSSF”) under which KSSF has invested
₹
4,000 million (USD 51.52 million) as of March 31, 2023. Sify Infinit Spaces Limited can further draw upto ₹ 6,000 million (USD 77.27 million) in one or more tranches during FY 2024, FY 2025 or by October 1, 2026 based on prior communication to
investors in writing of its requirement for Additional Investments
on or before October 1, 2023. The proceeds from these instruments are planned to be utilized for expansion of new data centers, including land acquisition for data centers, investment in renewable energy for data centers and repayment of existing debt.
Cash and cash equivalents:
Cash and cash equivalents comprise of ₹2,470 million, ₹2,504 million and ₹ 2,288 million in bank accounts and ₹2,375 million, ₹1,888 million and ₹ 3,049 million in the form of bank deposits as on March 31, 2023, 2022 and 2021out of which cash deposits in the form of margin money is restricted for use by us amounting to ₹ 1,195 million, ₹ 792 million and ₹ 401 million. Cheques on hand comprises of amount ₹ NIL Millions, ₹ 182 millions and ₹ 28 millions as on March 31, 2023, 2022 and 2021. Cash on hand comprises of amount ₹ 1 millions, ₹ 1 millions and ₹ 137 millions as on March 31, 2023, 2022 and 2021
Net cash generated from operating activities for the year ended March 31, 2023 was ₹ 8,338 million ($ 101.42 million). This is attributable to increases in trade and other payables by ₹ 2,843 million ($ 34.57 million), in contract liabilities ₹ 706 million ($ 8.59 million) due to advance billing and decrease in trade and other receivable by ₹ 400 million ($ 4.87 million), in other assets by ₹ 789 million ($ 9.60 million), due to payment of taxes by ₹ 1,363 million ($ 16.58 million).
Net cash generated from operating activities for the year ended March 31, 2022 was ₹ 2,245 million ($ 29.56 million). This is attributable to increases in trade and other payables by ₹ 1,362 million ($ 17.97 million), in contract liabilities ₹ 1,283 million ($ 16.92 million) due to advance billing and decrease in trade and other receivable by ₹ 4,083 million ($ 53.86 million), in Inventory by ₹ 992 million ($ 13.09 million), due to payment of taxes by ₹ 1,276 million ($ 16.83 million) and on account of decrease in contract asset and cost by ₹ 661 million ($ 8.72 million)
Net cash generated from operating activities for the year ended March 31, 2021 was ₹ 6,967 million ($ 94.78 million). This is attributable to increases in trade and other payables by ₹ 227 million ($ 3.08 million), in employee benefits ₹ 22 million ($ 0.3 million) and decrease in contract liabilities by ₹ 166 million ($ 2.26 million), and cashflow increased due to collection and decrease in trade receivables and Other receivables by ₹ 1,070 million ($ 14.55 million) and partially offset by decrease in inventories by ₹ 113 million ($ 1.53 million) and in other assets by ₹ 34 million ($0.35 million), increase in Contract assets by ₹ 9 million ($0.12million) and increase in contract costs ₹ 26 million ($ 0.35 million).
Net cash used in investing activities for the year ended March 31, 2023 was ₹ 13,592 million ($ 165.32 million) primarily on account of additional expenditure on Data Center facilities, investment in renewable energy for data center, upgradation of network backbone, expansion of metro fiber to additional cities.
Net cash used in investing activities for the year ended March 31, 2022 was ₹ 7,593 million ($ 100.16 million) primarily on account of additional expenditure on Data Center facilities, investment in renewable energy for data center, upgradation of network backbone, expansion of metro fiber to additional cities.
Net cash used in investing activities for the year ended March 31, 2021 was ₹ 3,619 million ($ 49.23 million) primarily on account of additional expenditure on Data Center, upgradation of network backbone.
Net cash generated from financing activities for fiscal year 2023 was ₹ 4,944 million ($ 60.13 million). The increase is mainly due to borrowings amounting ₹ 9,075 million ($ 110.38 million) out of which ₹ 1,980 million ($ 24.08 million) is on account of issue Compulsorily convertible debentures to Kotak Special Situations Fund (KSSF) and proceeds from issue of shares including share premium under ESOP ₹ 8 million ($ 0.10 million) received during the year. The increase was significantly offset by repayment of long term borrowings, Short term borrowings and lease liabilities of ₹ 2,705 million ($32.90), ₹ 1,520 million ($18.49) and ₹ 265 million ($ 3.22 million) respectively and finance expenses amounting to ₹ 1,628 million ($ 19.80 million).
Net cash generated from financing activities for fiscal year 2022 was ₹ 4,170 million ($ 55.02 million). The increase is mainly due to borrowings amounting ₹ 5,516 million ($ 72.77 million) out of which ₹ 2,020 million ($ 26.65 million) is on account of issue Compulsorily convertible debentures to Kotak Special Situations Fund (KSSF) and proceeds from issue of shares including share premium under ESOP ₹ 44 million ($ 0.59 million) received during the year. The increase was significantly offset by repayment of lease liabilities of ₹224 million ($ 2.95 million) and finance expenses amounting to ₹ 1,117million ($ 14.73 million).
Net cash generated from financing activities for fiscal year 2021 was ₹ 618 million ($ 8.41 million). The increase is mainly due to borrowings amounting ₹ 1,566 million ($ 21.29 million) and proceeds from issue of shares including share premium under ESOP ₹ 245 million ($ 3.34 million) received during the year. The increase was significantly offset by repayment of lease liabilities of ₹226 million ($ 3.08 million) and finance expenses amounting to ₹ 966 million ($ 13.14 million).
For the outstanding long term obligations of ₹ 16,160 million ($196.55 million) as on March 31, 2023, we have obligation to pay ₹ 3,302 million ($40.16 million) with in 1 years, ₹ 7,385 million ($ 89.82 million) in 1 to 3 years, ₹ 5,744 million ($ 69.86 million) in 3 to 5 years and ₹ 5,078 million ($ 61.76 million) more than 5 years amounting to
₹ 21,509
million ($ 261.61 million).
For the outstanding long term obligations of ₹ 10,012 million ($132.07 million) as on March 31, 2022, we have obligation to pay ₹ 2,871 million ($37.87 million) with in 1 years, ₹ 3,875 million ($ 51.12 million) in 1 to 3 years, ₹ 2,220 million ($ 29.28 million) in 3 to 5 years and ₹ 1,432 million ($ 18.89 million) more than 5 years amounting to ₹ 10,397 million ($ 137.15 million).
For the current outstanding long term obligations of ₹ 5,902 million ($ 77.86 million) as on March 31, 2021,we have obligation to pay ₹ 2,653 million ($ 35 million) with in 1 years, ₹ 2,675 million ($ 35.29 million) in 1 to 3 years, ₹ 837 million ($ 11.04 million) in 3 to 5 years and ₹ 500 million ($ 6.60 million) more than 5 years amounting to ₹ 6,665 million ($ 87.92 million).
For the outstanding Lease Liability obligations of ₹ 2,451 million ($ 29.81 million) as on March 31, 2023, we have obligation to pay ₹ 586million ($ 7.13 million) with in 1 years, ₹ 789 million ($9.60 million) in 1 to 3 years, ₹ 555 million ($ 6.75 million) in 3 to 5 years and ₹ 3,774 million ($ 45.90 million) more than 5 years amounting to ₹ 5,704 million ($ 69.38 million).
For the outstanding Lease Liability obligations of ₹ 2,207 million ($ 29.11 million) as on March 31, 2022, we have obligation to pay ₹ 507 million ($ 6.69 million) with in 1 years, ₹ 733 million ($ 9.67 million) in 1 to 3 years, ₹ 430 million ($ 5.67 million) in 3 to 5 years and ₹ 2,612 million ($ 34.46 million) more than 5 years amounting to ₹ 4,282 million ($ 56.49 million).
For the outstanding Lease Liability obligations of ₹ 2,203 million ($ 29.06 million) as on March 31, 2021, we have obligation to pay ₹ 540 million ($ 7.12 million) with in 1 years, ₹ 846 million ($ 11.16 million) in 1 to 3 years, ₹ 564 million ($ 7.44 million) in 3 to 5 years and ₹ 2,163 million ($ 28.53 million) more than 5 years amounting to ₹ 4,113 million ($ 54.26 million).
We incurred
₹
6,229 million (US$ 75.76 million) towards capital expenditure for the year ended March 31, 2023. We expect further capital expenditure to be incurred during the fiscal year 2023-24 to strengthen our infrastructure capabilities. The capital expenditure was funded out of internal accruals and bank borrowings. Also refer to section “Principal Capital Expenditures” under Item 4 for capital commitments as on March 31, 2023.
The Company does not have research and development activities and has also not undertaken any sponsored research and development activities.
The information is set forth under the caption ‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’ - ‘Operating and Financial review and Prospects’.
Recent Accounting Pronouncements
Certain new standards, amendments to standards and interpretations are not yet effective for annual periods beginning after April 1, 2022 and have not been applied in preparing these consolidated financial statements. New standards, amendments to standards and interpretations that could have potential impact on the consolidated financial statements of the Company are:
Amendments to IAS 12 – Income Taxes
On May 7, 2021, the IASB amended IAS 12 “Income Taxes” and published 'Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)' that clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations. In specified circumstances, companies are exempt from recognizing deferred tax when they recognize assets or liabilities for the first time. The amendments clarify that this exemption does not apply to transactions such as leases and decommissioning obligations and companies are required to recognize deferred tax on such transactions. These amendments are effective for annual reporting periods beginning on or after January 1, 2023 and are to be applied retrospectively, with earlier application permitted.
The adoption of amendments to IAS 12 is not expected to have any material impact on the consolidated financial statements.
Amendments to IAS 1 – Presentation of Financial Statements
On January 23, 2020, the IASB issued “Classification of liabilities as Current or Non-Current (Amendments to IAS 1)” providing a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangement in place at the reporting date. The amendments aim to promote consistency in applying the requirements by helping companies to determine whether, in the statement of financial position, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current. The amendments also clarified the classification requirements for debt a company might settle by converting it into equity. These amendments are effective for annual reporting periods beginning on or after January 1, 2023, and are to be applied retrospectively, with earlier application permitted.
The adoption of amendments to IAS 1 is not expected to have any material impact on the consolidated financial statements.
Amendments to IAS 1 – Presentation of Financial Statements
On October 31, 2022, the IASB issued 'Non-current Liabilities with Covenants (Amendments to IAS 1)'. The amendments specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or non-current at the reporting date. Instead, the amendments require a company to disclose information about these covenants in the notes to the financial statements. The amendments are effective for reporting periods beginning on or after January 1, 2024, with earlier application permitted.
The adoption of these amendments to IAS 1 are not expected to have any material impact on the consolidated financial statements.
Amendments to IFRS 16 – Leases
On September 22, 2022, the IASB issued ‘Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)’ that specifies the requirements that a seller-lessee uses in measuring the lease liability arising in a sale and leaseback transaction, to ensure the seller-lessee does not recognize any amount of the gain or loss that relates to the right of use it retains. The amendment is intended to improve the requirements for sale and leaseback transactions in IFRS 16 and will not change the accounting for leases unrelated to sale and leaseback transactions. These amendments are effective for annual reporting periods beginning on or after January 1, 2024, and are to be applied retrospectively, with earlier application permitted.
The adoption of amendments to IFRS 16 is not expected to have any material impact on the consolidated financial statements.
Critical Accounting Policies
Our accounting policies affecting our financial condition and results of operations are more fully described in Note 3 to our Consolidated Financial Statements included in Item 18 of this Annual Report on Form 20-F. Certain of our accounting policies require the application of judgment by management in selecting appropriate assumptions for calculating financial estimates, which inherently contain some degree of uncertainty. Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the reported carrying values of assets and liabilities and the reported amounts of revenues and expenses that may not be readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe the following are the critical accounting policies and related judgments and estimates used in the preparation of the Company’s Consolidated Financial Statements. Management has discussed the application of these critical accounting estimates with our Board of Directors and Audit Committee.
The Group derives revenue from converged ICT solutions comprised of Network-centric services, Data Center services, Digital services which includes Cloud and managed services, Technology integration services and Applications integration services.
The revenue recognition in respect of the various streams of revenue is described below:
(i) Network centric Services:
Revenue from Network services includes Data network services and Voice services. Network services primarily include revenue from connectivity services, NLD/ILD services and to a lesser extent, revenues from the setup and installation of connectivity links. The group provides connectivity for a fixed period of time at a fixed rate regardless of usage. Revenue from Network services are series of distinct services. The performance obligations are satisfied overtime.
Service revenue is recognized when services are provided, based upon period of time. The setup and installation of connectivity links are deferred and recognized over the associated contract period.
Sale of equipment are accounted as separate performance obligations if they are distinct and its related revenues are recognized at a point in time when the control is passed on to the customer.
The Group provides NLD (National Long Distance) and ILD (International Long Distance) services through Group’s network. The Group carries voice traffic, both national and international, using the network back-bone and delivers voice traffic to Inter-connect Operators. Revenue is recognized when the services are provided based upon the usage (e.g: metered call units of voice traffic terminated on the Group’s network).
(ii) Data Center Services (DC):
Revenue from DC services consists co-location of racks and power charges. The contracts are mainly for a fixed rate for a period of time. Revenue from co-location of racks, power charges and cross connect charges are series of distinct services. The performance obligations are satisfied overtime. Service revenue is recognized as the related services are performed. Sale of equipment, such as servers, switches, networking equipment, cable infrastructure and racks, are accounted as separate performance obligations if they are distinct and its related revenues are recognized at a point in time when the control is passed on to the customer.
Revenue from Cloud and managed services include revenue from Cloud and storage solutions, managed services, value added services, domestic and International managed services.
Revenues from Cloud and on demand compute and storage, are primarily fixed for a period of time. Revenue from Cloud and managed services are series of distinct services. The performance obligations are satisfied overtime. The group recognize service revenue as the related services are performed.
Revenues from domestic and international managed services, comprise of value added services, operations and maintenance of projects and from remote infrastructure management. Contracts from this segment are fixed and could also be based on time and material contracts.
In the case of time and material contracts, the group recognizes service revenue as the related services are performed.
In the case of fixed price contract, the group recognizes revenue over a period of time based on progress towards completion of performance obligation using efforts or cost to cost measure of progress (percentage completion method of accounting).
The stage of completion is measured by efforts spent to estimated total efforts over the term of the contract.
Revenue from Technology Integration Services include system integration Services, revenue from construction of Data Centers, network integration services, security solutions and to a lesser extent, revenue from sale of hardware and software. Revenue from construction contract includes revenue from construction of Data Centers to the specific needs and design of the customer. The Group recognize revenue at a point in time, when the customer does not take control of work-in-progress or over a period of time when the customer controls the work-in-progress. In the case where revenue is recognized over a period of time and progress is measured based on the costs incurred to date as a percentage of the total estimated costs to fulfill the contract.
If the Group does not have a sufficient basis to measure the progress of completion or to estimate the total contract revenues and costs, revenue is recognized only to the extent of contract cost incurred for which recoverability is probable.
When total cost estimates exceed revenues in an arrangement, the estimated losses are recognized in the statement of Income in the period in which such losses become probable based on the current contract estimates.
Revenue from Applications Integration services include online assessment, document management services, web development, digital certificate based authentication services, supply chain software and eLearning software development services. eLearning software development services consist of structuring of content, developing modules, delivery and training users in the modules developed. Revenue from Applications Integration Services is recognized over a period of time. The progress is measured based on the amount of time/effort spent on a project. Revenue in relation to ‘time’ is measured as the agreed rate per unit of time multiplied by the units of time expended. The element of revenue related to materials is measured in accordance with the terms of the contract. The Group enters into contracts with customers to serve advertisements in the portal and the Group is paid on the basis of impressions, click-throughs or leads and in each case the revenue is recognized ratably over the period of the contract based upon the usage (i.e. on actual impressions/click throughs / leads delivered.)
Revenue from commissions earned on electronic commerce transactions are recognized when the transactions are completed.
Digital Certification revenues include income received on account of Web certification. Generally the Group does not hold after sale service commitments after the activation of the Digital Certificates sold and accordingly, revenue is recognized fully on the date of activation of the respective certificate.
Multiple deliverable arrangements
In certain cases, some elements belonging to the services mentioned above are sold as a package consisting of all or some of the elements.
The Group accounts for goods or services of the package separately if they are distinct. i.e. if a good or service is separately identifiable from other promises in the contract and if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer.
The Group allocates the transaction price to each performance obligation identified in the contract on a relative stand-alone selling price basis. Standalone selling price is the price at which group would sell a promised good or service separately to the customer.
If the relative stand-alone selling prices are not available, the group estimates the same. In doing so, the group maximize the use of observable inputs and apply estimation methods consistently in similar circumstances.
Costs to fulfil customer contracts, i.e., the costs relating directly to a contract or to an anticipated contract that the Group can specifically identify or the costs generate/ enhance resources of the group that will be used in satisfying (or in continuing to satisfy) performance obligations in the future or the costs that are expected to be recovered are recognized as asset and amortized over the contract period.
Incremental costs of obtaining a contract are recognized as assets and amortized over the contract period if entity expects to recover those costs. The Group recognizes incremental cost of obtaining a contract as an expense when incurred if the amortisation period of the asset that the entity otherwise would have recognized is one year or less.
Costs to obtain a contract that is incurred regardless of whether the contract is obtained are recognized as an expense when incurred, unless those costs are explicitly chargeable to the customer regardless of whether the contract is obtained.
Income from operating leases:
Lease rentals arising on assets given on operating leases are recognized over the period of the lease term on a straight line basis.
Indefeasible Right of Use (IRU)
The Company has entered into IRU arrangements through which it entitles its customers to right of use of specified bandwidth capacity for a specified period of time. The upfront payment received towards right of use of bandwidth capacities under such agreements have been treated as deferred revenue and is recognized on a straight line basis over the term of the arrangement.
While preparing financial statements we make estimates and assumptions that affect the reported amount of assets, liabilities, disclosure of contingent liabilities at the date of financial statements and the reported amount of revenues and expenses for the reporting period.
Our estimate of liability relating to pending litigation is based on currently available facts and our assessment of the probability of an unfavorable outcome. Considering the uncertainties about the ultimate outcome and the amount of losses, we re-assess our estimates as additional information becomes available. Such revisions in our estimates could materially impact our results of operations and our financial position. Management believes that the estimates used in the preparation of the Consolidated Financial Statements are prudent and reasonable. The actual results could differ from these estimates.
Business Combinations, Goodwill and Intangible Assets
Business combinations are accounted for using IFRS 3 (Revised), Business Combinations. IFRS 3 requires the identifiable intangible assets and contingent consideration to be fair valued in order to ascertain the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. Significant estimates are required to be made in determining the value of contingent consideration and intangible assets. These valuations are conducted by independent valuation experts.
Business combinations have been accounted for using the acquisition method under the provisions of IFRS 3 (Revised). The cost of acquisition is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of acquisition. The cost of acquisition also includes the fair value of any contingent consideration. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value on the date of acquisition.
Transactions costs that the group incurs in connection with a business combination such as finder’s fees, legal fees, due diligence fees, and other professional and consulting fees are expensed as incurred.
When the fair value is concentrated towards a single asset, the acquisition shall be accounted as an asset acquisition. Also, the amendment provides that for an acquisition to be considered as business, the assessment of input and processes would depend on stage of the entity being acquired and hence it is important to assess whether the acquired process is substantive to be qualified as business. In other cases, the acquisition shall be accounted as an asset acquisition.
We amortize intangible assets on straight line basis over their respective individual estimated useful lives. Our estimates of the useful lives of identified intangible assets are based on a number of factors including the effects of obsolescence, demand, competition, and other economic factors (such as the stability of the industry, and known technological advances), and the level of maintenance expenditures required to obtain the expected future cash flows from the asset.
Estimated Useful Lives of Property, Plant and Equipment
In accordance with IAS 16,
Property, Plant and Equipment
, we estimate the useful lives of plant and equipment in order to determine the amount of depreciation expense to be recorded during any reporting period. If technological changes were to occur more rapidly than anticipated or in a different form than anticipated, the useful lives assigned to these assets may need to be shortened, resulting in the recognition of increased depreciation expense in future periods. Likewise, if the anticipated technological or other changes occur more slowly than expected, the useful lives could be extended. This could result in a reduction of depreciation expense in future periods.
Impairment Financial assets
Trade receivables, contract assets, lease receivables under IFRS 9, investments in debt instruments that are carried at amortised cost, investments in debt instruments that are carried at FVTOCI are tested for impairment based on the expected credit losses for the respective financial asset.
An impairment analysis is performed at each reporting date. The expected credit losses over lifetime of the asset are estimated by adopting the simplified approach using a provision matrix which is based on historical loss rates reflecting current condition and forecasts of future economic conditions. In this approach assets are grouped on the basis of similar credit characteristics such as industry, customer segment and other factors which are relevant to estimate the expected cash loss from these assets.
Other financial assets are tested for impairment based on significant change in credit risk since initial recognition and impairment is measured based on probability of default over the lifetime when there is significant increase in credit risk.
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, the recoverable amount is estimated each year on 31 December.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination. Corporate assets for the purpose of impairment testing are allocated to the cash generating units on a reasonable and consistent basis.
An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit or group of units on a
pro rata basis.
Reversal of impairment loss:
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
Income tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in other comprehensive income.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date. Minimum Alternate Tax (MAT) is accounted as current tax when the Company is subjected to such provisions of the Income Tax Act.
Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and associates to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill, as the same is not deductible for tax purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously. Credit of MAT paid is available when the Company is subjected to tax as per normal provisions in the future. Credit on account of MAT is recognized as a deferred tax asset based on the management’s estimate of its recoverability in the future.
A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred tax arising on investments in subsidiaries and associates is recognized except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Item 6.
Directors, Senior Management and Employees
Directors and Executive Officers with diversity statistics
The following table sets forth the name, age and position of each director and senior management of our Company as of March 31, 2023:
| | |
| | CEO, Chairman & Managing Director |
| | Director, Chairman & Financial Expert of Audit Committee |
| | Director & Chairman of Compensation & Nominating Committees |
Vegesna Bala Saraswathi (4) | | |
C E S Azariah (1) (2) (3) (4) (5) | | |
| | |
| | |
| | Whole Time Director and Chief Financial Officer |
| | |
| | Member of the Audit Committee. |
| | Member of the Compensation Committee. |
| | Member of the Nominating Committee. |
| | Member of the Corporate Social Responsibility Committee. |
| | Member of Nomination and Remuneration Committee. |
Raju Vegesna, CEO, Chairman and Managing Director, has served as a Director of our Company since November 2005. He was appointed as the Chief Executive Officer and Managing Director of the Company effective July 18, 2006. Mr. Raju Vegesna is a Silicon Valley entrepreneur who founded several leading edge technology companies, including Server Works Corporation, acquired by Broadcom in 2001. After that acquisition he had a brief stint with Broadcom. He holds a BS in Electrical Engineering from the University of Bangalore and holds an MS in Computer Engineering from Wayne State University, USA, and holds several patents in Microprocessor and Multiprocessor technology. He is also a Director of Raju Vegesna Infotech & Industries Private Limited.
Ananda Raju Vegesna, brother of Mr. Raju Vegesna, CEO, Chairman and Managing Director, has served as an Executive Director of our Company since June 2007. During the
fiscal year
, Mr Ananda Raju Vegesna, Executive Director of the Company has not attended all the Board Meetings held during a period of 12 months with or without seeking leave of absence and consequent to provision of Section 167(1)(b) of Companies Act, 2013, Mr Ananda Raju Vegesna ceases to be a Director at the closing business hours of October 28, 2022. He last attended the Board Meeting held on July 30, 2021 and has not attended the Meetings of the Board held on October 29, 2021, January 24, 2022, March 28, 2022, April 18, 2022, July 22, 2022 and October 21, 2022.
C.B. Mouli has served as a Director of our Company since July 2005. Mr. Mouli is a member of the Institute of Chartered Accountants of India and also holds a Bachelor of Law Degree. Mr. Mouli, a partner of C.B. Mouli & Associates, a Chartered Accountants firm. He is a Director of Ammana Equity Fund Private Limited.
T.H. Chowdary has served as a Director of our Company since February 1996. Dr. Chowdary retired as the Chief Executive Officer of VSNL. He has held key positions in the ITU, Intelsat and other international telecommunications organizations during the course of his career and was involved in the establishment of the Center for Telecommunications Management Studies (CTMS) at Hyderabad. Dr. Chowdary is also a director in Softsol India Limited and Tera Software Limited.
Ms. Vegesna Bala Saraswathi, spouse of Mr. Raju Vegesna, CEO, Chairman and Managing Director, served as Director of our Company since July 2015. Ms. Vegesna Bala Saraswathi is a Commerce Graduate, Associate Course Work in Computer Skills (US) and Associate Course Work in US Federal and State Taxes (US).
C E S Azariah has served as a Director of our Company since March 2013. Prior to joining the Company, he served as CEO of Fixed Income Money Market and Derivatives Association of India (FIMMDA). He has vast experience of more than 35 years in different segments of operations in State Bank of India and retired as Chief General Manager.
Arun Seth an alumni of the prestigious La Martiniere school, Indian Institute of Technology, Kanpur and Indian Institute of Management, Calcutta, Mr. Arun Seth is recognized as among the earliest Indian Telecom leaders. He has been a founding Charter Member of TiE Delhi and Indian Angel Network and advises/mentors a number of start-ups in the tech space in India and USA. An active evangelist of the Software product eco-system, he co-chairs the NASSCOM Product Conclave and the NASSCOM Product Council. He had earlier served on the Executive Council of NASSCOM for 10+ years when in British Telecom and Alcatel.
Kamal Nath has served as the Chief Executive Officer of Sify Technologies Limited, India, since August 2012. He is a Graduate in Electronics & Communications from BIT, Sindri. He has an overall experience of close to three decades in reputed organizations. Prior to joining Sify, he was with HCL Technologies Limited, a major IT Company, responsible for the Infrastructure Services Division. He was with Larsen & Toubro Limited and Uptron India Limited in the early part of his career. He is responsible for the business operations in India.
M P Vijay Kumar has served as Chief Financial Officer since October 2007 and has over two decades of experience in corporate audits, financial/management consulting, legal advisory services, management audit and investment banking. He is a Chartered Accountant and a Fellow Member of the Institute of Chartered Accountants of India, Fellow Member of the Institute of Company Secretaries of India and Associate member of the Institute of Cost and Works Accountants of India. During the year, pursuant to the recommendation of Nomination and Remuneration committee the Board has approved appointment of Mr M P Vijay Kumar as Whole Time Director (Additional) of the Company for a period of 5 (Five) years from November 14, 2022, on a remuneration and on such terms and conditions with liberty and authority to the Board of Directors to alter and vary the terms and conditions of the said appointment from time to time within the scope of Schedule V of the Companies Act, 2013, or any amendments thereto or any re-enactment thereof as may be agreed to between the Board of Directors and Mr M P Vijay Kumar subject to the approval of Members at the ensuing Annual General Meeting.
C R Rao, the Chief Operating Officer, has served as Vice President - Head HR & Administration since March 2009. He is a Graduate in Commerce and Law and also holds an MBA. He comes with an overall experience of close to three decades in Strategic Planning and Operations Management. Prior to joining Sify, he was with GSA Lufthansa as Vice President, responsible for Tamil Nadu and Andhra Pradesh. His key responsibilities included Strategic Planning, Business Development, Sales and Marketing for the Cargo division.
Infinity Capital Ventures, LP beneficially owned 7.60 % of our equity shares as of March 31, 2023. This shareholder is a party to the Subscription Agreement dated November 10, 2005 with our Company. The Subscription Agreement provides that, among other things, the Company shall appoint Mr. Raju Vegesna as the Chairman of the Board of Directors, Infinity Capital shall also nominate another person to the Board of Directors and so long as Infinity Capital continues to own at least 10% of the Company’s outstanding Equity Shares, the Company shall not enter into any agreement pursuant to which it would provide a third party with registration rights for Company securities, without the consent of Infinity Capital. In November 2005, Mr. Raju Vegesna, a nominee of Infinity Capital Ventures, LP, was appointed as Chairman of our Board of Directors. In February 2006, the Company also appointed Mr. P S Raju as the second nominee of Infinity Capital to the Board of Directors. Consequent to the resignation of Mr. P S Raju, as a Director effective May 31, 2015, Ms. Vegesna Bala Saraswathi was appointed as an additional Director effective July 22, 2015 of our Company as a Nominee. Further, she was elected by shareholders as a Director at the Annual General Meeting held on July 4, 2016. She got re-elected as a director in Annual General Meeting held on July 4, 2022.
Infinity Satcom Universal Private Limited beneficially owned 7.95% of our equity shares as of March 31, 2023. Mr. Ananda Raju Vegesna, Executive Director of the Company and brother of Mr. Raju Vegesna, is the Director of Infinity Satcom. Infinity Satcom is presently controlled by Mr. Raju Vegesna.
| | |
Country of Principal Executive Offices “Home Country” | | |
| | |
Disclosure Prohibited Under Home Country Law | | |
Total Number of Directors | | |
Part II: Demographic Background
| | |
Underrepresented Individual in Home Country Jurisdiction | | |
| | |
Did Not Disclose Demographic Background | | |
Our Articles of Association provide that each of our directors may receive a sitting fee not exceeding the maximum limits prescribed under the provisions of the Indian Companies Act, 2013. Accordingly, our Directors, other than the Chairman and Managing Director and Executive Director, have been receiving ₹ 20,000 for each committee meeting and ₹ 50,000 for each Board meeting attended by them.
Mr. Raju Vegesna, who is our CEO, Chairman and Managing Director, does not receive any compensation for his service on our Board of Directors. Similarly, Mr. Ananda Raju Vegesna, who is employed as our Executive Director, also does not receive any compensation for his service on our Board of Directors. Directors are reimbursed for travel and out-of-pocket expenses in connection with their attendance at Board and Committee meetings. T. H. Chowdary, a Director of our Company, has been receiving ₹ 25,000 per month for the technical services rendered by him.
The following table sets forth all compensation paid by us during the fiscal year ended March 31, 2023 to our executive officers:
| | Summary Compensation Table | |
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| | | | | | |
| | | | |
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| | | | | | | | |
| | | | | | | | |
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| | Includes provident fund contributions. |
As per the service contracts entered into with the employees (including executive officers), the Company provides the following retirement benefits: (a) Provident fund contributions and (b) Gratuity.
Provident fund contribution is a defined contribution plan governed by a statute in India. Under this, both employer and employee make monthly contributions (determined in relation to the basic salary of the respective employees) to a fund administered by the Government of India.
Gratuity is a defined benefit retirement plan covering all employees and provides for lump sum payment to employees at retirement or termination (computed based on the respective employees last drawn basic salary and years of employment with the Company). Liability for gratuity is accrued based on an actuarial valuation on an overall Company basis.
The Directors (who are not executive officers) are not entitled for any remuneration including any pension, retirement, or similar benefit schemes.
The details of our contribution to provident fund in respect of the executive officers are set out below:
Gratuity expense is determined at an overall Company level based on an actuarial valuation performed by an independent actuary. Thus, the cost for the year ended March 31, 2023 in respect of gratuity and compensated absences towards executive officers of the Company was not separately determined. Gratuity cost relating to such executive officers is not estimated to be material.
We make bonus payments to employees including executive officers upon satisfactory achievement of the following two performance criteria.
(i) Performance of the Company: Represents bonus payable on achievement of overall revenue and net profit targets for the Company.
(ii) Performance of the individual: Represents bonus payable on achievement of the individual’s Key Responsibility Areas (KRA) and Key Performance Indicators (KPI). These KRAs and KPIs vary in relation to each employee including executive officers and include both financial and non-financial parameters.
We have provided for ₹ 380.42 million ($4.63 million) towards bonus payable for the year ended March 31, 2023 to employees including executive officers who have achieved the KRAs and KPIs.
Total of 1.65 million options were allotted to executive officers as part of ASOP 2014 plan during fiscal 2015.Further 1.35 million options were allotted to executive officers during the fiscal 2019. Related charge for the fiscal 2021 amounted to ₹ 4.51 million ($ 0.06 million). During the fiscal 2021 executive officers exercised 0.035 million shares out of ASOP 2014 Plan.
Our Articles of Association sets the minimum number of directors at three and the maximum number of directors at twelve. We currently have seven directors on the Board. The Indian Companies Act require the following:
| | at least two-thirds of our directors shall be subject to retire by rotation by our shareholders; and |
| | at least one-third of our directors who are subject to retire by rotation shall be up for re-election at each annual meeting of our shareholders. |
However, the Managing Director, Executive Director and Independent Directors are not liable to retire by rotation.
On July 15, 2005, we appointed Mr.C.B. Mouli as independent Directors of the Board to comply with the applicable NASDAQ rules.
Mr. C E S Azariah was appointed as an independent Director effective March 25, 2013.
Dr T H Chowdary is also an independent Director of the Board.
Mr.Arun Seth was appointed as an Independent Director effective October 22, 2018.
Each of these Directors (Mr. C B Mouli, Mr. C E S Azariah and, Dr T H Chowdary and, Mr. Arun Seth) continue to remain independent in accordance with NASDAQ rules.
In addition, based on the recommendation of the Board of Directors, (Mr. C B Mouli, Mr. C E S Azariah and Dr T H Chowdary) were appointed by the shareholders as the Independent Directors of the Board for a term of five consecutive years from the conclusion of the Twenty Third Annual General Meeting held on July 5, 2019 and their terms expires in July 2024
Mr. Raju Vegesna, CEO, Chairman & Managing Director | Appointed as Chairman & Managing Director for a period of five years effective July 18, 2009, Mr. Raju Vegesna was subsequently appointed as the Chairman & Managing Director of the Company at the Annual General Meeting of the Company under Section 203 of the Companies Act, 2013 for a period of five years, effective from July 18, 2014, without any remuneration from the Company. His appointment was also approved by the Central Government. His present term expires on July 17, 2019, upon which he will become eligible for reappointment. |
| |
| Pursuant to the recommendation of the Nomination & Remuneration Committee, the Board of Directors have reappointed Mr. Raju Vegesna as the Chairman & Managing Director of the Company for a further period of Five years effective July 18, 2019 without any remuneration from the Company. |
| |
| In terms of Section 196 of the Companies Act, 2013, the above reappointment is subject to the approval of the shareholders at the Annual General Meeting. Further, as Mr. Raju Vegesna is a Non-Resident Indian, his reappointment as the Chairman & Managing Director of the Company is also subject to the approval of the Central Government under Part I of the Schedule V of the Companies Act, 2013. As per Articles of Association of the Company, he is not required to retire by rotation and hence shall hold office for the full term. |
| |
| The Shareholders had approved the reappointment of Mr Raju Vegesna as the Chairman and Managing Director at their Annual General Meeting held on July 5, 2019. |
| |
| Appointed as Executive Director for a period of five years effective June 22, 2010 and subsequently reappointed for a further period of five effective June 22, 2015. |
| |
| Pursuant to the recommendation of the Nomination & Remuneration Committee and the Board on May 5, 2020, Mr. Ananda Raju Vegesna was reappointed as the Executive Director for a further period of five years effective June 22, 2020 which is subject to the approval of shareholders at the Annual General Meeting to be held before September 30, 2020. |
| |
| Further, as per the Act, he retired by rotation at the ensuing Annual General Meeting scheduled on July 6, 2018 and got re-elected. |
| |
| The Board of Directors on May 5, 2020, have also appointed Mr.Ananda Raju Vegesna as an Additional Director under Section 161 of the Companies Act, 2013 and he shall hold office up to the date of the ensuing Annual General Meeting and is eligible for election as a Director by the shareholders at the AGM since the term of office expires on June 21, 2020. |
| |
| The Shareholders had approved the reappointment of Mr.Ananda Raju Vegesna as an Executive Director at their Annual General Meeting held on September 14, 2020. |
| |
| Further, as per the Act, he retired by rotation at the Annual General Meeting and got re-elected. |
| |
| During the fiscal year , Mr Ananda Raju Vegesna, Executive Director of the Company has not attended all the Board Meetings held during a period of 12 months with or without seeking leave of absence and consequent to provision of Section 167(1)(b) of Companies Act, 2013, Mr Ananda Raju Vegesna ceases to be a Director at the closing business hours of October 28, 2022. He last attended the Board Meeting held on July 30, 2021 and has not attended the Meetings of the Board held on October 29, 2021, January 24, 2022, March 28, 2022, April 18, 2022, July 22, 2022 and October 21, 2022. |
Ms. Vegesna Bala Saraswathi | Appointed as an Additional Director in July 2015. As per the Indian Companies Act, 2013, she was elected by the shareholders at the Annual General Meeting held on July 4, 2016. Further, as per the Act, she will retire by rotation and be eligible for re-election at the ensuing Annual General Meeting. |
| |
| Further, as per the Act, she will retire by rotation at the ensuing Annual General Meeting and will be eligible for re-election. |
| |
| Based on the recommendation of Nomination and Remuneration Committee Mr M P Vijay Kumar appointed as Whole Time Director (Additional) of the Company for a period of 5 (Five) years from November 14, 2022, on a remuneration and on such terms and conditions with liberty and authority to the Board of Directors to alter and vary the terms and conditions of the said appointment from time to time within the scope of Schedule V of the Companies Act, 2013, or any amendments thereto or any re-enactment thereof as may be agreed to between the Board of Directors and Mr M P Vijay Kumar subject to the approval of Members at the ensuing Annual General Meeting. |
| |
Dr T H Chowdary, Chairman of Compensation and Nominating Committees | Appointed as a Director in February 1996. As per the Indian Companies Act, 2013, he was appointed as an Independent Director for a term of five consecutive years from the conclusion of the Eighteenth Annual General Meeting held on July 28, 2014. He was re-appointed for a further period of five years by the Shareholders at the Twenty Third Annual General Meeting held on July 5, 2019 |
| |
Mr. C B Mouli, Chairman and Financial Expert of Audit Committee | Appointed as a Director in July 2005. As per the Indian Companies Act, 2013, he was appointed as an Independent Director for a term of five consecutive years from the conclusion of the Eighteenth Annual General Meeting held on July 28, 2014. He was re-appointed for a further period of five years by the Shareholders at the Twenty Third Annual General Meeting held on July 5, 2019 |
| |
| Appointed as a Director by the Board of Directors in March 2013. As per the Indian Companies Act, 2013, he was appointed as an Independent Director for a term of five consecutive years from the conclusion of the Eighteenth Annual General Meeting held on July 28, 2014. He was re-appointed for a further period of five years by the Shareholders at the Twenty Third Annual General Meeting held on July 5, 2019 |
| |
| Appointed as an Additional Director (Independent) in October 2018. As per the Indian Companies Act, 2013, he was elected by the shareholders at the Twenty Third Annual General Meeting held on July 5, 2019 and appointed as an Independent Director of the Company for a period of five years effective July 5, 2019. |
| |
| He shall be eligible for re appointment for a further period of five years subject to the approval of Shareholders. |
The Company has service contracts with Mr. Raju Vegesna, CEO, Chairman and Managing Director. The service contracts with Mr. Raju Vegesna do not provide for any remuneration or benefits either during or upon termination of employment.
For other non-executive Directors, the Company does not have any service contract and such directors’ term is governed by the Indian Companies Act, 2013.
The Company does not have any service contract with the other Senior Executives of its administrative, supervisory or management bodies. Such senior executives’ appointment does not have any specific term and can be terminated by either party based on the terms of the appointment.
Details relating to Audit, Compensation, Corporate Social Responsibility and Nominating Committees of our board are provided below:
Our Audit Committee is comprised of three independent directors, as determined under applicable NASDAQ rules. They are:
The primary objective of the Audit Committee is to monitor and provide effective supervision of our financial reporting process with a view towards ensuring accurate, timely and proper disclosures and the transparency, integrity and quality of financial reporting. Our Audit Committee oversees the work carried out in the financial reporting process by our management, including the internal auditors and the independent auditor and reviews the processes and safeguards employed by each. In addition, our Audit Committee has the responsibility of oversight and supervision over our system of internal control over financial reporting, audit process, and process for monitoring the compliance with related laws and regulations. The Audit Committee recommends to our Board the appointment of our independent registered auditors and approves the scope of both audit and non-audit services. All members of the Audit Committee meet the independence requirements and majority of them meet financial literacy requirements as defined by applicable NASDAQ and SEC rules.
The Audit Committee held five meetings in video conference during fiscal year 2022-23.
The Audit Committee has adopted a Charter and it is reviewed annually.
Our Compensation Committee consists of three independent directors as determined under applicable NASDAQ rules, and consists of:
The Compensation Committee of the Board of Directors determines the salaries, benefits and stock option grants for our employees, consultants, directors and other individuals compensated by our Company. The Compensation Committee also administers our compensation plans. The Compensation Committee has adopted a Charter, which is reviewed annually.
The Compensation Committee held five meetings in video conference during fiscal 2022-23.
Corporate Social Responsibility Committee
As per Section 135 of the Indian Companies Act, 2013, the Company is required to spend 2% of the average net profits from the three preceding financial years to Corporate Social Responsibility (CSR) activities. For this purpose, the Board has constituted the Corporate Social Responsibility Committee (CSR). Further the Board of Directors of the Company had appointed Ms Vegesna Bala Saraswathi as a Member of CSR Committee at their meeting held on January 24, 2022
Consequent to his vacation of his office of directorship of Mr Ananda Raju Vegesna, the CSR committee was reconstituted consisting of the following Members:
Ms Vegesna Bala Saraswathi
The purpose of the CSR Committee is to monitor the implementation of the CSR projects or programs or activities undertaken by the Company. A responsibility statement shall be signed by the CSR Committee confirming compliance with the CSR objectives and Policy of the Company. The Committee shall submit its report to the Board and the Board shall report the same in its report to the shareholders annually.
The Corporate Social Responsibility (CSR) is displayed on the Company’s website at http://sifytechnologies.com/investors/Company-profile/csr-policy/.
For the Financial year 2022-23, the Company has spent ₹ 33.09 million in pursuance of its Corporate Social Responsibility Policy in the following manner:
1.
Contribution towards Livelihood enhancement:
The Company has contributed
₹
24.39 million towards Livelihood enhancement to Raju Vegesna Foundation.
2.
Contribution towards Livelihood enhancement:
The Company has also contributed
₹
2.50 million towards Livelihood enhancement to Sree Anand Charitable Trust.
3.
Contribution towards Education:
The Company has contributed
₹
0.80 million towards promotion of Education to Sri Hanuman Mani Education & Culture Trust.
4.
Contribution towards Education:
The Company has also contributed
₹
0.30 million towards promotion of Education to Nayaki Vidya Mandir School.
5.
Contribution towards Livelihood enhancement:
The Company has contributed
₹
0.80 million towards promotion of
Livelihood enhancement
to CHILD (Project Shakthi).
6.
Contribution towards Rural development projects:
The Company has contributed
₹
2.50 million towards Rural development projects to Guided Fortune Samirti.
7.
Contribution towards Health:
The Company has contributed
₹
1.80 million towards promotion of Health to Voluntary Health Services Hospital, Taramani
The Nominating Committee of the board consists exclusively of the following non-executive, independent directors as determined under applicable NASDAQ rules:
The purpose of Nominating Committee is to oversee nomination process for top level management and specifically to identify, screen and review individuals qualified to serve as our Executive Directors, Non-Executive Directors and Independent Directors consistent with criteria approved by our board and to recommend, for approval by our board, nominees for election at our annual general meeting of shareholders.
On July 22, 2015, the Nominating Committee has reviewed and recommended the appointment of Ms. Vegesna Bala Saraswathi as an additional Director of the Company who holds office up to the Annual General Meeting. Further, she was elected by shareholders as a Director at the Annual General Meeting held on July 4, 2016, Further, as per the Act, she retires by rotation and eligible for re-election. She was re-elected at the Annual General Meeting held on July 6, 2017. The Nominations Committee has adopted a charter.
On October 22, 2018, the Nominating Committee reviewed and recommended the appointment of Mr. Arun Seth as an additional Director of the Company who shall hold office up to the ensuing Annual General Meeting scheduled on July 5, 2019. After election, he was appointed as an Independent Director of the Company for a period of five years effective July 5, 2019.
On May 5, 2020, the Nominating Committee reviewed and recommended the reappointment of Mr. Ananda Raju Vegesna as an Executive Director and also approved for appointment as an additional Director of the Company who shall hold office up to the ensuing Annual General Meeting to be held before September 30, 2020.
The Shareholders had approved the reappointment of Mr Ananda Raju Vegesna as an Executive Director at their Annual General Meeting held on September 14, 2020. During the Year, Mr Ananda Raju Vegesna, Executive Director of the Company has not attended all the Board Meetings held during a period of 12 months with or without seeking leave of absence and consequent to provision of Section 167(1)(b) of Companies Act, 2013, Mr Ananda Raju Vegesna ceases to be a Director at the closing business hours of October 28, 2022. He last attended the Board Meeting held on July 30, 2021 and has not attended the Meetings of the Board held on October 29, 2021, January 24, 2022, March 28, 2022, April 18, 2022, July 22, 2022 and October 21, 2022.
On November 2, 2022, the Nominating Committee reviewed and recommended the appointment of Mr M P Vijay Kumar as Whole Time Director (Additional) of the Company for a period of 5 (Five) years from November 14, 2022, on a remuneration and on such terms and conditions with liberty and authority to the Board of Directors to alter and vary the terms and conditions of the said appointment from time to time within the scope of Schedule V of the Companies Act, 2013, or any amendments thereto or any re-enactment thereof as may be agreed to between the Board of Directors and Mr M P Vijay Kumar subject to the approval of Members at the ensuing Annual General Meeting.
As of March 31, 2023, we had 4,439 employees, compared with 3,641 as of March 31, 2022. Of our current employees, 200 are administrative, 390 form our sales and marketing, 3,738 are dedicated to technology and technical support, and 111 are in business process and customer care. None of our employees are represented by a union. We believe that our relationship with our employees is good.
The following table sets forth information with respect to the beneficial ownership of our equity shares as of March 31, 2023 by each director and our senior management executives. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to equity shares. Unless otherwise indicated, the persons named in the table have sole voting and sole investment control with respect to all equity shares beneficially owned.
* Other than the above, none of the Directors or Executive Officers of the Company holds any shares in the Company.
The following options were granted to our senior management executives as part of our ASOP plan described below:
Total options outstanding (Shares) | | | | |
Weighted average exercise price ( ₹ ) | | | | |
Weighted average exercise period (years) | | | | |
Associate Stock Option Plan
We have an Associate Stock Option Plan, or ASOP, which provides for the grant of options to employees of our Company.
The Company introduced a new Stock Option Plan under Associate Stock Option Plan 2014 (ASOP 2014) for granting ESOPs as Equity Shares and/or ADSs linked warrants to the eligible Associates of the Company and its Holding/Subsidiaries/Associates. This was in addition to the earlier ASOP Plans of 2000, 2002, 2005 and 2007. For this purpose, the Company allocated 25 million Equity Shares of ₹ 10/- each under ASOP 2014. The proposal was approved by the Board of Directors and the shareholders of the Company at the Eighteenth Annual General Meeting held on July 28, 2014 and 25,000,000 shares were reserved for issuance under the plan. The Company also filed Form S-8 on December 21, 2015 with SEC for the options issued under the plan. As of March 31, 2023, we had outstanding options of 6.98 million under our ASOP Plans with a weighted average exercise price equal to approximately ₹ 92.60 ($1.13) per equity share.
The Board at their meeting held on January 20, 2015 approved to grant of 5,870,800 options to 85 Associates and issued Grant Letters. The vesting of options commenced in January 2016. During the year ended 2020, 3 associates have exercised 78,900 vested options.
The Company has granted additional 25,000, 195,000, 465,000, 7,220,000, 335,000, 150,000, 525,000 and 184,300 options to employees during the year 2022-23, 2021-22, 2020-21, 2019-20, 2018-19, 2017-18, 2016-17 and 2015-16 respectively.
The ASOP Plans are administered by the Compensation Committee of our Board of Directors. On the recommendation of the Compensation Committee, we issue option letters to identified employees, with the right to convert the issued options into our equity shares at the rates indicated in the options.
An employee holding options may apply for exercise of the options on a date specified therein which is referred to as the conversion date. The options are not transferable by an employee. The options lapse in the event of cessation of employment due to reasons of non-performance or otherwise. The equity shares transferred to the employee after conversion from options is the absolute property of the employee and will be held by the employee.
I
tem 7.
Major Shareholders and Related Party Transactions
The following table sets forth information with respect to the beneficial ownership of our equity shares as of March 31, 2023 by each person or group of affiliated persons who is known by us based on our review of public filings to beneficially own 5% or more of our equity shares. The table gives effect to equity shares issuable within sixty days upon the exercise of all options and other rights beneficially owned by the indicated shareholders on that date. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to equity shares as well as the power to receive the economic benefits of ownership of securities. Unless otherwise indicated, the persons named in the table have sole voting and sole investment control with respect to all equity shares beneficially owned. The information below is based on a review of filings made by such persons with the SEC.
Mr. Raju Vegesna, the Co-Trustee of the Vegesna Family Trust, which is the owner of Infinity Capital Venture Management LLC, which is the general partner of Infinity Capital Ventures, LP, exercise voting control and dispositive power over the equity shares owned by Infinity Capital Ventures, LP. Mr. Raju Vegesna, CEO, Chairman and Managing Director of our Company, is affiliated with Infinity Capital Ventures, LP.
Infinity Satcom Universal Private Limited is owned and controlled by Mr. Raju Vegesna, CEO, Chairman and Managing Director of the Company.
Ramanand Core Investment Company Private Limited is a wholly owned subsidiary Company of Raju Vegesna Infotech and Industries Private Limited which is owned and controlled by Infinity Satcom Universal Private Limited, which in turn is owned and controlled by Mr. Raju Vegesna, CEO, Chairman and Managing Director of the Company.
As of March 31, 2023, entities affiliated with our CEO, Chairman and Managing Director, Mr. Raju Vegesna, beneficially owned approximately 84.26% of our outstanding equity shares, which includes the 125,000,000 shares issued in connection with the private placement described below.
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Infinity Capital Ventures, LP, 11601 Wilshire Boulevard, Suite 1900, Los Angeles, CA 90025 | | | | | | | | |
Vegesna Family Trust, LP, 11601 Wilshire Boulevard, Suite 1900, Los Angeles, CA, 90025 | | | | | | | | |
Infinity Satcom Universal Private Limited, Visakhapatnam | | | | | | | | |
Ramanand Core Investment Company Private Limited, Visakhapatnam* | | | | | | | | |
* Ramanand Core Investment Company Private Limited is controlled by Raju Vegesna Infotech and Industries Private Limited, which is in turn, controlled by Infinity Satcom Universal Private Limited and therefore Infinity Satcom Universal Private Limited holds the beneficial interest in Ramanand Core Investment Company Private Limited.
Details of change in the percentage ownership held by the major
shareholders:
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Infinity Capital Ventures, LP, USA | | | | | | | | | | | | | | | | | | | | | | | | |
Vegesna Family Trust, USA | | | | | | | | | | | | | | | | | | | | | | | | |
Infinity Satcom Universal Private Limited | | | | | | | | | | | | | | | | | | | | | | | | |
Raju Vegesna Infotech and Industries Private | | | | | | | | | | | | | | | | | | | | | | | | |
Ramanand Core Investment Company Private Ltd | | | | | | | | | | | | | | | | | | | | | | | | |
* 125,000,000 shares were issued to Raju Vegesna Infotech and Industries Private Limited at a discount of 50% to the prevailing American Depositary Share market price since the allotment of shares was for unlisted Indian equity shares. The shareholders of the Company approved the unregistered offering through voting in a general meeting where the promoter group beneficially owned 84.26% of the equity shares eligible to vote in the meeting.
** Raju Vegesna Infotech and Industries Private Limited transferred its entire 125,000,000 shares to Ramanand Core Investment Company Private Ltd., its wholly owned subsidiary Company.
Reference is made to note 35 to the Consolidated Financial Statement as regards the shareholding of Ramanand Core Investment Company Private Limited. As of such date, these shares are fully paid up of the face value and hence carry entire voting rights of these shares.
The Company has not issued any shares having differential voting rights and hence the Company’s major shareholders do not have differential voting rights.
United States Shareholders
As of March 31, 2023, 43,304,717 of our ADSs were held in the United States and we had approximately 12,835 shareholders in the United States. Each ADS represents one equity share.
Host country Shareholders
As on March 31, 2023, 154,053,326 of our equity shares were held in India and we had 19 shareholders on record in India. Each equity share has a par value of ₹ 10/- each.
Based on our review of filings made with the SEC, Infinity Capital Ventures, LP beneficially owned 7.60% of our equity shares as of March 31, 2023. This shareholder is a party to the Subscription Agreement dated November 10, 2005 with our Company. The Subscription Agreement provides that, among other things, the Company shall appoint Mr. Raju Vegesna as the Chairman of the Board of Directors, Infinity Capital shall also nominate another person to the Board of Directors and for so long as Infinity Capital continues to own at least 10% of the Company’s outstanding Equity Shares, the Company shall not enter into any agreement pursuant to which it would provide a third party with registration rights for Company securities, without the consent of Infinity Capital. In November 2005, Mr. Raju Vegesna, a nominee of Infinity Capital Ventures, LP, was appointed as Chairman of our Board of Directors. In February 2006, the Company also appointed Mr. P S Raju as the second nominee of Infinity Capital to the Board of Directors. Consequent to the resignation of Mr. P S Raju, as a Director effective May 31, 2015, Ms. Vegesna Bala Saraswathi was appointed as an additional Director of our Company effective July 22, 2015, as a Nominee. Further, as per the Act, she retires by rotation and is eligible for re-election. She was re-elected at the Annual General Meeting held on July 6, 2017.
Infinity Satcom Universal Private Limited, India also beneficially owned 7.95% of our equity shares as of March 31, 2023.
As of March 31, 2023, entities affiliated with our CEO, Chairman and Managing Director, Mr. Raju Vegesna, beneficially owned approximately 84.26% of our outstanding equity shares, which includes the 125,000,000 shares issued in connection with the private placement described below.
These shareholders are presently able to exercise control over many matters requiring approval by our shareholders, including the election of directors and approval of significant corporate transactions. Under Indian law, a simple majority is sufficient to control all shareholder actions except for those items, which require approval by a special resolution. If a special resolution is required, the number of votes cast in favor of the resolution must be not less than three times the number of votes cast against it. Examples of actions that require a special resolution include:
| | altering our Articles of Association; |
| | issuing additional shares of capital stock, except for pro rata issuances to existing shareholders; |
| | commencing any new line of business; and |
| | commencing a liquidation. |
Circumstances may arise in which the interests of Infinity Capital Ventures, LP or Infinity Satcom Universal Private Limited or a subsequent purchaser of their shares could conflict with the interest of our other shareholders or holders of our ADSs. These shareholders could prevent or delay a change in control of our Company even if a transaction of that sort would be beneficial to our other shareholders, including the holders of our ADSs.
On October 30, 2010, we consummated the issuance and sale of 125,000,000 of our equity shares in a private placement with our promoter group, including an entity affiliated with our CEO, Chairman and Managing Director, Mr. Raju Vegesna. See note 35 in the notes to the financial statements in this Annual Report.
Forfeiture of equity shares issued in a private placement
During the year ended March 31, 2008, Sify proposed a scheme of amalgamation to merge Sify Communications Limited (erstwhile subsidiary) with the Company and made applications to the appropriate authorities in India for approval of the proposed scheme of amalgamation to take over the IP-VPN services from Sify Communications Limited ( erstwhile subsidiary) upon the consummation of the merger. Under the provisions of the local telecom regulations, a Company engaged in the business of providing IP-VPN services was required to maintain Indian shareholding at least 26% of the total paid up share capital of the Company. In order to maintain the Indian shareholding at 26% in Sify consequent to the approval of the proposed scheme of amalgamation, Sify and Infinity Satcom Universal, an Indian entity (the Purchaser) entered into a Subscription Agreement (effective March 24, 2008), whereby the Company agreed to sell, and Infinity agreed to purchase, 12,817,000 equity shares of the Company (herein after referred to as ‘the Share Purchase’), at a per share purchase price of USD $4.46/ - per share (referred to as ‘the Purchased Shares’), equivalent to ₹ 175/- per share in Indian Rupees.
In connection with the private placement of shares to Infinity Satcom Universal, the independent directors of the Board of the Directors waived the provision of the Standstill Agreement dated November 10, 2005 prohibiting Infinity Capital Ventures, Raju Vegesna and any Affiliate from acquiring additional shares of the Company. Each of Messrs. Raju Vegesna and Ananda Raju Vegesna abstained from voting on the waiver.
The Company received a sum of ₹ 112,149 (comprising of ₹ 12,817 towards face value and ₹ 99,332 towards Share premium) and called up a sum of ₹ 448,595 (comprising of ₹ 25,634 towards face value and ₹ 422,961 towards Share premium). Subsequent to fiscal 2008, the Company withdrew its applications made to appropriate authorities for the approval of the proposed scheme of amalgamation with Sify Communications Limited (erstwhile subsidiary). Consequent upon the withdrawal of the merger, Infinity Satcom Universal communicated to Sify that they would not contribute to calls already made and any balance monies which would become payable under the Subscription Agreement. Hence, the Board of Directors forfeited the shares allotted and the monies collected (₹ 112,149 including sums towards capital and premium) at the meeting held on August 29, 2008.
Sale of shares in a private transaction
Pursuant to a Share Purchase Agreement dated May 31, 2009 between Infinity Capital Venture Management and Infinity Satcom Universal Private Limited, a Company owned and controlled by Ananda Raju Vegesna, Executive Director of the Company and brother of Raju Vegesna, CEO, Chairman and Managing Director of the Company, Raju Vegesna has sold 4,000,000 Equity Shares of ₹ 10/- each of the Company to Infinity Satcom for a consideration of $ 3,000,000 in a private transaction.
Issuance of Equity Shares in private placement to the promoter group:
October 30, 2010, we consummated the issuance and sale of 125,000,000 of our equity shares in a private placement with our promoter group, including an entity affiliated with our CEO, Chairman and Managing Director, Mr. Raju Vegesna. See note 35 in the notes to the consolidated financial statements in this Annual Report.
The proceeds from the said issue have been utilized towards capital expenditure and expansion plans of the Company. During the fiscal 2019 the shares have become fully paid up.
Related Party Transactions
Refer to Note 32 ‘Related Parties’ in Item 18 of this Annual report for the list of related parties and their relationships as on March 31, 2022 and March 31, 2023.
Related party transactions & balances with subsidiaries on standalone basis as on March 31, 2022
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Transactions during the year: | |
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Lease rentals received*** | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Advances repaid by subsidiaries | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Advances given to subsidiaries | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Investment made in Compulsorily Convertible Debentures | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Investment made in Compulsorily Convertible Debentures | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Lease Deposit received from SISL | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Receivable / (Payable) | | | | | | | |
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Related Party transactions between fellow subsidiaries in the books of Sify Digital Services Limited :
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Loan given to fellow subsidiaries | | | | | | | | | | | | | | | | |
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Amount of outstanding balances | | | | | | | | | | | | | | | | |
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Loan given to fellow subsidiaries | | | | | | | | | | | | | | | | |
Related party transactions & balances with subsidiaries on standalone basis as on March 31, 2023
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Transactions during the year: | |
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Lease rentals received*** | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Advances repaid by subsidiaries | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Loan repaid by subsidiaries | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Investment made in Compulsorily Convertible Debentures | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Security Deposit Transfer | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Investment made in Compulsorily Convertible Debentures | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Lease Deposit received from SISL | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Receivable / (Payable) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Related Party transactions between fellow subsidiaries in the books of Sify Digital Services Limited :
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Loan repaid by fellow subsidiaries | | | | | | | | | | | | | | | | |
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Amount of outstanding balances | | | | | | | | | | | | | | | | |
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Loan given to fellow subsidiaries | | | | | | | | | | | | | | | | |
All transactions between Sify Technologies Limited and its subsidiaries up to March 31, 2023 of this Annual Report have been in the ordinary course of business
#Pursuant to BTA which is effective from February 1, 2021 with appointed date of April 1, 2020, the transactions that were recorded in the parent company and the balances as on January 31, 2021 pertaining the businesses that were transferred have been transferred to the subsidiary companies respectively. The customer and vendor contracts novation is in progress as on March 31, 2021. Pending confirmation from customers and vendors, the invoices have been booked in parent company and subsequently transferred to subsidiary companies as on March 31, 2021.
Pursuant to agreement for shared services between entities, the billing from parent entity to the subsidiary entities and vice versa is part of the services rendered and services received.
@ Sify NA revenue and receivables are on account of services rendered from Sify Digital Services Limited, hence the revenue and receivable has been transferred to SDSL
**During the year 2011-12, the Group had entered into a lease agreement with M/s Raju Vegesna Infotech and Industries Private Limited, the holding Group, to lease the premises owned by it for a period of three years effective February 1, 2012 on a rent of ₹ 0.075 Million (Rupees Seventy Five Thousand) per month. Subsequently, the Group entered into an amendment agreement with effect from April 1, 2013, providing for automatic renewal for a further period of two blocks of 3 years with an escalation of 15% on the last paid rent after the end of every three years. Subsequently on account of expiry of the said agreement, the Group entered into a fresh agreement for a period of three years effective February 01, 2021 on a rent of ₹ 0.114 Million (Rupees One Lakh Fourteen Thousand Only) per month.
During the year 2011-12, the Group had also entered into a lease agreement with M/s Raju Vegesna Developers Private Limited, a Group in which Mr Ananda Raju Vegesna, the then Executive Director of the Group and Mr Raju Vegesna, Chairman and Managing director of the Group exercise significant influence, to lease the premises owned by it for a period of three years effective February 1, 2012 on a rent of ₹ 0.030 Million (Rupees Thirty Thousand) per month. The agreement provides for the automatic renewal for further period of two blocks of 3 years with an escalation of 15% on the last paid rent after the end of every three years. Subsequently on account of expiry of the said agreement, the Group entered into a fresh agreement for a period of three years effective February 01, 2021 on a rent of ₹ 0.046 Million (Rupees Forty Six Thousand) per month.
During the year 2010-11, the Group had entered into a lease agreement with Ms Radhika Vegesna, daughter of Mr Anand Raju Vegesna, the then Executive Director of the Group, to lease the premises owned by her for a period of three years effective June 1, 2010 on a rent of ₹ 0.3 Million (Rupees Three Lakhs) per month and payment of refundable security deposit of ₹ 2.6 Million. This arrangement will automatically be renewed for a further period of two blocks of three years with all the terms remaining unchanged. Subsequently on account of expiry of the said agreement, the Group entered into a fresh agreement for a period of three years effective June 1, 2019 on a rent of ₹ 0.556 Million (Rupees Five Lakhs Fifty Six Thousand) per month and payment of additional refundable security deposit of ₹ 3.0 Million. This arrangement will automatically be renewed for a further period of two blocks of three years with all the terms remaining unchanged.
* Represents salaries and other benefits of Key Management Personnel comprising of Mr. Kamal Nath - Chief Executive Officer (Sify Technologies Limited), Mr. M P Vijay Kumar – Whole time director and Group Chief Financial Officer and Mr. C R Rao - Chief Operating Officer.
***During the year 2020-21, the Company had entered into a lease agreement with its parent Sify Technologies Limited, to lease the premises at Chennai, Noida and Hyderabad owned by the holding company for a period of ten years effective April 1, 2020 on a rent of ₹ 0.720 Million (Rupees Seven lakhs Twenty Thousand), ₹ 5.737 Million (Rupees Fifty Seven Lakhs Thirty Seven Thousand) & ₹ 5.032 Million (Rupees Fifty Lakhs Thirty two thousand) respectively per month with an escalation of 3% on the last paid rent after the end of every year and refundable security deposit equal to the rent of three months on all the said properties.
***During the year 2022-23, the Company had entered into a lease agreement with its parent Sify Technologies Limited, to lease the additional floors and to terminate existing 3rd floor at Hyderabad owned by the holding company for a period of five years effective January 1, 2023 on a rent of ₹ 6.465 Million (Rupees Sixty four lakhs sixty five Thousand) and ₹ 1.173 Million (Rupees Eleven lakhs Seventy Three Thousand) respectively , per month with an escalation of 3% on the last paid rent after the end of every year and refundable security deposit equal to the rent of three months.
Refer to Note 32 ‘Related Parties’ for details of transactions with KMP
We provide
interest
free loans to our employees in India who are not executive officers or directors which will be adjusted in their monthly salaries. As of March 31, 2023, the loan outstanding from employees is ₹ 6.51 million.
The following financial statements and auditors’ report appear under Item 18 in this Annual Report on Form 20-F and are incorporated herein by reference:
| | Report of Independent Registered Public Accounting Firm |
| | Consolidated Balance Sheet as of March 31, 2023 and 2022 |
| | Consolidated Statements of comprehensive income for the years ended March 31, 2023, 2022 and 2021 |
| | Consolidated Statements of changes in equity for the years ended March 31, 2023, 2022 and 2021 |
| | Consolidated Statements of cash flows for the years ended March 31, 2023, 2022 and 2021 |
| | Notes to the consolidated financial statements |
| | Proceedings before Department of Telecommunications |
TDSAT has by its Order dated 28.02.2022 quashed the demands made by DOT seeking license fee, interest on license fee, penalty & interest on penalty on the revenue accruing from other businesses other than the licensed based activities from 2005-06 onwards. This Order was passed in favor of one of the Service Provider having similar line of business and the DOT is yet to prefer appeal before Supreme Court.
The Company has been paying AGR on the licensed based activities and challenged the demands made by DOT on the revenue arising from other Business activities (Non Licensed businesses) and the petitions are pending before Madras High Court.
Supreme Court had by its Order dated 10.06.2020, accepted the stand of the DOT that the licenses of PSUs are different and the judgement of 24.10.2019 could not be made the basis for raising demands against PSUs as they are not in the actual business of providing Mobile Services to the General Public. Sify also has licenses similar to PSU. TDSAT also held that there is no scope to differentiate between 2 sets of licensees (PSU & Others) having same or similar licenses only on the basis of ownership, private or public. The statutory rights and liabilities must remain the same for both the classes in so far as they arise from the licenses/agreements under consideration.
DOT had issued separate licenses to Sify Technologies Ltd (Sify) for providing Internet, National Long Distance & International Long Distance services.. The license fee was payable to the DOT on the Adjusted Gross Revenue (AGR) as per the terms of each license. Sify has been regularly paying license fee on the revenue arising out of services as per the license conditions.
DOT has raised demands on service providers providing Internet, NLD, ILD services etc. demanding license fee on the revenue made by the service providers from other business income such as Data Center, Cloud, application services, power, gas, etc. DOT contended that all the income of the company irrespective of the business was required to be considered as part of 'income' for the purpose of calculation of the license fee. The company filed a Writ Petition before the Hon’ble Madras High Court challenging the demand made by DOT on the Income accruing from other business units and the demands have been stayed by the Court. The case is pending for final hearing.
The Service providers which had different license conditions for ISP, NLD & ILD and having revenue from other business units approached the Hon’ble Supreme Court stating that Hon’ble Supreme Court judgement dated 24.10.2019 on the access Telecom Service Providers is not applicable to other services providers as license conditions were different from the Access Telecom Service Providers. The Hon’ble Supreme Court observed that if the license conditions of Other Service Providers including ISP, NLD & ILD are different from the license conditions of the Mobile Access Providers, then the other service providers should adjudicate the license fee issue before the appropriate forum. Meanwhile DOT withdrew the demands against Public Sector Undertaking on account of different license conditions.
The Company which had approached Hon’ble High Court of Madras in 2013 by filing a writ petition prohibiting Department of Telecommunications (DOT) from levying a license fee on non-licensed activities obtained stay of the demands. The Hon’ble Court restrained DOT from recovering the license fee in respect of non- telecom activities and the case is pending for hearing.
The Company believes that it has adequate legal defenses against the demand raised by DOT and that the ultimate outcome of these actions will not have a material adverse effect on the Company's financial position and result of operations. ISPAI, association representing the internet service providers including the company issued a letter to DOT stating that the Hon’ble Supreme Court judgement dated 24.10.2019 is not applicable to Internet Service Providers and the license conditions are different.
The Company which had received notices for earlier years from DoT claiming license fee on the total Income (including income from Non Licensed activities) has already responded to these notices stating that license fees are not payable on income from non-licensed activities. The Company believes that it has adequate legal defenses against these notices and that the ultimate outcome of these actions may not have a material adverse effect on the Company's financial position and result of operations."
DOT in its written submission made before the Hon’ble Supreme Court had clearly mentioned that non telecom revenue would stand excluded from the purview of the gross revenue . In 2017, the Hon’ble Tripura High Court held that Service Providers are not liable to pay license fee on the income accruing from other businesses.
(ii) The present license for ISP under Unified License issued by DOT on June 2, 2014 provides for payment of License fee on pure internet services. However, the Company through Internet Service Providers Association of India (ISPAI) challenged the said clause before TDSAT and has not made payment in this regard. TDSAT set aside the demand made by the DOT and passed the order in favor of the ISP. DoT has challenged the Order of the TDSAT and the appeal is pending before Supreme Court. The Company has appropriately accounted for any adverse effect that may arise in this regard in the books of account. However TDSAT by its order dated 18.10.2019 held that license fee is not chargeable on the Internet Service Providers. DoT has filed appeal before Supreme Court and the appeal is pending for final hearing. However the company has started paying AGR on pure internet effective from 01.04.2022 pursuant to the notification issued by DOT.
b) The company is party to additional legal actions arising in the ordinary course of business. Based on the available information as on March 31, 2023, the Company believes that it has adequate legal defenses for these actions and that the ultimate outcome of these actions will not have a material adverse effect on the Company's financial position and results of operations.
c) The Company has received an order passed under section 7A of the Employees Provident Fund & Miscellaneous Provisions Act, 1952 from Employees Provident Fund Organisation (EPFO) claiming provident fund contribution aggregating to ₹ 6.4
million
on special allowances paid to employees. The company has filed a writ petition before High court of Madras and obtained the stay of demand. In February 2019, the Supreme Court held, in a similar case, that Special allowances paid by the employer to its employee will be included in the scope of basic wages and subject to provident fund contribution. However, the Supreme Court has not fixed the effective date of order.
d)During the financial year 2019-20, Directorate General of Goods and Services Tax Intelligence (DGGI) did an inspection based on the analysis of service tax returns filed by the company in the past. The company has been
categorizing
services relating to e-Learning and Infrastructure Management Services provided to foreign customers billed in convertible foreign currency under OIDAR services while filing its half-yearly service tax return. However, based on the Place of Provision of Services Rules then applicable under the Finance Act, 1994, Service Tax has to be paid for OIDAR services provided to foreign customers even if the conditions for qualifying as export of services are met. Hence, the DGGI contended that Service Tax should be paid on the services classified as OIDAR services in the returns. The total contended during the period April 2014 to November 2016 of Service Tax was ₹ 161.8 million
and the Interest & Penalty as applicable. The company believes that the services relating to e-learning and infrastructure management services will not fall under OIDAR services and also the activities covered under E-learning and IMS does not meet the conditions for taxation under the provisions applicable as OIDAR and hence there is no liability. However, during the investigation, the Company has paid ₹ 64.6 million
under protest to continue the proceeding with the relevant adjudicating authorities. Thereafter, the DGGI has issued Show Cause Notice and the company has replied on the same. The matter is pending with the Adjudicating Authority. The company believes that no provision is required to be made against this demand.
Under Indian law, a Company may pay dividends upon recommendation by its Board of Directors and approval by a majority of its shareholders. Any future cash dividends on our equity shares represented by ADSs will be paid to the depository in rupees and will generally be converted into dollars by the depository and distributed to holders of ADSs, net of the depository’s fees and expenses.
However, the dividend payment policy of the Company is not certain and is contingent upon each year’s profits of the Company. Investors seeking cash dividends should consider this at the time of purchase of our ADRs.
Due to the unexpected outbreak and prolongation of Covid-19 pandemic and the consequent lockdown and reduced economic activities, compounded by uncertainty of timing of return to normalcy and to conserve and plough back the resources within the Company to stay liquid and use prudently for operations and expansion. The Directors did not recommend any dividend for the fiscal year 2022-23.
There is no public market for our equity shares in India, the United States or any other market. Our ADSs evidenced by American Depository Receipts, or ADRs, are traded in the United States only on the NASDAQ Capital Market under the symbol “SIFY”. Each ADS represents one equity share. The ADRs evidencing ADSs were issued by our depository, Citibank, N.A., pursuant to a Deposit Agreement.
I
tem 10.
Additional Information
Our Authorized capital stood at ₹ 2,040,000,000, divided into 204,000,000 Equity Shares, having a par value ₹ 10 per share. As of March 31, 2023, 182,835,369 Equity Shares were issued and fully paid. There are no partly paid up shares. The equity shares are our only class of share capital. We have 6,972,978 options outstanding to purchase equity shares as of March 31, 2023.
Some of the share capital, 43,304,717 shares, is represented by American Depository Shares issued by our Company in accordance with applicable laws and regulations. Our Articles of Association and the Indian Companies Act permit us to issue classes of securities in addition to the equity shares. For the purposes of this annual report, “shareholder” means a shareholder who is registered as a member in the register of members of our Company. The term shareholders and ADSs holders have the same meaning in this annual report since the Indian Companies Act only defines a shareholder.
There have been no significant changes in the share capital of the Company during the fiscal 2023, 2022 and 2021 except for exercise of stock options by eligible employees. In addition to exercise of stock options during the fiscal 2021, the partly paid shares as part of the subscription agreement entered into with Mr. Ananda Raju Vegesna, dated October 22, 2010 were converted to fully paid up after receiving the balance money of ₹900 million towards the 125,000,000 equity shares.
Memorandum and Articles of Association
Set forth below is the material information concerning our share capital and a brief summary of the material provisions of our Articles of Association, Memorandum of Association and the Indian Companies Act, all as currently in effect. The following description of our equity shares and the material provisions of our Articles of Association and Memorandum of Association does not purport to be complete and is qualified in its entirety by our Memorandum of Association and Articles of Association that are incorporated by reference to this Annual Report on Form 20-F.
Objects of Memorandum of Association
The following is a summary of our Objects as set forth in Section 3 of our Memorandum of Association:
| | To develop and provide Internet service, Internet Telephony, Infrastructure based services, Virtual Private Network and other related data, voice and video services, wide area communication network, value added services on the network, lease or other transfers of network, software, peripherals and related products, and to provide marketing services. |
| | To provide security products for corporate, carry on the business of consulting, software and hardware, integrated platform(s) for the e-commerce solutions, applications, information technology, security and all other kinds of technology solutions or services, and to acquire, maintain, operate, manage and undertake technology and infrastructure for this purpose. |
| | To develop, service & sell/lease data based through direct or electronic media, to develop a wide area communication network of sell / lease the network or provide value added services on the network to develop, service, buy / sell computers, software, peripherals and related products to provide marketing services rising direct as well as electronic media; |
| | To undertake the designing and development of systems and applications software either for its own use or for sale in India or for export outside India and to design and develop such systems and application software for or on behalf of manufacturers, owners and users of computer systems and digital / electronic equipments in India or elsewhere in the world; |
| | To set up and run electronic data processing centers and to carry on the business of data processing, word processing, software consultancy, system studies, management consultancy, techno-economic feasibility studies of projects, design and development of management information systems, share / debenture issues management and / or registration and share/debenture transfer agency; |
| | To undertake and execute feasibility studies for Computerization, setting up of all kind of computer systems and digital/electronic equipment's and the selection, acquisition and installation thereof whether for the Company or its customers or other users; |
| | To conduct, sponsor or otherwise participate in training programs, courses, seminar conferences in respect of any of the objects of the Company and for spreading or imparting the knowledge and use of computers and computer programming languages including the publication of books, journals, bulletins, study / course materials, circulars and news-letters; and to undertake the business as agents, stockiest, distributors, franchise holders or otherwise for trading or dealing in computer systems, peripherals, accessories, parts and computer consumables, continuous and non-continuous stationery, ribbons and other allied products and things and standard software packages. |
| | To conduct e-commerce for sale of all kinds of products and services through direct or electronic media as well as on and off line e-commerce including travel related services, buying and selling of products and services / merchandise, software, data information etc., in India and abroad. |
Our Articles of Association provide that the minimum number of directors shall be 3 and the maximum number of directors shall be 12. Presently, we have 7 directors. Our Articles of Association provide that at least two-thirds of our directors shall be subject to re-election by our shareholders; and at least one-third of our directors who are subject to re-election shall be up for re-election at each Annual General Meeting of the shareholders.
Our Articles of Association do not require that our directors have to hold shares of our Company in order to serve on our board of directors.
Our Articles of Association provide that any director who has a personal interest in a transaction must disclose such interest, must abstain from voting on such a transaction and may not be counted for the purposes of determining whether a quorum is present at the meeting. Such director's interest in any such transaction shall be reported at the next meeting of shareholders. The remuneration payable to our directors may be fixed by the board of directors in accordance with provisions prescribed by the Government of India. Our Articles of Association provide that our board of directors may generally borrow or secure the payment of any sum of money for our business purposes, provided, however, where any amounts are to be borrowed, that when combined with any already outstanding debt, exceed the aggregate of our paid-up capital and free reserves, we cannot borrow such amounts without the consent of our shareholders.
In terms of the provisions of the Articles of Association of the Company and the Indian Companies Act 2013:
| | no director of the Company can vote on a proposal, arrangement or contract in which he is materially interested; |
| | the directors of the Company cannot vote on a proposal in the absence of an independent quorum for compensation to themselves or their body; |
| | each of our directors is entitled to receive a sitting fee not exceeding ₹ 100,000 for every meeting of the Board of Directors and each meeting of a Committee of the Board of Directors, as well as all traveling and out-of-pocket expenses incurred in attending such meetings; however, effective May 2014, the Company has been paying ₹ 50,000 to the directors for each Board Meeting attended by them. However, there is no increase in the sitting fee for the Committee meetings, which is Rs.20,000 for each Meeting. |
| | the directors are empowered to borrow moneys through board meetings up to the prescribed limit and beyond that with the approval of the shareholders through a General Meeting; |
| | retirement of directors is determined by rotation and not based on age limit; and |
| | no director is required to hold any qualification shares. |
For additional information, please see “Item 6. Director, Senior Management and Employees – Board Composition,” “Board Committees” and “Director Compensation,” and “Officer Compensation” of this Annual Report on Form 20-F.
Under the Indian Companies Act, our Board of Directors recommends the payment of a dividend which is then declared by our shareholders in a general meeting. However, the board is not obliged to recommend a dividend. Similarly, under our Articles of Association and the Indian Companies Act, although the shareholders may, at the annual general meeting, approve a dividend by an amount less than that recommended by the Board of Directors, they cannot increase the amount of the dividend. In India, dividends generally are declared as a percentage of the par value of a Company’s equity shares. The dividend recommended by the Board of Directors, and thereafter declared by the shareholders in the annual general meeting and subject to the limitations described above, is required to be distributed and paid to shareholders in proportion to the paid up value of their shares within 30 days of the declaration by the shareholders at the annual general meeting. Pursuant to our Articles, our Board of Directors has the discretion to declare and pay interim dividends without shareholder approval. Under the Indian Companies Act, dividends can only be paid in cash to the registered shareholder, the shareholder's order or the shareholder's banker's order, at a record date fixed on or prior to the date of the Annual General Meeting. We must inform the stock exchanges on which our equity shares and ADSs are listed on the record date for determining the shareholders who are entitled to receive dividends.
The Indian Companies Act provides that any dividends that remain unpaid or unclaimed after the 30-day period from the date of declaration of a dividend are to be transferred to a special bank account opened by the Company at an approved bank. We have to transfer any dividends that remain unclaimed for seven years from the date of the transfer to an Investor Education and Protection Fund established by the Government of India under the provisions of the Indian Companies Act. Under the Companies Act, 2013, after the transfer to this fund, such unclaimed dividends may be claimed by the shareholders on submission of such documents and in accordance with the procedures as may be prescribed by the Government.
With respect to equity shares issued during a particular fiscal year (including any equity shares underlying ADSs issued to the depository), cash dividends declared and paid for such fiscal year generally will be prorated from the date of issuance to the end of such fiscal year.
The Indian Companies Act, 2013 further provides that, in the event of an inadequacy or absence of profits in any year, a dividend may be declared for such year out of the Company’s accumulated profits subject to the fulfillment of the following conditions:
| | the rate of dividend to be declared may not exceed the average of the rate at which dividends were declared by it in the three years immediately preceding that year provided that this sub-rule shall not apply to a Company, which has not declared any dividend in each of the three preceding financial years. |
| | the total amount to be drawn from the accumulated profits shall not exceed one-tenth of such sum of its paid up capital and free reserves as appearing in the last audited financial statement, |
| | the amount so drawn shall first be utilized to set off the losses incurred in the financial year in which a dividend is declared before any dividend in respect of equity shares is declared. |
| | the balance of reserves after such withdrawal shall not fall below fifteen per cent of its paid up share capital as appearing in the latest audited financial statement. |
| | No Company shall declare dividends unless carried over previous losses and depreciation not provided in previous year or years are set off against profit of the Company of the current year. |
At any general meeting, voting is by show of hands unless a poll is demanded by a shareholder or shareholders present in person or by proxy holding (a) not less than one-tenth of the total voting power entitled to vote on a resolution or (b) shares with an aggregate paid up capital of at least ₹ 500,000. Upon a show of hands, every shareholder entitled to vote and present in person has one vote and, on a poll, every shareholder entitled to vote and present in person or by proxy has voting rights in proportion to the paid up capital held by such shareholders. The Chairperson has a casting vote in the case of any tie.
Any shareholder of the Company entitled to attend and vote at a meeting of the Company may appoint a proxy. The instrument appointing a proxy must be delivered to us at least 48 hours prior to the meeting. Unless the articles of association otherwise provide, a proxy may not vote except on a poll. A corporate shareholder may appoint an authorized representative who can vote on behalf of the shareholder, both upon a show of hands and upon a poll. An authorized representative is also entitled to appoint a proxy.
Ordinary resolutions may be passed by simple majority of those present and voting at any general meeting for which the required period of notice has been given. However, specified resolutions such as amendments to our Articles and the Memorandum of Association, commencement of a new line of business, the waiver of pre-emptive rights for the issuance of any new shares and a reduction of share capital, require that votes cast in favor of the resolution (whether by show of hands or on a poll) are not less than three times the number of votes, if any, cast against the resolution by members so entitled and voting. As per the Indian Companies Act, unless the articles of association of a Company provide for all directors to retire at every annual general meeting, not less than two-third of the directors of a public Company must retire by rotation, while the remaining one-third may remain on the board until they resign or are removed. Our Articles of Association require two thirds of our Directors to retire by rotation. One-third of the directors who are subject to retirement by rotation must retire at each Annual General Meeting. Further, the Indian Companies Act requires certain resolutions such as those listed below to be voted on only by a postal ballot:
(a) alteration of the objects clause of the memorandum and in the case of the Company in existence immediately before the commencement of the Act, alteration of the main objects of the memorandum;
(b) alteration of articles of association in relation to insertion or removal of provisions which, under sub-section (68) of section 2, are required to be included in the articles of a Company in order to constitute it a private Company;
(c) change in place of registered office outside the local limits of any city, town or village as specified in sub-section (5) of section 12;
(d) change in objects for which a Company has raised money from public through prospectus and still has any unutilized amount out of the money so raised under sub-section (8) of section 13;
(e) issue of shares with differential rights as to voting or dividend or otherwise under sub-clause (ii) of clause (a) of section 43;
(f) variation in the rights attached to a class of shares or debentures or other securities as specified under section 48;
(g) buy-back of shares by a Company under sub-section (1) of section 68;
(h) election of a director under section 151 of the Act;
(i) sale of the whole or substantially the whole of an undertaking of a Company as specified under sub-clause (a) of sub-section (1) of section 180;
(j) giving loans or extending guarantee or providing security in excess of the limit specified under sub-section (3) of section 186.
In addition to permitting dividends to be paid out of current or retained earnings as described above, the Indian Companies Act permits us to distribute an amount transferred from the reserve or surplus in our profit and loss account to our shareholders in the form of bonus shares, which are similar to a stock dividend. The Indian Companies Act also permits the issuance of bonus shares from a share premium account. Bonus shares are distributed to shareholders in the proportion recommended by the Board. Shareholders of record on a fixed record date are entitled to receive such bonus shares.
Consolidation and Subdivision of Shares
The Indian Companies Act permits a Company to split or combine the par value of its shares, provided such split or combination is not made in fractions. Shareholders of record on a fixed record date are entitled to receive the split or combination.
Pre-emptive Rights and Issue of Additional Shares
The Indian Companies Act gives shareholders the right to subscribe for new shares in proportion to their respective existing shareholdings unless otherwise determined by a special resolution passed by a General Meeting of the shareholders. Under the Indian Companies Act, in the event of an issuance of securities, subject to the limitations set forth above, a Company must first offer the new shares to the shareholders on a fixed record date. The offer must include: (i) the right, exercisable by the shareholders of record, to renounce the shares offered in favor of any other person; and (ii) the number of shares offered and the period of the offer, which may not be less than 15 days from the date of offer. If the offer is not accepted it is deemed to have been declined and thereafter the board of directors is authorized under the Indian Companies Act to distribute any new shares not purchased by the pre-emptive rights holders in the manner that it deems most beneficial to the Company.
Annual General Meetings of Shareholders
We must convene an annual general meeting of shareholders each year within 15 months of the previous annual general meeting or within six months of the end of previous fiscal year, whichever is earlier and may convene an extraordinary general meeting of shareholders when necessary or at the request of a shareholder or shareholders holding not less than one-tenth of our paid up capital carrying voting rights. In certain circumstances a three month extension may be granted by the Registrar of Companies to hold the Annual General Meeting. The Annual General Meeting of the shareholders is generally convened by our Company Secretary pursuant to a resolution of the board of directors. In addition, the Board may convene an Extraordinary General Meeting of shareholders when necessary or at the request of a shareholder or shareholders holding not less than one-tenth of our paid up capital carrying voting rights. Written notice setting out the agenda of any meeting must be given at least 21 days prior to the date of the General Meeting to the shareholders of record, excluding the days of mailing and date of the meeting. Shareholders who are registered as shareholders on the date of the General Meeting are entitled to attend or vote at such meeting. The Annual General Meeting of shareholders must be held at our registered office or at such other place within the city in which the registered office is located, and meetings other than the Annual General Meeting may be held at any other place if so determined by the board of directors.
Our Articles provide that a quorum for a general meeting is the presence of at least five shareholders in person.
2022 Annual General Meeting
Our Annual General Meeting for the fiscal year 2022 was held on July 4, 2022 as decided by the Board of Directors held at the registered office of our Company, 2
nd
Floor, TIDEL Park, 4 Rajiv Gandhi Salai, Taramani, Chennai 600 113, India.
At the Annual General Meeting, the shareholders approved the following items:
| | Adoption of audited financials for the fiscal year ended March 31, 2022 as per Indian Accounting Standard. |
| | Appoint a Director in place of Mrs. Vegesna Bala Saraswathi (DIN 07237117), who retires by rotation and being eligible, offers herself for reappointment. |
| | Ratification of Remuneration payable to Mr. S Ramachandran, Cost Auditor. |
Limitations on the Rights to Own Securities
The limitations on the rights to own securities of Indian companies, including the rights of non-resident or foreign shareholders to hold securities, are discussed in the section entitled “Ownership Restrictions” below.
Register of Shareholders; Record Dates; Transfer of Shares
We maintain a register of shareholders as required under the Indian Companies Act, 2013. For the purpose of determining the shares entitled to annual dividends, the register is closed for a specified period prior to the annual general meeting. The date on which this period begins is the record date.
To determine which shareholders are entitled to specified shareholder rights such as dividend, we may close the register of shareholders. The Indian Companies Act requires us to give at least seven days’ prior notice to the public before such closure. We may not close the register of shareholders for more than thirty consecutive days, and in no event for more than forty-five days in a year.
Following the introduction of the Depositories Act, 1996, and the repeal of Section 22A of the Securities Contracts (Regulation) Act, 1956, which enabled companies to refuse to register transfers of shares in some circumstances, the equity shares of a public Company are freely transferable, subject only to the provisions of Section 58 of the Indian Companies Act, 2013 and the listing agreement entered into between the Company and relevant stock exchange on which the shares of the Company are listed. Since we are a public Company under Indian law, the provisions of Section 58 will apply to us. Our Articles currently contain provisions that give our directors discretion to refuse to register a transfer of shares in some circumstances. According to our Articles, our directors are required to exercise this right in the best interests of our Company. While our directors are not required to provide a reason for any such refusal in writing, they must give notice of the refusal to the transferee within 30 days after receipt of the application for registration of transfer by our Company. In accordance with the provisions of Section 58 of the Indian Companies Act, our directors may exercise this discretion if they have sufficient cause to do so. If our directors refuse to register a transfer of shares, the shareholder wishing to transfer his, her or its shares may file a civil suit or an appeal with the National Company Law Tribunal.
Pursuant to Section 58, if a transfer of shares contravenes any of the provisions of the Indian Companies Act and Securities and Exchange Board of India Act, 1992 or the regulations issued there under or the Sick Industrial Companies (Special Provisions) Act, 1985 or any other Indian laws, the Tribunal may, on application made by the relevant Company, a depository incorporated in India, an investor, a participant, or the Securities and Exchange Board of India or other parties, direct the rectification of the register, record of members and/or beneficial owners. Pursuant to Section 58, the CLB/Tribunal may, in its discretion, issue an interim order suspending the voting rights attached to the relevant shares before making or completing its investigation into the alleged contravention. Notwithstanding such investigation, the rights of a shareholder to transfer the shares will not be restricted.
Under the Indian Companies Act, unless the shares of a Company are held in a dematerialized form, a transfer of shares is effected by an instrument of transfer in the form prescribed by the Indian Companies Act and the rules there under together with delivery of the share certificates. Our transfer agent is GNSA Infotech Limited, Chennai.
Ministry of Corporate Affairs has mandated the Dematerialization of shares for all Unlisted Public Companies through its Notification dated 10.9.2018, in which Rule 9A of the Companies (Prospectus and Allotment of Securities, 2014, was introduced.
According to the said Rule, every Unlisted Public Company was required to dematerialize its Shares on or before 2.10.2018 as well as transfer of physical Shares was also restricted after the said date.
However, the following classes of Unlisted Public Companies are exempted to dematerialize their shares:
| | Wholly Owned Subsidiary Company |
Disclosure of Ownership Interest
Section 89 of the Indian Companies Act 2013 requires holders on record who do not hold beneficial interests in shares of Indian companies to declare to the Company certain details, including the nature of the holder's interest and details of the beneficial owner. Any person who fails to make the required declaration within 30 days may be liable for a fine which may extend to ₹50 and where the failure is a continuing one with a further fine which may extend to ₹ 1 for every day after the first during which the failure continues.
Disclosure of Significant Beneficial Ownership
Section 90 of the Indian Companies Act, 2013 read with Companies (Significant Beneficial Owners) Rule, 2018, as amended from time to time
a significant beneficial owner to submit necessary declarations to the Company regarding the details of ownership interests held in that Company. Further, every Company shall take necessary steps to identify an individual who is a significant beneficial owner in relation to the Company and require such individual to comply with the applicable provisions
A significant beneficial owner means every individual who, acting alone or together, or through one or more persons or trust, possesses one or more of the following rights or entitlements in such reporting Company: a) holds indirectly, or together with any direct holdings, not less than 10% of the shares; b) holds indirectly, or together with any direct holdings, not less than 10% of the voting rights in the shares; c) has the right to receive or participate in not less than 10% of the total distributable dividend or any other distribution, in a financial year through indirect holdings alone, or together with any direct holdings; or d) has the right to exercise, or actually exercises, significant influence or control, in any manner other than through direct holdings alone, over the Company.
As per the SBO Rules, a reporting Company shall send notice to all its non-individual members who hold more than 10% of shares, voting rights or right to receive or participate in dividends or any other distribution in order to identify the individual SBO and cause such individual to make the required reporting to the Company. On receipt of such declaration, the Company shall intimate the same to the Ministry of Corporate Affairs.
Any person failing to submit the required disclosures is punishable with imprisonment for a term which may extend to one year or a minimum fine of one lakh rupees, but which may extend to ten lakh rupees or both imprisonment and fine. Where the failure is a continuing one, the individual will be levied a further fine which may extend to one thousand rupees for every day after the first during which the failure continues.
Under the Indian Companies Act, a Company must file its annual report with the Registrar of Companies within 7 months from the close of the accounting year or within 30 days from the date of the Annual General Meeting, whichever is earlier. At least 21 days before the annual general meeting of shareholders excluding the days of mailing and receipt, we must distribute to our shareholders a detailed version of our audited balance sheet, profit and loss account and cash flow statement and the related reports of the Board and the auditors, together with a notice convening the annual general meeting. These materials are also generally made available at our corporate website,
www.sifytechnologies.com
Under the Indian Companies Act; we must file the audited financial statements presented to the shareholders within 30 days of the conclusion of the annual general meeting with the Registrar of Companies in Tamil Nadu, India, which is the state in which our registered office is located. We must also file an annual return containing a list of our shareholders and other information within 60 days of the conclusion of the meeting.
As per the directive of the Ministry of Corporate Affairs, Government of India, effective fiscal year ended March 31, 2011 onwards, the Company is required to file the audited financials in Extensible Business Reporting Language (XBRL) mode by using XBRL taxonomy.
The Company has filed the financial statements and other documents with Ministry of Corporate Affairs, Government of India (“MCA”) for the financial year 2019-20 in Extensible Business Reporting Language (XBRL) mode by using XBRL taxonomy.
Company Acquisition of Equity Shares
A Company may, under some circumstances, acquire its own equity shares without seeking the approval of the High Court. However, a Company would have to extinguish the shares it has so acquired within the prescribed time period. Generally, a Company is not permitted to acquire its own shares for treasury operations. An acquisition by a Company of its own shares (without having to obtain the approval of the High Court) must comply with prescribed rules, regulations and conditions as laid down in the Indian Companies Act and the Securities and Exchange Board of India (Buy-back of Securities) Regulations, 1998, or Buy-back Regulations.
Any ADS holder may participate in a Company's purchase of its own shares by withdrawing his or her ADSs from the depository facility, acquiring equity shares upon the withdrawal and then selling those shares back to the Company.
There can be no assurance that equity shares offered by an ADS investor in any buyback of shares by us will be accepted by us. The regulatory approvals required for ADS holders to participate in a buyback are not entirely clear. ADS investors are advised to consult their legal advisors for advice prior to participating in any buyback by us, including advice related to any related regulatory approvals and tax issues.
Subject to the rights of creditors, employees and the holders of any shares entitled by their terms to preferential repayment over the equity shares and taxes, if any, as may be prescribed under the Indian Companies Act, in the event of our winding-up the holders of the equity shares are entitled to be repaid the amounts of paid up capital or credited as paid up on those equity shares. All surplus assets after payments due to the holders of any preference shares at the commencement of the winding-up shall be paid to holders of equity shares in proportion to their shareholdings.
Redemption of Equity Shares
Under the Indian Companies Act, equity shares are not redeemable.
Discriminatory Provisions in Articles
There are no provisions in our Articles of Association discriminating against any existing or prospective holder of such securities as a result of such shareholder owning a substantial number of shares.
Alteration of Shareholder Rights
Under the Indian Companies Act, and subject to the provisions of the articles of association of a Company, the rights of any class of shareholders can be altered or varied (i) with the consent in writing of the holders of not less than three-fourths of the issued shares of that class; or (ii) by special resolution passed at a separate meeting of the holders of the issued shares of that class. In the absence of any such provision in the articles, such alteration or variation is permitted as long as it is not prohibited by the agreement governing the issuance of the shares of that class.
Under the Indian Companies Act, the articles of association may be altered by a special resolution of the shareholders
Provisions on Changes in Capital
Our authorized capital can be altered by an ordinary resolution of the shareholders in a General Meeting. The additional issue of shares is subject to the pre-emptive rights of the shareholders. In addition, a Company may increase its share capital, consolidate its share capital into shares of larger face value than its existing shares or sub-divide its shares by reducing their par value, subject to an ordinary resolution of the shareholders in a General Meeting.
See the agreements listed in Item 7, “Major Shareholders and Related Party Transactions” regarding our material contracts involving certain of our officers and directors.
The subscription, purchase and sale of shares of an Indian Company by Person Resident outside India (non-residents) are governed by various Indian laws regulating the transfer or issue of Securities by the Company to non-residents. These regulations have been progressively relaxed in recent years. Set forth below is a summary of various forms of investment, and the regulations applicable to each, including the requirements under Indian law applicable to the issuance of ADSs.
Foreign Direct Investment
Foreign Direct Investment (FDI) in India is governed by the FDI Policy announced by the Government of India and the provisions of the Foreign Exchange Management Act (FEMA), 1999. Reserve Bank has issued Notification No. FEMA 20 /2000-RB dated May 3, 2000 which contains the Regulations in this regard. This Notification has been amended from time to time. The various amendments are compiled every year in Master Circulars. In terms of Master Circular issued on July 1, 2009, FDI is freely permitted in almost all sectors. Under the FDI Scheme, investments can be made by non-residents in the shares / convertible debentures / preference shares of an Indian Company, through two routes; the Automatic Route and the Government Route. Under the Automatic Route, the foreign investor or the Indian Company does not require any approval from the Reserve Bank or Government of India (RBI) for the investment. Under the Government Route, prior approval of the Government of India, Ministry of Finance and Foreign Investment Promotion Board (FIPB) / Department of Industrial Policy and Promotion (DIPP) is required. The details of FDI are contained in the policy and procedures in respect of FDI in India are available in
“
the Manual on Investing in India - Foreign Direct Investment, Policy & Procedures
”.
In terms of Master Circular issued in April 2014, in most manufacturing / service sectors do not require prior approval of the FIPB/DIPP, or the RBI, if the activity of the investee-Company fulfill the conditions prescribed for Automatic Route. These conditions include certain eligibility norms, pricing requirements, subscription in foreign exchange, compliance with the Takeover Code (as described below), and ownership restrictions based on the nature of the foreign investor (as described below). Purchases by foreign investors of ADSs are treated as direct foreign investment in the equity issued by Indian companies for such offerings. Foreign investment up to 100 % of our share capital is currently permitted in telecom industry.
Ministry of Finance has made the prior approval of the Government mandatory for receiving foreign investments (including the subsequent transfer of ownership), from countries that share land border with India on or after April 22, 2020. This requirement also applies in cases where the beneficial owner of such foreign investment (both at the time of investment and any change thereafter due to transfer of ownership) is situated in or is a resident of a country sharing land border with India.
Restrictions for subsequent transfers of shares of Indian companies between residents and non-residents were relaxed significantly as of October 2004. As a result, for a transfer between a resident and a non-resident of securities of an Indian Company in the Telecom sector, such as ours, no prior approval of either the RBI or the Government of India is required, as long as the terms and conditions set out in A.P. (DIR Series) Circular No. 16 of October 4, 2004 is complied with. These conditions / procedures include compliance with pricing guidelines, Consent letters from the Transaction Parties, applicability of regulatory requirements such as FDI and the Takeover Code, filing Form FC TRS with Authorized Dealers (authorized bankers) with relevant enclosures and so on.
Price of shares issued to persons resident outside India under the FDI Policy dated October 15, 2020, shall not be less than the fair valuation of shares done by a SEBI registered Merchant Banker or a Chartered Accountant as per any internationally accepted pricing methodology on arm’s length basis, where the shares of the Company are not listed on any
recognized
stock exchange in India; The price as applicable to transfer of shares from resident to non-resident as per the pricing guidelines laid down by the Reserve Bank from time to time, where the issue of shares is on preferential allotment. However, where non-residents (including NRIs) are making investments in an Indian Company in compliance with the provisions of the Companies Act, as applicable, by way of subscription to its Memorandum of Association, such investments may be made at face value subject to their eligibility to invest under the FDI scheme.
Transfers of shares or convertible debenture, by way of sale or gift, between two non-residents are not subject to RBI approvals or pricing restrictions, provided the buying non-residents do not have investment in similar business / collaboration / commercial arrangements in India. If the buying non-residents have similar investment / collaboration / commercial arrangements in India, prior Government Approval is required for such transaction.
Upon conversion of ADSs into equity shares, a holder of ADSs will be subject to the Takeover Code as prescribed by the Securities and Exchange Board of India.
Reduction of limit for Overseas Direct Investment
In terms of the extant provisions under the Foreign Exchange Management Act, 1999 (FEMA, 1999) on overseas direct investments, the total overseas direct investment (ODI) of an Indian Party can make outside investment through automatic route subject to the total financial commitment of Indian Party in overseas Joint Venture/ Wholly Owned Subsidiary shall not exceed 400% of its net worth as per the last audited Balance Sheet.
However, any financial commitment exceeding $1 billion or its equivalent in a financial year, or certain types of acquisition structures requires prior approval of the RBI under the approval route, even when the total financial commitment of the Indian Company is within 400% of the net worth of the acquiring Company as per the last audited balance sheet.
A limited two-way fungibility scheme has been put in place by the Government of India for ADRs / GDRs. Under this Scheme, a stock broker in India, registered with SEBI, can purchase shares of an Indian Company from the market for conversion into ADRs/GDRs based on instructions received from overseas investors. Re-issuance of ADRs / GDRs would be permitted to the extent of ADRs / GDRs which have been redeemed into underlying shares and sold in the Indian market.
Currently, there is no public trading market for our equity shares in India or elsewhere nor can we assure you that we will take steps to develop one. Our equity securities are only traded on NASDAQ through the ADSs as described in this report. Under prior Indian laws and regulations, our Depository could not accept deposits of outstanding equity shares and issue ADRs evidencing ADSs representing such equity shares without prior approval of the Government of India. The Reserve Bank of India has announced fungibility regulations permitting, under limited circumstances, the conversion of ADSs to equity shares and the reconversion of equity shares to ADSs provided that the actual number of ADSs outstanding after such reconversion is not greater than the original number of ADSs outstanding. If you elect to surrender your ADSs and receive equity shares, you will not be able to trade those equity shares on any securities market and, under present law, likely will not be permitted to reconvert those equity shares to ADSs.
If in the future a market for our equity shares is established in India or another market outside of the United States, those shares may trade at a discount or premium to the ADSs. Under current Indian regulations and practice, the approval of the Reserve Bank of India is not required for the sale of equity shares underlying ADSs by a non-resident Indian to a resident Indian as well as for renunciation of rights to a resident of India, unless the sale of equity shares underlying the ADSs is through a recognized stock exchange or in connection with the offer made under the regulations regarding takeovers. The shareholders who intend transferring their equity shares shall comply with the procedural requirements set out under the head ‘subsequent transfers’ above.
The Government is yet to notify the scheme.
Transfer of ADSs and Surrender of ADSs
A person resident outside India may transfer the ADSs held in Indian companies to another person resident outside India without any permission. An ADS holder is permitted to surrender the ADSs held by him in an Indian Company and to receive the underlying equity shares under the terms of the Deposit Agreement. Under Indian regulations, the re-deposit of these equity shares with the Depository for ADSs may not be permitted.
Government of India Approvals
Pursuant to the RBI's regulations relating to sponsored ADS offerings, an issuer in India can sponsor the issue of ADSs through an overseas depository against underlying equity shares accepted from holders of its equity shares in India. The guidelines specify, among other conditions, that:
| | the ADSs must be offered at a price determined by the lead manager of such offering; |
| | all equity holders may participate; |
| | the issuer must obtain special shareholder approval; and |
| | the proceeds must be repatriated to India within one month of the closure of the issue. |
The Securities and Exchange Board of India and Reserve Bank of India regulate Portfolio Investments in Indian Companies by Foreign Institutional Investors and Non-Resident Indians, both of which we refer to as foreign portfolio investors. The Reserve Bank of India issued a circular in August 1998 stating that foreign institutional investors in aggregate may hold no more than 30% of the equity shares of an Indian Company and non-resident Indians and overseas corporate bodies in aggregate may hold no more than 10% of the shares of an Indian Company through portfolio investments. Under current Indian Law, the aggregate of the investment by the Foreign Institutional Investors cannot be more than 24% of the equity share capital of an Indian Company, and the aggregate of the investment by the Non-Resident Indians cannot be more than 10% of the equity share capital of an Indian Company through Portfolio Investments. The 24% and 10% limit referred above may be increased to 49% and 24% respectively on passing of a Special Resolution by the Shareholders to that effect. Moreover, no single Foreign Institutional Investor may hold more than 10% of the shares of an Indian Company and no single Non-Resident Indian may hold more than 5% of the shares of an Indian Company.
Foreign institutional investors are urged to consult with their Indian legal and tax advisers about the relationship between the foreign institutional investor regulations and the ADSs and any equity shares withdrawn upon surrender of ADSs.
Under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, Every purchaser who acquires (directly or indirectly) more than 5% of the equity share capital at any point of time (the aggregate of the existing shares and the newly acquired shares) of a Listed Public Indian Company, is required to notify the Company within four days of such acquisition or receipt of allotment information and the Company in turn is required to notify all the stock exchanges on which the shares of the Company are listed with seven days.
Any purchaser whose proposed acquisition entitled him to hold 15% (the aggregate of the existing shares and the newly acquired shares) or more of such shares or a change in control of the Company, either by himself or with others acting in concert is required to make annual disclosures of the purchaser’s holdings in the Company and to make an Open Offer to the other Shareholders offering to purchase at least 20% of all the outstanding shares of the Company at a minimum offer price as determined pursuant to the provisions of the regulations. A purchaser who holds between 15 % and 75 % of a Company’s shares cannot acquire additional shares or voting rights that would entitle the purchaser to exercise an additional 5.% of the voting rights in any 12 month period unless such purchaser makes a public announcement offering to acquire an additional 20% of the Company’s shares. Upon conversion of ADSs into equity shares, an ADS holder will be subject to the Takeover Code. The Takeover Code does not apply to purchases involving the acquisition of shares (i) by allotment in a public and rights issue, (ii) pursuant to an underwriting agreement, (iii) by registered stockbrokers in the ordinary course of business on behalf of customers, (iv) in unlisted companies, (v) pursuant to a scheme of reconstruction or amalgamation or (vi) pursuant to a scheme under Section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985. The Takeover Code does not apply to purchases in the ordinary course of business by public financial institutions either on their own account or as a pledgee. In addition, the Takeover Code does not apply to the purchase of ADSs so long as they are not converted into equity shares. However, since we are an unlisted Company, the provisions of the new regulations will not apply to us. If our shares are listed on an Indian stock exchange in the future, the new regulations will apply to the holders of our ADSs.
Open market purchases of securities of Indian companies in India by foreign direct investors or investments by non-resident Indians and foreign institutional investors above the ownership levels set forth above require Government of India approval on a case-by-case basis.
Voting Rights of Deposited Equity Shares Represented by ADSs
Holders of ADSs generally have the right under the deposit agreement to instruct the depository bank to exercise the voting rights for the equity shares represented by the related ADSs. At our request, the depository bank will mail to the holders of ADSs any notice of shareholders’ meeting received from us together with information explaining how to instruct the depository bank to exercise the voting rights of the securities represented by ADSs.
If the depository bank timely receives voting instructions from a holder of ADSs, it will endeavor to vote the securities represented by the holder’s ADSs in accordance with such voting instructions. In the event that voting takes place by a show of hands, the depository bank will cause the custodian to vote all deposited securities in accordance with the instructions received by holders of a majority of the ADSs for which the depository bank receives voting instructions.
Please note that the ability of the depository bank to carry out voting instructions may be limited by practical and legal limitations and the terms of the securities on deposit. We cannot assure you that ADS holders will receive voting materials in time to enable them to return voting instructions to the depository bank in a timely manner. Securities for which no voting instructions have been received will not be voted except as discussed above.
As a foreign private issuer, we are not subject to the SEC’s proxy rules, which regulate the form and content of solicitations by United States-based issuers of proxies from their shareholders. To date, our practice has been to provide advance notice to our ADS holders of all shareholder meetings and to solicit their vote on such matters, through the depository, and we expect to continue this practice. The form of notice and proxy statement that we have been using does not include all of the information that would be provided under the SEC’s proxy rules.
Under Indian law, the ADS holders have the right to vote on any general meetings either by show of hands or by poll only on becoming the Shareholder of the Company by converting the ADS into equity shares of the Company.
Given below is the summary of tax implications for holders of ADSs and equity shares, upon withdrawal of such equity shares, who are not resident in India, whether of Indian origin or not. These tax provisions are governed by the Income Tax Act, 1961 (‘the Act’) read with the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme, 1993 or the Scheme, as amended.
This section is not intended to constitute a complete analysis of the individual tax consequences to non-resident holders under Indian law for the acquisition, ownership and sale of ADSs and equity shares. Personal tax consequences of an investment may vary for non-resident holders in various circumstances, and potential investors should therefore consult their tax advisors on tax consequences of such acquisition, ownership and sale, including specifically the tax consequences under the law of the jurisdiction of their residence and any tax treaty between India and their country of residence. Each prospective investor should consult his, her or its own tax advisors with respect to Indian and local tax consequences of acquiring, owning or disposing of equity shares or ADSs.
Residential status of individuals:
A person is said to be resident in India during any fiscal year if he or she stays in India in that year:
| | For a period of at least 182 days or |
| | For a period of at least 60 days and, within the four preceding years has been in India for a period or periods amounting to at least 365 days. |
| | citizen of India who leaves India in a previous year for the purposes of employment outside of India, |
| | citizen of India or a person of Indian origin living abroad who visits India |
then, the second condition as mentioned above will be applicable only if the person stays in India for a minimum of 182 days as against 60 days in the relevant fiscal year.
Further, Finance Act, 2020 has amended the provisions of residential status as below:
| | In case of Indian citizens or a person of Indian origin living abroad visiting India having total income, other than income from foreign source, exceeding Rs. 15 lakhs, the period of stay would be considered as 120 days as against 60/ 182 days as provided above. Further such person would be treated as Resident but Not Ordinarily Resident (RNOR) if his stay in India is less than 182 days. |
| | Moreover, such person would be deemed to be a Resident of India if his total income (not including foreign sourced income) exceeds Rs. 15 lakhs during the previous year and if he/she is not liable to income tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature. Such person who is deemed to be resident of India would be treated as RNOR. |
Residential status of corporates:
As per the provisions of the Act a Company is said to be resident in India if it is an Indian Company or if the control and management of its affairs is situated wholly in India. If none of the aforesaid conditions are satisfied, the Company is treated as a non-resident as per the Act.
| | However, Finance Act, 2015 brought in a concept called Place of Effective Management (‘POEM’). Accordingly, the residential status of companies was redefined. A Company would be considered a resident if it is an Indian Company or if its POEM, in that year, is in India. POEM was defined as a place where key management and commercial decisions that are necessary for conduct of business as an entity, as a whole are, in substance, made. Thus, a foreign Company will become a resident of India if its POEM is in India. |
| | POEM is a well recognized concept in OECD & UN Model Tax Convention. OECD recognized POEM as a tie-breaker rule for determining residential status and hence most of Double Taxation Avoidance Agreements (‘DTAA’) with India recognize it as a tie-breaker rule. |
| | Finance Act, 2016 deferred the applicability of POEM by one year and accordingly POEM was applicable from fiscal year 2017 onwards. Ministry of Finance issued detailed guidelines for POEM compliances vide CBDT circular dated January 24, 2017 and also prescribed guidelines specifying the exceptions, modifications and adaptations to the provisions of the Act relating to computation of total income, treatment of unabsorbed depreciation, set off or carry forward and set off of losses, collection and recovery and special provisions relating to avoidance of tax applicable to foreign companies having POEM in India vide CBDT Notification No. 29/2018 dated June 22, 2018. This could increase the burden of compliances for our subsidiary companies situated outside India. |
Taxation of Distributions:
Up to fiscal year 2020, dividend income was exempt in the hands of shareholders since corporates, while disbursing dividends, paid dividend distribution tax (‘DDT’) thereon. Finance Act, 2017 provided that, dividend income in excess of Rs.1 million per annum is taxable at the rate of 10% (plus applicable surcharge and education cess) for non-corporate resident investors.
However, Finance Act 2020 brought back the earlier provisions relating to taxability of dividends, wherein dividend income will be taxed in the hands of shareholders based on their respective taxation limits and provided that companies can do away with payment of DDT. Accordingly, it was also provided that companies are required to withhold taxes on the dividends paid to shareholders as per the relevant provisions of the Act also adhering to the provisions of DTAA/ Multilateral Instruments (MLI) with respective countries.
In order to remove the cascading effect on taxes on the dividends paid on the same profits, the amendments also provided for reduction of dividends received from subsidiary companies from total income of the holding company receiving dividend if the same is distributed as dividends by the holding companies (i.e., dividend distributed out of the dividends received from their subsidiaries). Such reduction is available for dividends distributed by the holding companies up to one month prior to the due date of filing Income Tax Return. Consequent amendment was also made to the provisions for deductions to be allowed on dividend income. It was provided that no deduction shall be allowed from dividend income, other than the deduction on account of interest expense and such deduction shall not exceed twenty percent of the dividend income.
A brief history of taxation of dividend distributions is given below:
Up to fiscal 2013, the domestic companies were liable to pay a dividend distribution tax at the rate of 16.22% inclusive of applicable surcharge and education cess. Finance Act, 2013 increased the surcharge on DDT from 5% to 10% which resulted in increase in the effective rate of DDT to 16.995% as against 16.22% effective April 1, 2013. Any distributions of additional ADSs or equity shares to resident or non-resident holders will not be subject to Indian tax. Finance Act, 2014 made an amendment in section 115-O, which requires grossing up of dividend amount distributed for computing DDT. As a result, the effective rate of DDT increased from 16.995% to 19.994% inclusive of surcharge and cess. This was effective from October 1, 2014. Further as a result of increase in rate of surcharge in the Finance Act, 2015, the effective rate of DDT has increased to 20.3576% from 19.994%. However, for fiscal year 2019 the Government replaced existing 3 per cent education cess with a 4 per cent ‘Health and Education Cess’ resulting in effective tax rate of 20.555%. Further, the Government of India, through Finance Act, 2017, introduced a tax on dividends accrued to non-corporate resident investors in excess of 1 million per annum at the rate of 10% (plus applicable surcharge and education cess). This is in addition to a DDT payable by the Company. If the applicability of DDT or new forms of taxes on distribution of profits are amended or introduced, the dividend amount receivable by shareholders after taxes may decrease.
Taxation of Employee Stock Option Plans:
Finance Act, 2009 brought provisions to tax any specified securities or sweat equity shares allotted or transferred, directly or indirectly, by a Company free of cost or at concessional rate to its current or former employees. Accordingly, the fair market value (‘FMV’) of the specified security or share as on the date of exercise of the option by the employee as reduced by the amount actually paid by, or recovered from the employee is taxable as a perquisite in the hands of the employee under the head ‘Salaries’. This treatment extends to all options granted under a Company’s stock option plan, where such option is exercised on or after April 1, 2009. It is to be noted that such securities or sweat equity shares allotted or transferred by a Company free of cost or at concessional rate to its employees were earlier subject to a fringe benefit tax which was abolished in 2009.
Taxation of Capital Gains:
Any gain realized on the sale of ADSs by a non-resident holder to any non-resident outside India is not subject to Indian capital gains tax as it is not regarded as transfer by virtue of section 47(viia) of the Act which is prerequisite for taxing as capital gains. Since our ADS offerings were approved by the Government of India under the Issue of Foreign Currency Convertible Bonds and Ordinary Shares Scheme, non-resident holders of the ADSs have the benefit of tax concessions available under Section 115AC.
The following provisions pertain to taxation of capital gains as per the provisions of the Act:
| | Shares (including shares issuable on the conversion of the ADSs) held by the non-resident investor for a period of more than 12 months are treated as long term capital assets. If the shares are held for a period of less than 12 months from the date of conversion, the same is treated as short term capital asset. |
| | Taxable gain realized by a non-resident in respect of equity shares held for more than 12 months, or long-term gain, is subject to tax at the rate of 10.00% (excluding applicable surcharge and cess). |
| | Taxable gain realized in respect of equity shares held for 12 months or less, or short-term gain, is subject to tax at variable rates with a maximum rate of 30.00% (excluding applicable surcharge and cess). The actual rate of tax on short-term gain depends on a number of factors, including the country of residence of the non-resident holder and the type of income chargeable in India. |
| | Long Term Capital Gain arising from sale of equity shares in a Company (or a unit of an equity-oriented fund or a unit of a business trust) on or after October 1, 2004 and on which STT is paid at the time of sale, was earlier exempt from Tax. The Finance Act 2017 had amended the Act to provide that the Long-term capital gains realized by any person upon the sale of equity shares in a Company is exempt from tax only if the sale of such shares is made on a recognized stock exchange and Securities Transaction Tax, or STT (described below) is paid both at the time of purchase and sale of such shares, or such acquisition has been notified by the Central Government. Finance Act, 2018 amended the Act to provide that Long Term Capital Gain exceeding ₹100,000 arising from sale of equity shares in a Company or a unit of an equity-oriented fund or a unit of a business trust will be taxable at a rate of 10%, subject to satisfaction of certain conditions and will not get the benefit of indexation. Thus, any transfer carried out after 1 April 2018 resulting in Long Term Capital Gains in excess of ₹100,000 will attract tax at the rate of 10 percent. Further if investments are made on or before January 31, 2018, a method of determining the Cost of Acquisition (COA) of such investments has been specifically laid down. The COA of such investments shall be deemed to be the higher of- |
| | The actual COA of such investments; and |
| | FMV of such investments as on January 31, 2018; and |
| | Full Value of Consideration received or accruing as a result of the transfer of the capital asset i.e. the Sale Price. |
| | With respect to assets listed as on January 31, 2018, the FMV would be the highest price quoted on the recognized stock exchange on January 31, 2018. In case there is no trading of the said asset in such stock exchange, the highest price on a day immediately preceding January 31, 2018 shall be considered to be the FMV; and any short-term capital gain is taxed at 15% excluding the applicable surcharge and education cess, if the sale of such equity shares is settled on a recognized stock exchange and STT is paid on such sale. |
Surcharge and education cess:
As per Finance Act, 2015, the rate of surcharge for domestic companies having total taxable income exceeding ₹ 10 Million but not exceeding ₹ 100 Million is 7% and in the case of domestic companies with total taxable income greater than ₹ 100 Million, the applicable surcharge is 12%. For foreign companies, the rate of surcharge is 2% if the total taxable income exceeds ₹ 10 Million but does not exceed ₹ 100 Million and it is 5% if the total taxable income of the foreign Company exceeds ₹ 100 Million. The taxes and applicable surcharge will be increased by incremental levy known as ‘Health and Education cess’ at 4%.
Since October 1, 2004, with respect to a sale and purchase of equity shares entered into on a recognized stock exchange in India, (i) both the buyer and seller are required to pay a Securities Transaction Tax (‘STT’) at the rate of 0.1% of the transaction value of the securities, if the transaction is a delivery based transaction, i.e. the transaction involves actual delivery or transfer of shares; (ii) the seller of the shares is required to pay a STT at the rate of 0.025% of the transaction value of the securities if the transaction is a non-delivery based transaction, i.e. a transaction settled without taking delivery of the shares. STT is leviable with respect to a sale and purchase of a derivative and the rates of STT as substituted by Finance Act, 2008 effective June 1, 2008 is as follows: (i) in case of sale of an option in securities, the seller is required to pay an STT at the rate of 0.05% of the option premium; (ii) in case of a sale of an option in securities, where the option is exercised, the buyer is required to pay a STT at the rate of 0.125% of the settlement price; and (iii) in case of sale of futures in securities, the seller is required to pay STT at 0.01% on transaction value.
| | Any resulting taxes on capital gains arising out of such transaction may be offset by the applicable credit mechanism allowed under DTAA. The capital gains tax is computed by applying the appropriate tax rates to the difference between the sale price and the purchase price of the equity shares. Under the Scheme, the purchase price of equity shares in an Indian listed Company received in exchange for ADSs will be the market price of the underlying shares on the date that the Depositary gives notice to the custodian of the delivery of the equity shares in exchange for the corresponding ADSs, or the “stepped up” basis purchase price. The market price will be the price of the equity shares prevailing on the BSE or the NSE, as applicable. |
| | There is no corresponding provision under the Act in relation to the “stepped up” basis for the purchase price of equity shares. However, to the best of our knowledge, the tax department in India has not denied this benefit. In the event that the tax department denies this benefit, the original purchase price of ADSs would be considered the purchase price for computing the capital gains tax. |
| | According to the Scheme, a non-resident holder’s holding period for the purposes of determining the applicable Indian capital gains tax rate relating to equity shares received in exchange for ADSs commences on the date of the notice of the redemption by the Depositary to the custodian. However, the Scheme does not address this issue in the case of resident employees, and it is therefore unclear when the holding period for the purposes of determining capital gains tax commences for such a resident employee. |
| | The Finance Act, 2017 has also introduced section 56(2)(x) in the Act to include that following shall be chargeable to Income tax as “Income from other sources”: |
Where any person receives, in any previous year, from any person or persons on or after the first day of April, 2017, amongst others, any shares or securities without consideration, the FMV of which exceeds fifty thousand rupees, the whole of the FMV of such shares or securities or for a consideration which is less than the FMV of the shares or securities by an amount exceeding fifty thousand rupees, the FMV of such shares or securities as exceeds such consideration. For this purpose, the FMV is required to be computed as per prescribed taxation rules. Further, this provision is subject to certain specified exemptions, as an example, receipt of shares or securities from specified relatives, or pursuant to tax neutral mergers and demergers. It is unclear whether capital gains derived from the sale of subscription rights or other rights by a non-resident holder not entitled to an exemption under a DTAA will be subject to Indian capital gains tax. If such subscription rights or other rights are deemed by the Indian tax authorities to be situated within India, the gains realized on the sale of such subscription rights or other rights will be subject to Indian taxation. The capital gains realized on the sale of such subscription rights or other rights, which will generally be in the nature of short-term capital gains, will be subject to tax at a maximum rate of 40% (excluding applicable surcharge and education cess), in case of a foreign Company and at a maximum rate of 30% (excluding applicable surcharge and education cess), in case of resident employees and non-resident individuals with taxable income over
₹
Withholding Tax on Capital Gains:
Any taxable gain realized by a non-resident on the sale of ADSs or equity shares is to be subject to withholding of tax at source by the buyer. According to Sections 196C and 196D of the Act, where any income by way of interest or dividends in respect of bonds or global depository receipts referred to in section 115AC of the Act or by way of long-term capital gains arising from the transfer of such bonds or global depository receipts is payable to a non-resident respectively, the person responsible for making the payment shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a check or draft or by any other mode, whichever is earlier, deduct income tax thereon at the rate of ten per cent subject to any concession rate of tax provided as per DTAA of respective countries read along with applicable MLI. The concessional tax rate benefit as per DTAA would be available subject to providing various Tax forms including Tax Residency Certificate by non-resident shareholders. However, as per the provisions of Section 196D(2) of the Act, no withholding of tax is required from any income by way of capital gains arising to Foreign Institutional Investors as defined in Section 115AD of the Act on the transfer of securities defined in the said section.
Prior to July 5, 2019, Indian listed companies were not subject to any tax on the buy-back of their shares. However, the shareholders will be taxed on any resulting gains. In case of resident shareholders in absence of any specific provision under the Act, the Company is not required to deduct tax on the consideration payable to resident shareholders pursuant to the Buyback. In case non-resident FPIs, section 196D (2) of the Act provides for specific exemption from withholding tax. Thus, no withholding of tax is required in case of consideration payable to FPIs. In case other than FPIs, Indian companies would be required to deduct tax at source (including applicable surcharge and cess) on any sum chargeable to tax under section 195(1) of the Act. Subject to regulations in this regard, wherever applicable and it is required to do so, tax at source (including applicable surcharge and education cess) shall be deducted at appropriate rates as per the Act. In doing this, the Company will be guided by generally followed practices and make use of data available in its records except in cases where the non-resident shareholders provide a specific mandate in this regard. Since the buyback is through the recognized stock exchanges in India, the responsibility of discharge of the tax due on the gains (if any) is primarily on the non-resident shareholder given that practically it is very difficult to withhold taxes. It is therefore important for the non-resident shareholders to suitably compute such gains (if any) on this transaction and immediately pay taxes in India in consultation with their custodians, authorized dealers and/or tax advisors, as appropriate. In case of buyback of unlisted shares as per section 115QA of the Act, domestic companies are subject to tax on buyback of unlisted shares. Further with effect from July 5, 2019, the Finance Act (No. 2) 2019 has extended the buy-back Tax to shares of listed Company under section 115QA of the Act, domestic companies are subject to tax on buyback of listed shares. The statutory obligation of the non-resident shareholder to pay tax dues on gains (if any) is separate and independent from the statutory obligation of the Company to withhold taxes. Correspondingly exemption to shareholder under section 10(34A) of the Act is provided.
Further Taxation Law (Amendment) Act 2019 provided that the Tax on buy-back of shares would not apply to such buy-back of shares (being the shares listed on a recognized stock exchange), in respect of which public announcement has been made on or before the 5
th
day of July, 2019 in accordance with the provisions of the Securities and Exchange Board of India (Buy-back of Securities) Regulations, 2018 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992).
Stamp Duty and Transfer Tax
A sale of equity shares in physical form by a non-resident holder will be subject to Indian stamp duty at the rate of 0.25% of the market value of the equity shares on the trade date, although customarily such tax is borne by the transferee. Shares must be traded in dematerialized form. The transfer of shares in dematerialized form is currently not subject to stamp duty. Transfer of ADSs is not subject to Indian stamp duty.
As per the Finance Act 2019 stamp duty shall be chargeable on transfer of shares in Dematerialized Form. Rate in such case shall be 0.015% of total market value of shares in case transfer is made on delivery basis and 0.003% in case transfer is made on non-delivery basis. If the issue of securities other than through stock exchange and depository the Rate of Stamp Duty will be 0.005 % of the market value. This provision would be applicable from July 1, 2020.
Corporate Taxability under the provisions of the Act
Section 115JA was introduced to the Act with effect from April 1, 1997, to bring certain zero tax companies under the ambit of a Minimum Alternative Tax (‘MAT’). Finance Act, 2000 introduced Section 115JB to the Act modifying the MAT provisions. Accordingly, if the tax on taxable income of a Company computed under the Act, in respect of a fiscal year is less than 7.5% (later revised to 18.5% and then 15%) of its book profits, the tax on total income of such Company for the relevant fiscal year shall be deemed to be an amount equal to 7.5% (later revised to 18.5% and then 15%) (plus applicable surcharge & cess) of such book profits. Further, the Act provides that the MAT paid by companies can be adjusted against its tax liability under the normal provisions of the Act over the next fifteen years but limited to the extent that is over and above the tax computed under MAT provisions for the same period.
Section 115BAA of the Act (a new corporate tax regime) was introduced with effect from fiscal year 2019-20 providing that Indian companies can opt for a lower corporate tax rate of 22% (plus surcharge and cess) subject to satisfaction of certain conditions. As part of the new regime, the aforementioned MAT provisions are fully made not applicable if the new regime is opted by the corporates. While MAT paid by companies can be adjusted against its tax liability over the next fifteen years, if corporates opt for the new tax regime, existing MAT Credit cannot be carried forward & adjusted in subsequent years and will have to be foregone upon opting of new regime.
Finance Act, 2023 has amended various provisions of the Act. Captured below are the amendments relevant in the context of the current discussion:
| | Section 80-IAC: Extension of last date for incorporation of eligible startups (engaged in innovation, development or improvement of products or processes or services or a scalable business model with a high potential of employment generation or wealth creation) from 31 March 2023 to 31 March 2024 to avail profit linked exemption (100 percent of profits allowed as deduction). |
| | Section 43B: Deduction of payments to MSME allowed only on actual payment basis except where the same is not due as per the timelines provided in the MSME Act, 2006. |
| | Section 9: Receipt of gifts by residents but not ordinarily residents within the purview of income deemed to accrue or arise in India. |
| | Section 56(2)(vii)(b): Applicability extended to receipt of excess consideration for issue of shares to a resident company from non-resident/ resident but not ordinarily residents as well. |
| | Section 49: Cost of acquisition for certain capital assets such as intangibles or any similar other right clearly defined as ‘NIL. |
| | Section 206AA/AB: Exclude from its purview of higher rate of TDS persons not liable to file income tax returns. |
| | Sections 154 and 155: Provides procedure for grating TDS credit in relation to income offered to tax in earlier years. |
| | Penalty provisions introduced for non-compliance with TDS obligations under sections 194R (Benefit or perquisite provided to a resident carrying on business or profession, exceeding ₹ 20,000 in a year, shall be subjected to TDS at 10 percent of the value of such benefit/ perquisite) and 194S ( mandates TDS by any person making payment to any resident in India on purchase/ transfer of a virtual digital asset). |
| | Penalty provisions introduced for submitting inaccurate information in Specified Financial Transactions (‘SFT’) return (specified entities required to furnish certain reportable transactions such as issue of bonds/debentures/ shares, buy back of shares, dividend distribution, etc. undertaken during the year. |
| | Relaxation to enable filing of modified return by the successor in the case of Business reorganization within six months of the court order and authority to and procedure to be followed by the officer in such scenarios also prescribed. |
Material U. S. Federal Income Tax Consequences
The following is a summary of the material U.S. federal income tax consequences that may be relevant with respect to the ownership and disposition of equity shares or ADSs and is for general information only. This summary addresses the U.S. federal income tax considerations of U.S. holders. For purposes of this discussion, “U.S. holders” are beneficial owners of equity shares or ADSs who or that are (a) individuals who are citizens or residents of the United States for U.S. federal income tax purposes, (b) corporations (or other entities treated as corporations for U.S. federal income tax purposes) created in or under the laws of the United States or any political subdivision thereof, (c) estates, the income of which is includable in gross income for U.S. federal income tax purposes, regardless of its source and (d) trusts having a valid election to be treated as “United States persons” (within the meaning of Section 7701(a)(30) of U.S. Internal Revenue Code of 1986, as amended (the “
Code
”)) in effect under U.S. Department of the Treasury regulations (“
U.S. Treasury Regulations
”) or the administration of which a U.S. court exercises primary supervision and with respect to which a United States person has the authority to control all substantial decisions.
This summary is limited to U.S. holders who hold or will hold equity shares or ADSs as capital assets (generally property held for investment). In addition, this summary is limited to U.S. holders who are not residents in India for purposes of the Convention between the Government of the United States of America and the GOI for the avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on Income (the “
Convention
”).
This summary does not address any tax considerations arising under the laws of any U.S. state or local or non-U.S. jurisdiction, or tax considerations under any U.S. estate or gift tax or other non-income tax laws. In addition, this summary does not address tax considerations applicable to holders that may be subject to special tax rules, such as banks, insurance companies, regulated investment companies, real estate investment trusts, financial institutions, dealers in securities or currencies, tax-exempt entities, persons subject to alternative minimum tax, persons subject to special accounting rules under Section 451(b) of the Code, persons that will hold equity shares or ADSs as a position in a “straddle” or as part of a “hedging” or “conversion” transaction for tax purposes, persons holding ADSs or equity shares through partnerships or other pass-through entities and investors therein, persons that have a “functional currency” other than the U.S. dollar or holders owning directly, indirect or through the application of certain constructive ownership rules, 10% or more, by voting power or value, of the shares of our Company. This summary is based on the Code, the U.S. Treasury Regulations in effect or, in some cases, proposed, as of the date of this document, as well as judicial and administrative interpretations thereof available on or before such date and is based in part on the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms. All of the foregoing is subject to change, which could apply retroactively and could affect the tax consequences described below.
If a partnership (or an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds the equity shares or ADSs, the tax treatment of a partner in such partnership will generally depend upon the status of the partner and upon the activities of the partnership. A partner in a partnership holding equity shares or ADSs should consult its own tax advisor.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR WITH RESPECT TO THE U.S. FEDERAL, U.S. STATE, U.S. LOCAL AND NON-U.S. TAX CONSEQUENCES OF ACQUIRING, OWNING OR DISPOSING OF EQUITY SHARES OR ADSs
. For U.S. federal income tax purposes, holders of ADSs generally will be treated as the owners of equity shares represented by such ADSs. Accordingly, the conversion of ADSs into equity shares generally will not be subject to U.S. federal income tax.
. Subject to the passive foreign investment company (“
PFIC
”) rules described below, the gross amount of any distributions of cash or property (other than, generally, distributions of our equity shares) with respect to equity shares or ADSs will generally be included in income by a U.S. holder as foreign source dividend income at the time of receipt, which in the case of a U.S. holder of ADSs generally should be the date of receipt by the depositary, to the extent such distributions are made from the current or accumulated earnings and profits (as determined under U.S. federal income tax principles) of our Company. Such dividends will not be eligible for the dividends received deduction (“
DRD
”) generally allowed to corporate U.S. holders, other than certain corporate U.S. holders who own 10% or more of the equity in our Company (including ADSs). Such U.S. holders should consult their tax advisors regarding any DRD to which they are entitled. To the extent, if any, that the amount of any distribution by our Company exceeds our Company’s current or accumulated earnings and profits as determined under U.S. federal income tax principles, such excess will be treated first as a tax-free return of capital to the extent of the U.S. holder’s tax basis in the equity shares or ADSs and thereafter as capital gain. However, because we do not intend to determine our earnings and profits under U.S. federal income tax principles, any distribution will generally be treated as a dividend for U.S. federal income tax purposes.
Subject to certain conditions and limitations, including the PFIC rules described below, dividends paid to non-corporate U.S. holders, including individuals, may be eligible for a reduced rate of taxation if we are deemed to be a “qualified foreign corporation” for U.S. federal income tax purposes and certain holding period requirements are met (including the requirement that the non-corporate U.S. holder holds the equity shares or ADSs for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date).
A qualified foreign corporation generally includes a non-U.S. corporation (1) with respect to any dividend it pays on its shares (or ADSs in respect of such shares) that are readily tradable on an established securities market in the United States, or (2) it is eligible for the benefits under a comprehensive income tax treaty with the United States meeting certain requirements. In addition, a corporation is not a qualified foreign corporation if it is a PFIC (as discussed below) for the taxable year in which the dividend is paid or the preceding taxable year. Our ADSs are traded on the NASDAQ, an established securities market in the United States as identified by Internal Revenue Service (“
IRS
”) guidance. We may also be eligible for benefits as a result of the Convention. Each U.S. holder should consult his, her or its own tax advisor regarding the treatment of such dividends and such holder’s eligibility for a reduced rate of taxation.
Subject to certain conditions and limitations, Indian dividend withholding tax, if any, imposed upon distributions paid to a U.S. holder with respect to such holder’s equity shares or ADSs generally should be eligible for credit against the U.S. holder’s U.S. federal income tax liability. Alternatively, a U.S. holder may claim a deduction for such amount, but only for a year in which a U.S. holder does not claim a credit with respect to any non-U.S. income taxes. The overall limitation on non-U.S. income taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, distributions on equity shares or ADSs generally will be income from sources outside the United States and will generally be “passive category income” for purposes of computing the U.S. “foreign tax credit” allowable to a U.S. holder. No foreign tax credit or deduction is allowed for taxes paid or accrued with respect to a dividend that qualifies for the DRD. If dividends are paid in Indian rupees, the amount of the dividend distribution included in the income of a U.S. holder will be in the U.S. dollar value of the payments made in Indian rupees, determined at a spot exchange rate between Indian rupees and U.S. dollars applicable to the date such dividend is included in the income of the U.S. holder, regardless of whether the payment is in fact converted into U.S. dollars. Generally, gain or loss, if any, resulting from currency exchange fluctuations during the period from the date the dividend is paid to the date such payment is converted into U.S. dollars will be treated as U.S. source ordinary income or loss.
Sale or Exchange of Equity Shares or ADSs
. A U.S. holder generally will recognize gain or loss on the sale or exchange of equity shares or ADSs equal to the difference between the amount realized on such sale or exchange and the U.S. holder’s adjusted tax basis in the equity shares or ADSs, as the case may be. Subject to the discussion of the PFIC rules below, such gain or loss generally will be capital gain or loss, and generally will be long-term capital gain or loss if the equity shares or ADSs, as the case may be, were held for more than one year. Gain or loss, if any, recognized by a U.S. holder generally will be treated as U.S. source passive category income or loss for U.S. foreign tax credit purposes. If capital gains realized by a U.S. holder upon the sale of equity shares or ADSs are subject to tax (including withholding tax) in India (see the “Taxation of Distributions” and “Taxation of Capital Gains” discussions with respect to Indian taxes above), a U.S. holder may not be able to utilize any such taxes as a credit against the U.S. holder’s U.S. federal income tax liability due to certain limitations on U.S. foreign tax credits.
Backup Withholding Tax and Information Reporting.
Any dividends paid, or proceeds on a sale of, equity shares or ADSs to or by a U.S. holder may be subject to U.S. federal information reporting, and U.S. federal backup withholding, currently at a rate of 24%, may apply unless the holder is an exempt recipient or provides such holder’s correct U.S. taxpayer identification number, certifies that such holder is not subject to backup withholding and otherwise complies with any applicable backup withholding requirements. Any amount withheld under the backup withholding rules may be allowed as a refund or credit against the holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS.
Additional Tax on Net Investment Income.
U.S. holders that are individuals, estates or trusts and whose income exceeds certain thresholds are subject to a 3.8% tax on certain net investment income, including, among other things, dividends on, and capital gains from the sale or other taxable disposition of, equity shares or ADSs, subject to certain limitations and exceptions.
Passive Foreign Investment Company
. A non-U.S. corporation will be classified as a PFIC for any taxable year for U.S. federal income tax purposes if either:
| | 75% or more of its gross income for the taxable year is passive income; or |
| | 50% or more of its assets (determined based on a quarterly average) by value, or, if it is not a publicly traded corporation and so elects or is a controlled foreign corporation, by adjusted basis, and including its pro rata share of the assets of any company in which it is considered to own 25% or more by value, produce or are held for the production of passive income. |
We do not believe that we satisfy either of the tests for PFIC status for the taxable year ended March 31, 2023. However, because this determination is made on an annual basis and depends on a variety of factors (including, potentially, the value of our equity shares or ADSs), no assurance can be given that we were not considered a PFIC in a prior taxable year, or that we will not be considered a PFIC for the current taxable year and/or future taxable years. If we were to be a PFIC for any taxable year, U.S. holders would be required to either:
| | pay an interest charge together with tax calculated at ordinary income rates on “excess distributions,” as the term is defined in relevant provisions of the Code, including on any gain on a sale or other disposition of ADSs or equity shares; |
| | if an election is made for us to be a “qualified electing fund” (as the term is defined in relevant provisions of the Code) in the first taxable year in which our Company is a PFIC during the period that the U.S. holders owns equity shares or ADSs, include in such U.S. holders taxable income their pro rata shares of undistributed amounts of our income and gain; or |
| | if the equity shares are “marketable” and a “mark-to-market” (as such terms are defined in the Code) election is made, mark-to-market the equity shares each taxable year and recognize ordinary gain and, to the extent of prior ordinary gain, ordinary loss for the increase or decrease in market value for such taxable year. |
If we are treated as a PFIC in any year, we do not plan to provide information necessary for U.S. holders to make the qualified electing fund election. As such, it is not expected that a U.S. holder will be able to make a qualified electing fund election with respect to our equity shares or ADSs.
If we are treated as a PFIC for any taxable year during which a U.S. holder holds the ADSs or equity shares, we will continue to be treated as a PFIC with respect to such U.S. holder for all succeeding years during which the U.S. holder holds the ADSs or equity shares, unless we were to cease to be a PFIC and the U.S. holder makes a “deemed sale” election with respect to the ADSs or equity shares.
In addition, certain U.S. federal information reporting obligations applicable to ownership of PFICs generally will apply to U.S. holders if we are determined to be a PFIC, such as annually filing an IRS Form 8621. Penalties may be imposed where applicable for failure to file IRS Form 8621.
The above summary is not intended to be a complete analysis of all tax consequences relating to ownership of equity shares or ADSs. You should consult with your own tax advisors regarding the application of the U.S. federal income tax laws to your particular circumstances, as well as any additional tax consequences resulting from an investment in the ADSs or equity shares, including the applicability and effect of the tax laws of any state, local or non-U.S. jurisdiction, and any estate, gift and inheritance laws.
This report and other information filed or to be filed by us can be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. Copies of these materials can also be obtained from the Public Reference Section of the SEC, 100 F Street, NE., Washington, DC 20549, at prescribed rates. Additionally, all of our publicly filed SEC reports are available at the SEC’s website,
www.sec.gov,
which contains all the public filings and other information regarding registrants that make electronic filings with the SEC using its EDGAR system.
Additionally, documents referred to in this Annual Report may be inspected at our corporate offices which are located at TIDEL Park. No, 4, Rajiv Gandhi Salai, Taramani, Chennai, 600 113 India.
| | Repo Rate under LAF has been increased to 6.50 per cent, through Six (6) trench increase from 4.40 per cent this fiscal year. |
| | Reverse repo rate under the LAF retained at 3.35 per cent, throughout this fiscal year. |
| | Foreign Trade Policy benefits have been extended to include rupee realizations through special Vostro accounts that have been set up according to the RBI circular released on July 11, 2022 |
| | The Reserve Bank of India (RBI) has issued an advisory to banks and other RBI-regulated entities, emphasizing the complete transition from London Interbank Offered Rate (LIBOR) to widely accepted Alternative Reference Rate (ARR) |
| | Cash Reserve Ratio increased by 50 bps to 4.50 per cent from 4.00 per cent to reduce the marginal liquidity in the system. |
| | Subsequent, to the increase of Repo Rate, the standing deposit facility (SDF) rate stands adjusted to 6.25 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.75 per cent. |
| | Government of India approved the Extension of Interest Equalization Scheme for Pre and Post Shipment Rupee Export Credit (‘Scheme’) up to March 31, 2024 or till further review. |
| | During the fiscal year 2022-23 the rupee depreciated by 7.64 per cent against the USD (Concluding at Rs. 82.2169 / USD) as on 31st March, 2023. |
| | RBI has decided through its notification on 21st April, 2022 that the guidelines on LEI stand extended to Primary (Urban) Co-operative Banks (UCBs) and Non-Banking Financial Companies (NBFCs). It is further advised that non-individual borrowers enjoying aggregate exposure of ₹5 crore and above from banks and financial institutions shall be required to obtain LEI codes as per the proposed timelines |
| | During the fiscal year 2022-23 the rupee depreciated by 10.45 per cent against the SGD (Concluding at Rs. 61.82 / SGD) as on 31st March, 2023. The SGD has been resilient despite base rate hike by FED multiple times as Singapore being the business heaven for entities. |
| | Debt Ceiling crisis: The years of 2022 and 2023 have been years, testing the United Nation’s Debt ceiling on its federal Treasury department. Owing to the cautious movement of financial markets across the globe. Which have paved way for the new heights for the INR/USD rate |
I
tem 11. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of loss of future earnings, to fair values or to future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments, foreign currency receivables, payables and debt. Our exposure to market risk is a function of our investment and borrowing activities and our revenue generating activities in foreign currency. The objective of market risk management is to avoid excessive exposure of our earnings and equity to loss.
Risk Management Procedures
We manage market risk through a corporate treasury department, which evaluates and exercises independent control over the entire process of market risk management. Our corporate treasury department recommends risk management objectives and policies which are approved by senior management and our Audit Committee. The activities of this department include management of cash resources, implementing hedging strategies for foreign currency exposures, borrowing strategies, and ensuring compliance with market risk limits and policies on a daily basis.
Refer to note 41 of the notes to consolidated financial statements to this Annual Report for further analysis and exposure arising out of credit risk, liquidity risk and currency risk
I
tem 12.
Description of Securities Other Than Equity Securities
Item 12(d). American Depositary Shares
Citibank, N.A. (the “Depositary”) serves as the depositary for our ADSs, pursuant to that certain Deposit Agreement by and between the Company and the Depositary, dated as October 18, 1999, as amended from time to time. ADS holders are required to pay various fees to the Depositary and the Depositary may refuse to provide any service for which a fee is assessed until the applicable fee has been paid. For purposes of this section, “Shares” means the Company’s equity shares.
The fees and charges payable by holders of our ADSs include the following:
| | a fee not in excess of US $5.00 per 100 ADSs is charged for each issuance of ADS upon deposit of Shares, excluding certain issuances described below; |
| | |
| | a fee not in excess of US $5.00 per 100 ADSs is charged for each surrender of ADSs, property and cash in exchange for the underlying deposited securities; |
| | |
| | a fee not in excess of US $2.00 per 100 ADSs for each distribution of cash dividend or other cash distribution pursuant to the deposit agreement; |
| | |
| | a fee not in excess of US $2.00 per 100 ADSs for the distribution of ADSs pursuant to stock dividends or other free distributions or an exercise of rights; and |
| | |
| | a fee not in excess of $5.00 per 100 ADSs for depositary services. |
Additionally, under the terms of our deposit agreement, the depositary is entitled to charge each registered holder, beneficial owner, persons depositing Shares and person surrendering ADS for cancellation and for the purpose of withdrawing deposited securities the following:
| | taxes (including applicable interest and penalties) and other Governmental charges; |
| | |
| | such registration fees as may from time to time be in effect for the registration of shares or other deposited securities on the share register and applicable to transfers of shares or other deposited securities to or from the name of the custodian, the Depositary or any nominees upon the making of deposits and withdrawals, respectively; |
| | |
| | such cable, telex and facsimile transmission and delivery expenses as are expressly provided in the Deposit Agreement to be at the expense of the person depositing shares or holders and beneficial owners of ADSs; |
| | |
| | the expenses and charges incurred by the Depositary in the conversion of foreign currency; |
| | |
| | such fees and expenses as are incurred by the Depositary in connection with compliance with exchange control regulations and other regulatory requirements applicable to shares, deposited securities, ADSs and ADRs; and |
| | |
| | the fees and expenses incurred by the Depositary in connection with the delivery of deposited securities. |
If any tax or other Governmental charge is payable by the holders and/or beneficial owners of ADSs to the depositary, the depositary, the custodian or the Company may withhold or deduct from any distributions made in respect of deposited securities and may sell for the account of the holder and/or beneficial owner any or all of the deposited securities and apply such distributions and sale proceeds in payment of such taxes (including applicable interest and penalties) or charges, with the holder and the beneficial owner thereof remaining fully liable for any deficiency.
Amendment to the Depositary Agreement with Citibank NA. New York.
By Letter dated October 4, 2016, the Company has executed an amendment to the Letter Agreement dated February 17, 2009 with Citibank N.A., New York wherein the Depository Service Fees was reduced from USD 0.025 to USD 0.015 per ADS per year.
As per the amendment agreement, Citibank will make available to the Company an Annual Financial Contribution for each Program Year equal to 33% of the Depositary Service Fee collected from the ADS holders and the Contribution will be used by the Company solely to defray Program Related Expenses.
Further on September 18, 2018, the Company executed an amendment to the Letter agreements dated February 17, 2009, April 20, 2010, June 3, 2011 and October 4, 2016 with Citibank N.A., New York waiving the issuance fees for ADRs issued pursuant to the Company’s Associate Stock Option Plan on the issuance of up to 25 million ADRs. Also, the term was extended until March 31, 2025.
Direct and Indirect Payments by the Depositary to Sify
Pursuant to the Deposit Agreement with Citibank N.A, we have received Nil from Citibank during the fiscal year ended March 31, 2023 in connection with our ADS Program
See Item No 18
Consolidated Statements and other Financial Information
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Sify Technologies Limited
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Sify Technologies Limited (the “Company”) and its subsidiaries (the Company and its subsidiaries together referred to as “Group”) as of March 31, 2023 and 2022, the related consolidated statement of comprehensive income, changes in equity, and cash flows, for the each of the two years in the year ended March 31, 2023,, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of March 31, 2023 and 2022, and the consolidated results of its operations and its cash flows each of the two years in the year ended March 31, 2023, in conformity with the International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”).
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Group's internal control over financial reporting as of March 31, 2023, based on criteria established in
Internal Control — Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
June 28, 2023
, expressed an unqualified opinion on the Group's internal control over financial reporting.
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Group's consolidated financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provide a reasonable basis for our opinion.
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Valuation of Trade receivables
Critical Audit Matter Description
The collectability of the Group’s aged Trade Receivables and the valuation of allowance for impairment of Trade Receivables is a Critical Audit Matter due to the judgement involved in assessing the recoverability. The Trade Receivable as at March 31, 2023 is Rs.
11,345,542
thousands and Allowance for doubtful receivable charged in the Statement of Income for the year ended March 31, 2023 is Rs
371,890
thousands
.
How the Critical Audit Matter Was Addressed in the Audit
In view of the significance of the matter, we applied the following audit procedures in this area, among others, to obtain sufficient appropriate audit evidence:
| | We evaluated and tested the Group’s processes for trade receivables, including the credit control, collection and provisioning processes. |
| | We evaluated the management view point and estimates used to determine the allowance for bad and doubtful debts. |
| | We have reviewed the ageing, tested the validity of the receivables, the subsequent collections of trade receivables, the past payment and credit history of the customer, disputes (if any) with customers and based on discussion with the Company’s management (information and explanation provided by them) and evidences collected, we understood and evaluated the reason for delay in realisation of the receivables and possibility of realisation of the aged receivables. |
| | Where there were indicators that trade receivables were unlikely to be collected, we assessed the adequacy of allowance for impairment of trade receivables . |
| | We tested the sufficiency of the allowance for bad and doubtful debts charged in the Statement of Income for the year ended March 31, 2023. |
| |
| |
Manohar Chowdhry & Associates (5341) | |
| |
| |
We are serving as the Company's auditor for the second year.
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Sify Technologies Limited
Opinion on the Financial Statements
We have audited the accompanying consolidated statement of income, statement of comprehensive income, consolidated statement of changes in equity and cash flows of Sify Technologies Limited and its subsidiaries (‘the Company’) for the year ended March 31, 2021 and the related notes (collectively referred to as the ‘financial statements’).
In our opinion, the financial statements referred to above present fairly, in all material respects the results of their operations and their cash flows of Sify Technologies Limited and its subsidiaries for the year ended March 31, 2021, in conformity with the International Financial Reporting Standards as issued by the International Accounting Standards Board.
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements, based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. Federal Securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Valuation of Trade Receivables:
Critical Audit Matter Description
The collectability of the Company’s aged Trade Receivables and the valuation of allowance for impairment of Trade Receivables is a Critical Audit Matter due to the judgement involved in assessing the recoverability. The Trade Receivable as at March 31, 2021 is Rs 8,547,254 thousands and Allowance for doubtful receivable charged in the Statement of Income for the year ended March 31, 2021 is Rs 755,495 thousands (including bad debts written off Rs 599,629 thousands ).
How the Critical Audit Matter Was Addressed in the Audit
| | We evaluated and tested the Company’s processes for trade receivables, including the credit control, collection and provisioning processes. |
| | We evaluated the management view point and estimates used to determine the Allowance for bad and doubtful debts. |
| | We have reviewed the ageing, tested the validity of the receivables, tested that aged trade receivables were subsequently collected, the past payment and credit history of the customer, disputes (if any) with customers and based on discussion with the Company management (information and explanation provided by them) and evidences collected, we understood and evaluated the reason for delay in realisation of the receivable and possibility of realisation of the aged receivable. |
| | Where there were indicators that trade receivables were unlikely to be collected, we assessed the adequacy of allowance for impairment of trade receivables. |
| | We tested the sufficiency of the Allowance for bad and doubtful debts charged in the Statement of Income for the year ended March 31, 2021. |
Independent Registered Public Accounting Firm
We have served as the Company’s auditor since year ended March 31, 2011.
Sify Technologies Limited
Consolidated Statement of Financial Position
(In thousands of Rupees, except share data and as otherwise stated)
| | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Property, plant and equipment | | | 5 | | | | 22,306,077 | | | | 16,694,877 | | | | 271,308 | |
Right of Use Assets | | | 7 | | | | 5,689,423 | | | | 4,412,714 | | | | 69,200 | |
Intangible assets | | | 6 | | | | 622,688 | | | | 634,730 | | | | 7,574 | |
Other assets | | | 10 | | | | 4,540,098 | | | | 2,136,850 | | | | 55,221 | |
Deferred contract costs | | | | | | | 12,157 | | | | 20,625 | | | | 148 | |
Other investments | | | 15 | | | | 1,044,020 | | | | 476,050 | | | | 12,698 | |
Deferred tax assets | | | 11 | | | | 865,638 | | | | 686,193 | | | | 10,529 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Inventories | | | 12 | | | | 1,941,923 | | | | 2,407,203 | | | | 23,620 | |
Trade and other receivables, net | | | 13 | | | | 14,615,606 | | | | 14,061,653 | | | | 177,769 | |
Contract assets | | | 9 | | | | 52,581 | | | | 51,283 | | | | 640 | |
Deferred contract costs | | | | | | | 127,566 | | | | 304,225 | | | | 1,552 | |
Prepayments for current assets | | | 14 | | | | 741,129 | | | | 607,961 | | | | 9,014 | |
Restricted cash | | | 8 | | | | 1,194,787 | | | | 792,035 | | | | 14,532 | |
Cash and cash equivalents | | | 8 | | | | 3,650,446 | | | | 3,781,978 | | | | 44,400 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | |
| | | 16 | | | | | | | | | | | | | |
Share capital | | | | | | | 1,841,168 | | | | 1,840,238 | | | | 22,394 | |
Other Equity | | | | | | | 2,000,000 | | | | - | | | | 24,326 | |
Share premium | | | | | | | 19,685,143 | | | | 19,676,167 | | | | 239,429 | |
Share based payment reserve | | | | | | | 361,184 | | | | 349,123 | | | | 4,393 | |
Other components of equity | | | | | | | 53,094 | | | | 77,299 | | | | 646 | |
Accumulated deficit | | | | | | | (6,794,901 | ) | | | (7,466,624 | ) | | | (82,646 | ) |
Total equity attributable to equity holders of the Company | | | | | | | | | | | | | | | | |
Sify Technologies Limited
Consolidated Statement of Financial Position
(In thousands of Rupees, except share data and as otherwise stated)
| | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Borrowings | | | 19 | | | | 13,817,634 | | | | 7,769,122 | | | | 168,063 | |
Lease liabilities | | | 7 | | | | 1,866,176 | | | | 1,715,361 | | | | 22,698 | |
Employee benefits | | | 17 | | | | 129,903 | | | | 145,004 | | | | 1,580 | |
Contract liabilities | | | | | | | 2,323,958 | | | | 1,797,611 | | | | 28,266 | |
Other liabilities | | | 18 | | | | 55,877 | | | | 60,742 | | | | 680 | |
Total non-current liabilities | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Borrowings | | | 19 | | | | 5,710,355 | | | | 7,111,069 | | | | 69,455 | |
Lease Liabilities | | | 7 | | | | 585,003 | | | | 492,042 | | | | 7,115 | |
Bank overdraft | | | 8 | | | | 951,504 | | | | 371,995 | | | | 11,573 | |
Trade and other payable | | | 20 | | | | 12,845,558 | | | | 11,336,886 | | | | 156,240 | |
Contract liabilities | | | | | | | 1,972,483 | | | | 1,792,342 | | | | 23,993 | |
Total current liabilities | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total equity and liabilities | | | | | | | | | | | | | | | | |
The accompanying notes form an integral part of these consolidated financial statements
Sify Technologies Limited
Consolidated Statement of Income
(In thousands of Rupees, except share data and as otherwise stated)
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Cost of goods sold and services rendered
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- Profit on sale of property, plant and equipment (Net)
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Selling, general and administrative expenses
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Depreciation and amortization
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Impairment Loss on goodwill
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Profit from operating activities
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Net finance income / (expense)
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Income tax (expense) / benefit
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Equity holders of the Company
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Diluted earnings per share
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The accompanying notes form an integral part of these consolidated financial statements
Sify Technologies Limited
Consolidated Statement of Comprehensive Income
(In thousands of Rupees, except share data and as otherwise stated)
| | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Other comprehensive income | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Items that will not be reclassified to profit or loss | | | | | | | | | | | | | | | | |
Remeasurements of the net defined benefit liability/asset | | | | | | | | | | | | | | | | |
Items that may be reclassified to profit or loss | | | | | | | | | | | | | | | | |
Exchange differences on translation of foreign operations | | | | | | | | | | | | | | | | |
Total other comprehensive income, net of taxes | | | | | | | | | | | | | | | | |
Total comprehensive income | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total comprehensive income attributable to: | | | | | | | | | | | | | | | | |
Equity holders of the Company | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Sify Technologies Limited
Consolidated Statement of Changes in Equity
(In thousands of Rupees, except share data and as otherwise stated)
For year ended March 31, 202
3
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Total comprehensive income for the year
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Reclassification Compulsorily Convertible Debentures
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Transactions with owners, recorded directly in equity
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Shares issued on exercise of ESOP
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Transaction costs related to equity
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Transferred from share based payment reserve on exercise of ESOP
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|
Balance on March 31, 2023
|
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|
|
|
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|
Sify Technologies Limited
Consolidated Statement of Changes in Equity
(In thousands of Rupees, except share data and as otherwise stated)
For year ended March 31, 20
22
|
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Total comprehensive income for the year
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|
Transactions with owners, recorded directly in equity
|
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|
Shares issued on exercise of ESOP
|
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Transaction costs related to equity
|
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|
Transferred from share based payment reserve on exercise of ESOP
|
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|
|
|
|
|
|
|
Balance on March 31, 2022
|
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|
Sify Technologies Limited
Consolidated Statement of Changes in Equity
(In thousands of Rupees, except share data and as otherwise stated)
For year ended March 31, 20
21
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total comprehensive income for the year | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transactions with owners, recorded directly in equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Shares issued on exercise of ESOP | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transaction costs related to equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transferred from share based payment reserve on exercise of ESOP | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance on March 31, 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Sify Technologies Limited
Consolidated Statements of Cash Flows
For the fiscal years ended March 31
(In thousands of Rupees, except share data and as otherwise stated)
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|
Depreciation and amortization & Impairment of goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) / loss on sale of property, plant and equipment
|
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|
|
|
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|
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|
|
Deposits/Advances no longer payable written back
|
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|
Provision for doubtful receivables/ advances
|
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|
|
Stock compensation expense
|
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|
Net finance (income) / expense
|
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|
Unrealized (gain)/ loss on account of exchange differences
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Amortization of leasehold prepayments
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Cash flow from operating activities before working capital changes
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Change in trade and other receivables
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Change in Contract Assets
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Change in Contract Liabilities
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Change in trade and other payables
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Change in employee benefits
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Cash generated from operations
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Income taxes (paid)/ refund received
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Net cash from / (used in) operating activities
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Sify Technologies Limited
Consolidated Statements of Cash Flows
For the fiscal years ended March 31,
(In thousands of Rupees, except share and per share data and as otherwise stated)
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Cash flows from / (used in) investing activities
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Acquisition of property, plant and equipment
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Expenditure on intangible assets
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Proceeds from sale of property, plant and equipment
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Investments in corporate debt securities & Equity
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Amount paid for acquisition of right of use assets
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Net cash from / (used in) investing activities
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Cash flows from / (used in) financing activities
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Proceeds from issue of shares on exercise of options (including share premium)
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Proceeds from / (repayment) of borrowings (net)
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Repayment of lease liabilities
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Net cash from / (used in) financing activities
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Net increase / (decrease) in cash and cash equivalents
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Cash and cash equivalents on April 1
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Effect of exchange fluctuations on cash held
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Cash and cash equivalents on March 31
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Refer note 3 (c) and note 8 for the composition of cash and cash equivalents.
Disclosure relating to changes in liabilities arising from financing activities – Refer note below
The accompanying notes form an integral part of these consolidated financial statements
Note: Reconciliation of liabilities from financing activities
SIFY TECHNOLOGIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of Rupees, except share data and as stated otherwise)
Sify Technologies Limited (‘Sify’ or ‘the Company’) is a Company domiciled in India. The address of the Company’s registered office is 2nd Floor, Tidel Park, 4, Rajiv Gandhi Salai, Taramani, Chennai – 600113, India. The Company and its subsidiaries Sify Technologies (Singapore) Pte. Limited, Sify Technologies North America Corporation, Sify Data and Managed Services Limited, Sify Infinit Spaces Limited, Sify Digital Services Limited , Print House (India) Private Limited
and Patel Auto Engineering Company India Private Limited
(are together referred to as the ‘Group’ and individually as ‘Group entities’). The Group offers converged Information and Communication Technology (ICT) solutions comprising Network-centric services, Data Center services and Digital Services which include Cloud and Managed services, Applications Integration services and Technology Integration services. The Company was incorporated on December 12, 1995 and its ADRs are listed on the NASDAQ Capital Market. The financial statements are for the Group consisting of Sify Technologies Limited (the 'Company') and its subsidiaries.
The accompanying Consolidated Financial Statements of the Group have been prepared in accordance with the International Financial Reporting Standards (IFRS) and its interpretations as issued by the International Accounting Standards Board (IASB).
These Consolidated Financial Statements have been approved for issue by the Board of Directors on June
28
, 2023
These Consolidated Financial Statements have been prepared on the historical cost basis except for the following:
| Derivative financial instruments are measured at fair value |
| Financial instruments at fair value through profit or loss are measured at fair value. |
| Financial assets at fair value through other comprehensive income are measured at fair value |
| |
| The defined benefit asset is recognized as the net total of the plan assets, plus unrecognized past service cost and unrecognized actuarial losses, less unrecognized actuarial gains and the present value of the defined benefit obligation. |
| In relation to lease prepayments, the initial fair value of the security deposit is estimated as the present value of the refundable amount, discounted using the market interest rates for similar instruments. The difference between the initial fair value and the refundable amount of the deposit is recognized as a Right of Use Asset and present value of lease liability |
The above items have been measured at fair value and the methods used to measure fair values are discussed further in Note 4.
| | Functional and presentation currency |
Items included in the financial statements of each Group entity are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). Indian rupee is the functional currency of Sify, its domestic subsidiaries. The U.S. dollar is the functional currency of Sify’s foreign subsidiaries i.e. Sify Technologies North America Corporation and Sify Technologies (Singapore) Pte. Ltd. located in
North America, United States of America and in Singapore.
The Consolidated Financial Statements are presented in Indian Rupees which is the Group’s presentation currency. All financial information presented in Indian Rupees has been rounded up to the nearest thousand except where otherwise indicated.
Convenience translation
:
Solely for the convenience of the reader, the financial statements as of and for the year ended March 31, 2023 have been translated into United States dollars (neither the presentation currency nor the functional currency of the Group) based on the reference rate in the City of Mumbai on March 31, 2023, for cable transfers in Indian rupees as published by the Reserve Bank of India which was ₹ 82.2169 per $1.00. No representation is made that the Indian rupee amounts have been, could have been or could be converted into United States dollar at such a rate or at any other rate on March 31, 2023 or at any other date.
| | Use of estimates and judgments |
The preparation of Consolidated Financial Statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, the disclosures of contingent assets and contingent liabilities at the date of financial statements, income and expenses during the period. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in future periods which are affected.
Application of accounting policies that require critical accounting estimates, judgments and assumptions having the most significant effect on the amounts recognized in the financial statements are
:
| | Useful lives of property, plant and equipment (Note 3 e and Note 5) |
| | Useful lives of intangible assets (Note 3 g and Note 6) |
| | Estimate of Lease term and measurement of Right of Use Assets and Lease Liabilities (Note 3 h, 7) |
| | Identification of performance obligation and timing of satisfaction of performance obligation, measurement of transaction price on revenue recognition (Note 3 o) |
| | Measurement of the recoverable amounts of cash-generating units containing goodwill (Note 3 k and Note 6) |
| | Utilization of tax losses and computation of deferred taxes (Note 3 r, 11) |
| | Measurement of defined employee benefit obligations (Note 17) |
| | Measurement of share-based payments (Note 3 m, 27) |
| | Valuation of financial instruments (Note 3 c, 4, 34 and 33) |
| | Provisions and contingencies (Note 3 n and 31) |
| | Expected Credit losses on Financial Assets (Note 3 c, 13) |
| | Impairment testing [N ote 3 k ] |
| | Significant accounting policies |
The accounting policies set out below have been applied consistently to all periods presented in these Consolidated Financial Statements
The financial statements of the Group companies are consolidated on a line-by-line basis. Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated. These financial statements are prepared by applying uniform accounting policies in use at the Group.
Subsidiaries are entities controlled by the Company. Control exists when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Thus, the Company controls an investee if and only if the Company has all the following :
(a) power over the investee;
(b) exposure, or rights, to variable returns from its involvement with the investee; and
(c) the ability to use its power over the investee to affect the amount of the Company’s returns.
Generally, there is a presumption that majority of voting rights results in control. To support this presumption and when the Group has less than a majority of voting of similar rights of an investee, the group considers all relevant facts and circumstances in assessing whether it has power over an investee.
The financial statements of subsidiaries are consolidated from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed where necessary to align them with the policies adopted by the Group.
(i) Foreign currency transactions and balances
Transactions in foreign currencies are initially recognized in the financial statements using exchange rates prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the relevant functional currency at the exchange rates prevailing at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary assets and liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction. Foreign currency differences arising on translation are recognized in the income statement for determination of net profit or loss during the period.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the functional currency at exchange rates at the reporting date. The income and expenses of foreign operations and cash flows are translated to Indian Rupees using average exchange rates during the period. Any differences arising on such translation are recognized in other comprehensive income. Such differences are included in the foreign currency translation reserve “FCTR” within other components of equity. When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to profit or loss.
Financial assets comprise of investments in equity and debt securities, trade and other receivables, cash and cash equivalents and other financial assets.
All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that the Group commits to purchase or sell the asset.
Financial assets measured at amortized cost:
Financial assets held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding are measured at amortised cost using effective interest rate (EIR) method. The EIR amortisation is recognized as finance income in the Statement of Income.
The Group while applying above criteria has classified the following financial assets at amortised cost
- Other financial assets.
- Investment in debt securities
Financial assets at fair value through other comprehensive income (FVTOCI):
Financial assets that are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding are subsequently measured at FVTOCI. Fair value movements in financial assets at FVTOCI are recognized in other comprehensive income.
Equity instruments held for trading are classified as at fair value through profit or loss (FVTPL). For other equity instruments the Group classifies the same as at FVTOCI or FVTPL. The classification is made on initial recognition and is irrevocable. Fair value changes on equity investments at FVTOCI, excluding dividends, are recognized in other comprehensive income (OCI).
Financial assets at fair value through profit or loss (FVTPL):
Financial assets are measured at fair value through profit or loss if it does not meet the criteria for classification as measured at amortised cost or at fair value through other comprehensive income. All fair value changes are recognized in the Statement of Income.
Derecognition of financial assets:
Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire or the financial asset is transferred and the transfer qualifies for derecognition. On derecognition of a financial asset in its entirety, the difference between the carrying amount (measured at the date of derecognition) and the consideration received (including any new asset obtained less any new liability assumed) shall be recognized in the Statement of Income.
Impairment of financial assets:
Trade receivables, contract assets, lease receivables under IFRS 9, investments in debt instruments that are carried at amortised cost, investments in debt instruments that are carried at FVTOCI are tested for impairment based on the expected credit losses for the respective financial asset.
An impairment analysis is performed at each reporting date. The expected credit losses over lifetime of the asset are estimated by adopting the simplified approach using a provision matrix which is based on historical loss rates reflecting current condition and forecasts of future economic conditions. In this approach assets are grouped on the basis of similar credit characteristics such as industry, customer segment and other factors which are relevant to estimate the expected cash loss from these assets.
Other financial assets are tested for impairment based on significant change in credit risk since initial recognition and impairment is measured based on probability of default over the lifetime when there is significant increase in credit risk.
(ii) Financial liabilities
Financial liabilities are initially recognized at fair value and any transaction cost that are attributable to the acquisition of the financial liabilities except financial liabilities at fair value through profit or loss which are initially measured at fair value.
The financial liabilities are classified for subsequent measurement into following categories:
- at fair value through profit or loss
Financial liabilities at amortised cost
The Group is classifying the following financial liabilities at amortised cost;
b) Finance lease obligations
c) Trade and other payables
d) Other financial liabilities
Amortised cost for financial liabilities represents amount at which financial liability is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount.
Financial liabilities at fair value through profit or loss
Financial liabilities held for trading are measured at FVTPL.
Derecognition of financial liabilities:
A financial liability shall be derecognized when, and only when, it is extinguished i.e. when the obligation specified in the contract is discharged or cancelled or expires.
(iii) Derivative financial instruments
Foreign exchange forward contracts and options are entered into by the Group to mitigate the risk of changes in foreign exchange rates associated with certain payables, receivables and forecasted transactions denominated in certain foreign currencies. The group also enters into cross currency interest rate swaps for hedging the risk against variability in cash flows of its term loan.
These derivative contracts do not qualify for hedge accounting under IFRS 9 and are initially recognized at fair value on the date the contract is entered into and subsequently re-measured at their fair value. Gains or losses arising from changes in the fair value of the derivative contracts are recognized immediately in profit or loss.
(iv) Offsetting of Financial Assets and Financial Liabilities
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the assets and settle the liability simultaneously.
(v) Reclassification of financial assets
The Group determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are
categorized
as equity instruments at FVTOCI and financial assets or liabilities that are specifically designated as FVTPL. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be very infrequent. The management determines change in the business model as a result of external or internal changes which are significant to the Group’s operations. A change in the business model occurs when the Group either begins or ceases to perform an activity that is significant to its operations. If the Group reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Group does not restate any previously recognized gains, losses (including impairment gains or losses) or interest.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or share options are recognized as a deduction from equity, net of any tax effects.
| | Property, plant and equipment |
Property, Plant and Equipment is stated at cost less accumulated depreciation and where applicable accumulated impairment losses. Cost of an item of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchases taxes, after deducting trade discounts and rebates and includes expenditure directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials, direct labour and any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.
When parts of an item of Property, Plant and Equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
Amount paid as advances towards the acquisition of property, plant and equipment is disclosed separately under other non-current assets as capital advances and the cost of assets not put to use as on balance sheet date are disclosed under ‘Capital work-in-progress’.
Gains and losses on disposal of an item of Property, Plant and Equipment are determined by comparing the proceeds from disposal with the carrying amount of Property, Plant and Equipment and are recognized net within “other income / other expenses” in the Statement of Income.
The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is de-recognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in statement of income during the period in which it is incurred.
Depreciation is recognized in the Statement of Income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment considering residual value to be zero. Depreciation on contract-specific assets are charged co-terminus over the contract period. Management’s estimated useful lives for the year ended March 31, 2023 and March 31, 2022 were as follows:
| | Estimate of useful life in years | |
| | | | |
Plant and machinery comprising computers, servers etc. | | | | |
Plant and machinery comprising other items | | | | |
| | | | |
| | | | |
| | | | |
Depreciation is not recorded on construction-in-progress until construction and installation are complete and the asset is ready for its intended use.
The depreciation method, useful lives and residual value are reviewed at each of the reporting date
(i) Business combinations
Business combinations are accounted for using IFRS 3 (Revised), Business Combinations. IFRS 3 requires the identifiable intangible assets and contingent consideration to be fair valued in order to ascertain the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. Significant estimates are required to be made in determining the value of contingent consideration and intangible assets. These valuations are conducted by independent valuation experts.
Business combinations have been accounted for using the acquisition method under the provisions of IFRS 3(Revised). The cost of acquisition is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of acquisition. The cost of acquisition also includes the fair value of any contingent consideration. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value on the date of acquisition.
Transactions costs that the group incurs in connection with a business combination such as finder’s fees, legal fees, due diligence fees, and other professional and consulting fees are expensed as incurred.
Business combinations between entities under common control is outside the scope of IFRS 3 (Revised), Business Combinations and is accounted for at carrying value of assets acquired and liabilities assumed.
The acquisition of an asset or a group of assets that does not constitute a ‘business’ as per IFRS 3 is accounted for by identifying and recognizing the individual identifiable assets acquired and liabilities assumed. The cost of the group is allocated to such individual identifiable assets and liabilities on the basis of their relative fair values on the date of purchase.
Business combinations involving entities or businesses under common control have been accounted for using the pooling of interests method.
Goodwill represents the cost of a business acquisition in excess of the Group's interest in the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative (negative goodwill), the Group reassesses the identification and measurement of identifiable assets, liabilities and contingent liabilities, and the measurement of the cost of acquisition, and recognizes any remaining excess in profit or loss immediately on acquisition.
Goodwill is measured at cost less accumulated impairment losses.
Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortization and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the intangible asset.
Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, are recognized in profit or loss as incurred.
Amortization of intangible assets with finite useful lives
Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current and previous year are as follows:
| | Estimate of useful life in years | |
| | | | |
| | | | |
| | | | |
Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
The Group’s lease asset classes primarily consist of leases for land and buildings. The group assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the group assesses whether: (1) the contract involves the use of an identified asset (2) the group has substantially all of the economic benefits from use of the asset through the period of the lease and (3) the group has the right to direct the use of the asset.
At the date of commencement of the lease, the Group recognizes a right-of-use asset (“ROU”) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Group recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements include the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of the leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the group changes its assessment if whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
Leases for which the group is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
For operating leases, rental income is recognized on a straight line basis over the term of the relevant lease.
Inventories comprising traded hardware and software are measured at the lower of cost (determined using first-in first-out method) and net realizable value. Cost comprises cost of purchase and all directly attributable costs incurred in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
| Contract assets/liability |
Contract Assets (Unbilled revenue) represents revenue in excess of billing. Contract Liability (Deferred income) represents unserviced portion of billed contracts.
| | Impairment of non-financial assets |
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).
An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit or group of units on a pro rata basis.
Reversal of impairment loss
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized directly in other comprehensive income and presented within equity.
Employee benefits are accrued in the period in which the associated services are rendered by employees of the Group, as detailed below:
| Defined contribution plan (Provident fund) |
Defined contribution plans are post-employment benefit plans under which an entity pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. The Group makes specified monthly contribution towards Government administered provident fund scheme. The Group also contributes to 401(K) plans on behalf of eligible employees. Obligations for contributions to defined contribution plans are recognized as an employee benefit expense in profit and loss in the periods during which the related services are rendered by employees.
| Defined benefit plans (Gratuity) |
In accordance with applicable Indian laws, the Group provides for a lump sum payment to eligible employees, at retirement or termination of employment based on the last drawn salary and years of employment with the Group. The gratuity fund is managed by the Life Insurance Corporation of India (LIC). The Group's net obligation in respect of defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting any unrecognized past service cost and the fair value of any plan assets.
The discount rate is the yield at the reporting date on risk free Government bonds that have maturity dates approximating the terms of the Group’s obligations. The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognized asset is limited to the total of any unrecognized past service costs and the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan.
Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest), are recognized in other comprehensive income and presented within equity. Remeasurements are not reclassified to profit or loss in subsequent periods. Service costs, net interest expenses and other expenses related to defined benefit plans are recognized in profit or loss.
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
| Compensated leave of absence |
The employees of the Group are entitled to compensated absence. The employees can carry forward a portion of the unutilized accrued absence and utilize it in future periods or receive cash compensation at retirement or termination of employment for the unutilized accrued compensated absence. The Group recognizes an obligation for compensated absences in the period in which the employee renders the services. The Group provides for the expected cost of compensated absence in the Statement of Income as the additional amount that the Group expects to pay as a result of the unused entitlement that has accumulated based on actuarial valuations carried out by an independent actuary at the balance sheet date.
| | Share-based payment transactions |
The fair value of options on grant date, (equity-settled share based payments) granted to employees is recognized as an employee expense, with a corresponding increase in equity, over the period in which the options are vested. The increase in equity recognized in connection with a share based payment transaction is presented as a separate component in equity. The amount recognized as an expense is adjusted to reflect the actual number of share options that vest. In respect of options whose terms and conditions are modified, the Group includes the incremental fair value of the options in the measurement of the amounts recognized for services received from the employees. The incremental fair value is the difference between the fair value of the modified option and that of the original option both estimated as at the date of the modification. If the modification occurs during the vesting period, the incremental fair value granted is included in the measurement of the amount recognized for services received over the period from the modification date until the date when the modified equity instruments vest, in addition to the amount based on the grant date fair value of the original equity instruments, which is recognized over the remainder of the original vesting period. If the modification occurs after vesting date, the incremental fair value granted is recognized immediately, or over the vesting period if the employee is required to complete an additional period of service before becoming unconditionally entitled to those modified equity instruments.
Provisions are recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
A provision for onerous contracts is recognized when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognizes any impairment loss on the assets associated with that contract.
The Group derives revenue from converged ICT solutions comprising Network-centric services, Data Center services and Digital Services which includes cloud and managed services, applications integration services and technology integration services.
The Group recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services excluding the amount collected on behalf of third parties.
The revenue recognition in respect of the various streams of revenue is described as follows
i) Network centric services
Revenue from Network centric services includes Data network services and Voice services. Network services primarily include revenue from connectivity services, NLD/ILD services and to a lesser extent, revenues from the setup and installation of connectivity links. The group provides connectivity for a fixed period of time at a fixed rate regardless of usage. Revenue from Network services are series of distinct services. The performance obligations are satisfied overtime.
Service revenue is recognized when services are provided, based upon period of time. The setup and installation of connectivity links are deferred and recognized over the associated contract period.
Sale of equipment’s are accounted as separate performance obligations if they are distinct and its related revenues are recognised at a point in time when the control is passed on to the customer.
The Group provides NLD (National Long Distance) and ILD (International Long Distance) services through Group’s network. The Group carries voice traffic, both national and international, using the network back-bone and delivers voice traffic to Inter-connect Operators. Revenue is recognised when the services are provided based upon the usage (e.g: metered call units of voice traffic terminated on the Group’s network).
Revenue from DC services consists co-location of racks and power charges. The contracts are mainly for a fixed rate for a period of time. Revenue from co-location of racks, power charges and cross connect charges are series of distinct services. The performance obligations are satisfied overtime. Service revenue is recognized as the related services are performed. Sale of equipment such as servers, switches, networking equipment, cable infrastructure and racks etc., are accounted as separate performance obligations if they are distinct and its related revenues are recognized at a point in time when the control is passed on to the customer.
Revenue from Cloud and managed services include revenue from Cloud and storage solutions, managed services, value added services, domestic and International managed services.
Revenues from Cloud and on demand compute and storage, are primarily fixed for a period of time. Revenue from Cloud and managed services are series of distinct services. The performance obligations are satisfied overtime. The group recognize service revenue as the related services are performed.
Revenues from domestic and international managed services, comprise of value added services, operations and maintenance of projects and from remote infrastructure management. Contracts from this segment are fixed and could also be based on time and material contracts.
In the case of time and material contracts, the group recognizes service revenue as the related services are performed.
In the case of fixed price contract, the group recognize revenue over a period of time based on progress towards completion of performance obligation using efforts or cost to cost measure of progress (percentage completion method of accounting).
The stage of completion is measured by efforts spent to estimated total efforts over the term of the contract.
Revenue from Technology Integration Services include system integration Services, revenue from construction of Data Centers, network services, security solutions and to a lesser extent, revenue from sale of hardware and software.
Revenue from construction contract includes revenue from construction of Data Centers to the specific needs and design of the customer. The Group recognize revenue at point in time, when the customer does not take control of work-in-progress or over a period of time when the customer controls the work-in-progress. In the case where revenue is recognized over a period of time and progress is measured based on the costs incurred to date as a percentage of the total estimated costs to fulfill the contract. If the Group does not have a sufficient basis to measure the progress of completion or to estimate the total contract revenues and costs, revenue is recognized only to the extent of contract cost incurred for which recoverability is probable. When total cost estimates exceed revenues in an arrangement, the estimated losses are recognized in the statement of Income in the period in which such losses become probable based on the current contract estimates.
Revenue from Applications Integration services include online assessment, document management services, web development, digital certificate based authentication services, supply chain software and eLearning software development services. eLearning software development services consist of structuring of content, developing modules, delivery and training users in the modules developed.
Revenue from Applications Integration Services is recognized over a period of time. The progress is measured based on the amount of time/effort spent on a project. Revenue in relation to ‘time’ is measured as the agreed rate per unit of time multiplied by the units of time expended. The element of revenue related to materials is measured in accordance with the terms of the contract.
The Group enters into contracts with customers to serve advertisements in the portal and the Group is paid on the basis of impressions, click-throughs or leads and in each case the revenue is recognized ratably over the period of the contract based upon the usage (i.e., on actual impressions/click throughs / leads delivered.)
Revenue from commissions earned on electronic commerce transactions are recognized when the transactions are completed.
Digital Certification revenues include income received on account of Web certification. Generally the Group does not hold after sale service commitments after the activation of the Digital Certificates sold and accordingly, revenue is recognized fully on the date of activation of the respective certificate.
Multiple deliverable arrangements
In certain cases, some elements belonging to the services mentioned above are sold as a package consisting of all or some of the elements.
The Group accounts for goods or services of the package separately if they are distinct. i.e., if a good or service is separately identifiable from other promises in the contract and if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer.
The Group allocate the transaction price to each performance obligation identified in the contract on a relative stand-alone selling price basis. Standalone selling price is the price at which group would sell a promised good or service separately to the customer.
If the relative stand-alone selling prices are not available, the group estimates the same. In doing so, the group maximise the use of observable inputs and apply estimation methods consistently in similar circumstances.
Costs to fulfil customer contracts i.e., the costs relate directly to a contract or to an anticipated contract that the Group can specifically identify or the costs generate/ enhance resources of the group that will be used in satisfying (or in continuing to satisfy) performance obligations in the future or the costs that are expected to be recovered are recognized as asset and amortized over the contract period.
Incremental costs of obtaining a contract are recognized as assets and amortized over the contract period if entity expects to recover those costs. The Group recognize incremental cost of obtaining a contract as an expense when incurred if the amortisation period of the asset that the entity otherwise would have recognized is one year or less.
Costs to obtain a contract that is incurred regardless of whether the contract is obtained are recognized as an expense when incurred, unless those costs are explicitly chargeable to the customer regardless of whether the contract is obtained.
Significant judgments on applying IFRS 15
The group contracts with customer include promises or arrangements to transfer multiple goods or services to a customer. The group assess whether such arrangements in the contract has distinct goods or services (performance obligation). Identification of distinct performance obligation involves judgment to determine ability of customer to benefit independently from other promises in the contract.
The judgment is required to measure the transaction price for the contract. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration could be fixed amount or variable amount or could be both. Transaction price could also be adjusted for time value of money if contract includes a significant financing component.
In the case of multiple arrangements in a contract, the group allocate transaction price to each performance obligation based on standalone transaction price. The determination of standalone transaction price involves judgment.
The group uses judgment in determining timing of satisfaction of performance obligation. The group considers how customer benefits from goods or services as the services are rendered, who controls as the assets is created or enhanced, whether asset has an alternate use and the entity has an enforceable right to payment for performance completed to date, transfer of significant risk and reward to the customer, acceptance or sign off from the customer etc.,
The group uses judgement when capitalising the contract cost as to whether it generates or enhances resources of the entity that will be used in satisfying performance obligation in the future.
Finance income comprises interest income on funds invested, dividend income and gains on the disposal of financial assets at fair value through profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest method. Dividend income is recognized in profit or loss on the date when the Group’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date.
Finance expense comprises borrowing costs, bank charges, unwinding of discount on provision, fair value losses on financial assets at fair value through profit or loss that are recognized in Statement of Income. Fair value changes attributable to hedged risk are recognized in the Statement of Income.
Borrowing costs are interest and other costs (including exchange difference relating to foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs) incurred in connection with the borrowing of funds. Interest expense is recognized using effective interest method.
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. Other borrowing costs are recognized as expenses in the period in which they are incurred. To the extent the Group borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowings costs eligible for capitalization by applying a capitalization rate to the expenditure incurred on such asset. The capitalization rate is determined based on the weighted average of borrowing costs applicable to the borrowings of the Group which are outstanding during the period, other than borrowings made specifically towards purchase of the qualifying asset. The amount of borrowing costs that the Group capitalizes during a period does not exceed the amount of borrowing costs incurred during that period.
Income tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity or in other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date. Minimum Alternate Tax (MAT) is accounted as current tax when the Group is subjected to such provisions of the Income Tax Act. However, credit of such MAT paid is available when the Group is subjected to tax as per normal provisions in the future. Credit on account of MAT is recognized as a deferred tax asset based on the management’s estimate of its recoverability in the future. Significant judgments are involved in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions.
Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences:
(i) the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss.
(ii) differences relating to investments in subsidiaries and associates to the extent that it is probable that they will not reverse in the foreseeable future.
(iii) arising due to taxable temporary differences on the initial recognition of goodwill, as the same is not deductible for tax purposes.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred taxation arising on investments in subsidiaries and associates is recognized except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred taxation on temporary differences arising out of undistributed earnings of the equity method accounted investee is recorded only when it is expected to be distributed in foreseeable future based on the management's intention.
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Where ordinary shares are issued but not fully paid, they are treated in the calculation of basic earnings per share as a fraction of an ordinary share to the extent that they were entitled to participate in dividends during the period relative to a fully paid ordinary share. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which includes share options granted to employees. To the extent that partly paid shares are not entitled to participate in dividends during the period they are treated as the equivalent of warrants or options in the calculation of diluted earnings per share.
| Dividend distribution to equity shareholders |
Dividend distributed to Equity shareholders is recognized as distribution to owners of capital in the Statement of Changes in Equity, in the period in which it is paid after approval of shareholders.
| Current/ non-current classification |
An asset is classified as current if:
(a) it is expected to be realized or sold or consumed in the Group's normal operating cycle;
(b) it is held primarily for the purpose of trading;
(c) it is expected to be realized within twelve months after the reporting period;
(d) it is cash or a cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is classified as current if:
(a) it is expected to be settled in normal operating cycle;
(b) it is held primarily for the purpose of trading;
(c) it is expected to be settled within twelve months after the reporting period;
(d) it has no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
All other liabilities are classified as non-current.
The operating cycle is the time between acquisition of assets for processing and their realisation in cash and cash equivalents. The Group's normal operating cycle is twelve months.
Recent accounting pronouncements
New amendments not yet adopted:
Certain new standards, amendments to standards and interpretations are not yet effective for annual periods beginning after April 1, 2022 and have not been applied in preparing these consolidated financial statements. New standards, amendments to standards and interpretations that could have potential impact on the consolidated financial statements of the Company are:
Amendments to IAS 12 – Income Taxes
On May 7, 2021, the IASB amended IAS 12 “Income Taxes” and published 'Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)' that clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations. In specified circumstances, companies are exempt from recognizing deferred tax when they recognize assets or liabilities for the first time. The amendments clarify that this exemption does not apply to transactions such as leases and decommissioning obligations and companies are required to recognize deferred tax on such transactions. These amendments are effective for annual reporting periods beginning on or after January 1, 2023 and are to be applied retrospectively, with earlier application permitted.
The adoption of amendments to IAS 12 is not expected to have any material impact on the consolidated financial statements.
Amendments to IAS 1 – Presentation of Financial Statements
On January 23, 2020, the IASB issued “Classification of liabilities as Current or Non-Current (Amendments to IAS 1)” providing a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangement in place at the reporting date. The amendments aim to promote consistency in applying the requirements by helping companies to determine whether, in the statement of financial position, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current. The amendments also clarified the classification requirements for debt a company might settle by converting it into equity. These amendments are effective for annual reporting periods beginning on or after January 1, 2023, and are to be applied retrospectively, with earlier application permitted.
The adoption of amendments to IAS 1 is not expected to have any material impact on the consolidated financial statements.
Amendments to IAS 1 – Presentation of Financial Statements
On October 31, 2022, the IASB issued 'Non-current Liabilities with Covenants (Amendments to IAS 1)'. The amendments specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or non-current at the reporting date. Instead, the amendments require a company to disclose information about these covenants in the notes to the financial statements. The amendments are effective for reporting periods beginning on or after January 1, 2024, with earlier application permitted.
The adoption of these amendments to IAS 1 are not expected to have any material impact on the consolidated financial statements.
Amendments to IFRS 16 – Leases
On September 22, 2022, the IASB issued ‘Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)’ that specifies the requirements that a seller-lessee uses in measuring the lease liability arising in a sale and leaseback transaction, to ensure the seller-lessee does not recognize any amount of the gain or loss that relates to the right of use it retains. The amendment is intended to improve the requirements for sale and leaseback transactions in IFRS 16 and will not change the accounting for leases unrelated to sale and leaseback transactions. These amendments are effective for annual reporting periods beginning on or after January 1, 2024, and are to be applied retrospectively, with earlier application permitted.
The adoption of amendments to IFRS 16 is not expected to have any material impact on the consolidated financial statements.
| Determination of fair values |
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal market or the most advantageous market must be accessible to the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,
maximizing
the use of relevant observable inputs and
minimizing
the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorized
within the fair value hierarchy based on the lowest level input that is significant to the fair value measurement as a whole. The fair value hierarchy is described as below:
Level
1 - unadjusted quoted prices in active markets for identical assets and liabilities.
Level
2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level
3 - unobservable inputs for the asset or liability.
For assets and liabilities that are recognized in the financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing
categorization
at the end of each reporting period.
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of fair value hierarchy.
Fair values have been determined for measurement and / or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
| Property, plant and equipment |
The fair value of property, plant and equipment recognized as a result of a business combination is an estimated amount for which a property could be exchanged on the date of acquisition in an orderly transaction between market participants. The fair value of items of plant, equipment, fixtures and fittings is based on the market approach and cost approach using quoted market prices for similar items when available and replacements costs when appropriate.
The fair value of inventories acquired in a business combination is determined based on the estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.
The fair value of intangible assets acquired in the business combinations is based on discounted cash flows expected to be derived from the use and eventual sale of assets (terminal value).
| Investments in equity and debt securities |
The fair value is determined by reference to their quoted price at the reporting date. In the absence of quoted price, the fair value of the financial asset is measured using valuation techniques.
| Trade and other receivables |
The fair value of trade and other receivables expected to be realized beyond twelve months, excluding construction contracts in progress, is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. However in respect of such financial instruments, fair value generally approximates the carrying amount due to the short term nature of such assets. This fair value is determined for disclosure purposes or when acquired in a business combination.
The fair value of forward exchange contracts is based on their quoted price, if available. If a quoted price is not available, the fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk free interest rate (based on Government bonds). The fair value of foreign currency option contracts is determined based on the appropriate valuation techniques, considering the terms of the contract. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and the counter party when appropriate. The fair value of the cross currency swaps (principal only swaps) and interest rate swaps is determined based on the discounting of the future cash flows at the market rates existing on the reporting date.
| Non derivative financial liabilities |
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases, the market rate of interest is determined by reference to similar lease agreements.
| Share-based payment transactions |
The fair value of employee stock options is measured using the Black-Scholes method. Measurement inputs include share price on grant date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), expected term of the instrument (based on historical experience and general option holder behavior), expected dividends, and the risk free interest rate (based on Government bonds).
| Property, plant and equipment |
The following table presents the changes in property, plant and equipment during the year ended March 31, 202
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The following table presents the changes in property, plant and equipment during the year ended March 31, 202
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As of March 31, 2023 and 2022, the Company had committed to spend approximately ₹ 10,678,787 and ₹ 6,651,423 respectively, under agreements to purchase property, plant and equipment.
Amounts paid towards acquisition of property, plant and equipment outstanding at each balance sheet date and the cost of property, plant and equipment that are not ready to be put into use are disclosed under construction-in-progress.
As of March 31, 2023 property, plant and equipment with a carrying amount of ₹ 16,910,327 (March 31, 2022: ₹ 14,045,705) are subject to a registered charge to secure bank borrowings.
Capitalized borrowing costs
Borrowing costs capitalized during the year amounted to ₹ 149,297 (March 2022, ₹ 22,012)
Intangible assets comprise the following:
The following table presents the changes in goodwill during the years ended March 31, 2023 and 2022
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Impairment loss recognized during the year
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Net carrying amount of goodwill
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|
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The amount of goodwill and impairment loss as of March 31, 2022 has been allocated to Digital Services segment.
During the year, the company has discontinued the current affairs and sports channel of its portal sify.com pursuant to notification from the Government of India regulating the entities which have FDI of more than 49% to carry content relating to current affairs and sports. Consequently the eyeballs to the site would come down and hence the goodwill associated to this business has been impaired.
The following table presents the changes in intangible assets
during
the years ended March 31, 2023 and
2022.
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Acquisitions during the year | | | | | | | | | | | | | | | | |
Disposals during the year | | | | | | | | | | | | | | | | |
Balance as of March 31, 202 2 | | | | | | | | | | | | | | | | |
Acquisitions during the year | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Disposals during the year | | | | | | | | | | | | | | | | |
Balance as of March 31, 2023 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Amortization for the year | | | | | | | | | | | | | | | | |
Impairment loss on intangibles | | | | | | | | | | | | | | | | |
Balance as of March 31, 202 2 | | | | | | | | | | | | | | | | |
Amortization for the year | | | | | | | | | | | | | | | | |
Impairment loss on intangibles | | | | | | | | | | | | | | | | |
Balance as of March 31, 2023 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Intangible assets that were fully impaired / amortised were removed from the block.
The Company had not committed to spend any amount under agreements to purchase intangible assets during the year ending March 31, 2023
2022.
Following are the changes in the carrying value of right of use assets for the year ended March 31, 2023:
| | | | | | |
| | | | | | | | | | | | | | | |
Balance as of April 1, 2022 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | ) | | | | ) |
Balance as of March 31, 202 3 | | | | | | | | | | | | | | | | | | | | |
Following are the changes in the carrying value of right of use assets for the year ended March 31, 202
2
:
| | | | | | |
| | | | | | | | | | | | | | | |
Balance as of April 1, 2021 | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Balance as of March 31, 202 2 | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Current lease liabilities | | | | | | | | |
Non-current lease liabilities | | | | | | | | |
| | | | | | | | |
The following is the movement in lease liabilities during the Year ended
| | | | | | |
| | | | | | | | |
| | | | | | | | |
Finance cost accrued during the period | | | | | | | | |
| | | | | | | | |
Payment of lease liabilities | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
The table below provides details regarding the contractual maturities of lease liabilities as of
March 31, 2023 and March 31, 202
2
on an undiscounted basis (including finance expenses):
| | Cash and cash equivalents |
Cash and cash equivalents as per consolidated statement of financial position, as of March 31, 2023 amounted to ₹
3,650,446
(March 31, 2022: ₹
3,781,978
March 31, 2021:
₹
5,101,083
). This excludes cash-restricted of ₹ 1,194,787 (March 31, 2022: ₹ 792,035 and March 31, 2021: ₹ 400,971), representing deposits held under lien against working capital facilities availed and bank guarantees given by the Group towards future performance obligations.
| | | | | | | | | |
| | | | | | | | | |
Bank deposits held under lien against borrowings / guarantees from banks / Government authorities | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Bank overdraft used for cash management purposes | | | | | | | | | | | | |
Cash and cash equivalents for the statement of cash flows | | | | | | | | | | | | |
The following table provides information about receivables, contract assets and contract liabilities from the contracts with the customers
| | | | | | |
| | | | | | | | | | | | | | | | |
Contract Assets – Unbilled Revenue | | | | | | | | | | | | | | | | |
Contract liabilities – Deferred Income | | | | | | | | | | | | | | | | |
Current contract liabilities | | | | | | | | | | | | | | | | |
Non-current contract liabilities | | | | | | | | | | | | | | | | |
Total Contract liabilities – Deferred Income | | | | | | | | | | | | | | | | |
The following table provides the movement in contract assets (unbilled revenue) for the year ended March 31, 2023 and March 31, 2022:
| | | | | | |
Balance as of April 1, 2022 | | | | | | | | |
Add: Revenue recognized during the year | | | | | | | | |
Less: Invoiced during the year | | | | | | | | |
Add: Translation gain or (loss) | | | | | | | | |
Balance as of March 31, 20 23 | | | | | | | | |
The /following table provides the movement in contract liabilities (Deferred Income) for the year ended March 31, 2023 and March 31, 2022:
| | | | | | |
Balance as of April 1, 2022 | | | | | | | | |
Less: Revenue recognized during the period | | | | | | | | |
Add: Invoiced during the period but revenue not recognized | | | | | | | | |
Add: Translation gain or (loss) | | | | | | | | |
Balance as of March 31, 2023 | | | | | | | | |
Contract Cost and Amortisation
Costs to fulfil customer contracts are deferred and amortized over the contract period. For the year ended March 31, 2023 the Company has capitalised
₹
119,312 (March 31, 2022:
₹
307,221) and amortised
₹
304,439 (March 31, 2022:
₹
91,111). There was no impairment loss in relation to the capitalised cost.
Incremental costs of obtaining a contract are recognized as assets and amortized over the contract period. The Company recognizes incremental cost of obtaining a contract as an expense when incurred if the amortisation period of the asset that the entity otherwise would have recognized is one year or less.
| | | | | | |
Other deposits and receivables | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Financial assets included in other assets | | | | | | | | |
| | Deferred tax assets and liabilities |
The tax effects of significant temporary differences that resulted in deferred tax assets and a description of the items that created these differences is given below
Recognized deferred tax assets / (liabilities) | | | | | | |
| | | | | | |
Deductible temporary difference | | | | | | | | |
Property, Plant and Equipment | | | | | | | | |
Lease obligations on right of use assets | | | | | | | | |
Provision for employee benefits | | | | | | | | |
| | | | | | | | |
Provision for Doubtful Advances | | | | | | | | |
| | | | | | | | |
Taxable temporary difference | | | | | | | | |
| | | | | | | | |
Finance Lease obligations | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Net deferred tax asset (liability) recognized in Balance Sheet | | | | | | | | |
In assessing the realizability of deferred tax assets, management considers whether some portion or all of deferred tax assets will not be realized. The ultimate realization of deferred tax assets and tax loss carry forwards is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategy in making this assessment. Based on the level of historical taxable income and projections of future taxable income over the periods in which deferred tax assets are deductible, management believes that the Group will realize the benefits of those recognized deductible differences. The amount of deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced.
Movement in temporary differences during the year
| | Balance as of March 31, 20 21 | | | Recognized in income statement | | | Recognized in Equity / Balance sheet | | | Balance as of March 31, 202 2 | | | Recognized in income statement | | | Recognized in Equity / Balance sheet | | | Balance as of March 31, 202 3 | |
Property, plant and equipment | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Lease obligations on right of use assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Finance Lease obligations | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Provision for employee benefits | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | (6,797 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrecognized deferred tax assets / (liabilities)
| | | | | | |
Deductible temporary differences | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Considering the probability of availability of future taxable profits in the period in which tax losses expire, deferred tax assets have not been recognized in respect of tax losses carried forward by the Group. The above tax losses expire at various years.
Income tax expense recognized in profit or loss
| | | | | | | | | |
Current tax expense / (benefit) | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Deferred tax expense / (benefit) | | | | | | | | | | | | |
Origination and reversal of temporary differences | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Total income tax expense / (benefit) | | | | | | | | | | | | |
There are no income taxes directly recognized in other comprehensive income.
Reconciliation of effective tax rate
A reconciliation of the income tax provision to the amount computed by applying the statutory income tax rate to the income before taxes is summarized below:
| | Year ended March 31, 202 3 | | | Year ended March 31, 202 2 | | | Year ended March 31, 2021 | |
Profit before income taxes | | | | | | | | | | | | |
Enacted tax rates in India | | | | | | | | | | | | |
Computed expected tax expense / (benefit) | | | | | | | | | | | | |
| | | | | | | | | | | | |
Share based payment expense not deductible for tax purposes | | | | | | | | | | | | |
Unrecognized deferred tax assets on losses incurred during the year (net of temporary differences, if any) | | | | | | | | | | | | |
Recognition of previously unrecognised deferred tax asset on temporary differences | | | | | | | | | | | | |
Difference on account differential tax rates in different jurisdictions | | | | | | | | | | | | |
Effect of Unrecognised business loss including reversal of previously recognised DTA on business loss | | | | | | | | | | | | |
Expenses/income not taxable | | | | | | | | | | | | |
Recognition of current year temporary differences | | | | | | | | | | | | |
Recognition of previously unrecognized tax losses | | | | | | | | | | | | |
Difference on account of differential tax rates in different companies | | | | | | | | | | | | |
Effect of expenses that are not deductible in determining taxable profit | | | 1,700 | | | | | | | | | |
Expenses/income not taxable | | | | | | | | | | | | |
Unrecognized temporary differences | | | | | | | | | | | | |
Utilisation of previously unrecognised temporary differences | | | | | | | | | | | | |
Effect of rate difference in opening and closing deferred tax | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Reversal of previously recognised temporary differences | | | | | | | | | | | | |
| | | | | | | | | | | | |
* Includes project inventory of ₹1,692,378 ( previous year: ₹ 2,142,385)
| | Trade and other receivables |
Trade and other receivables comprise:
| | | | | | |
(i) Trade receivables, net | | | | | | | | |
(ii) Other receivables including deposits | | | | | | | | |
(iii) Contract related accruals | | | | | | | | |
| | | | | | | | |
| | Trade receivables as of March 31, 2023 and March 31, 2022 are stated net of allowance for doubtful receivables. The Group maintains an allowance for doubtful receivables based on expected credit loss model. The Group’s exposure to credit and currency risks and impairment losses related to trade and other receivables, excluding construction work in progress is disclosed in note 34. Trade receivables consist of: |
| | | | | | |
Trade receivables from related parties | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Less: Allowance for doubtful receivables | | | | | | | | |
Balance at the end of the year | | | | | | | | |
The activity in the allowance for doubtful accounts receivable is given below: | | | |
| | | | | | |
Balance at the beginning of the year | | | | | | | | |
Add : Additional provision, net | | | | | | | | |
Less : Bad debts written off | | | | | | | | |
Balance at the end of the year | | | | | | | | |
| | Other receivables comprise of the following items: |
| | | | | | |
Advances and other deposits (Refer Note (a) below) | | | | | | | | |
Withholding taxes (Refer Note (b) below) | | | | | | | | |
| | | | | | | | |
Financial assets included in other receivables | | | | | | | | |
| | Advances and other deposits primarily comprise of receivables in the form of deposits, sales tax/VAT, service tax, GST and other advances given in the ordinary course of business. |
| | |
| | Includes withholding taxes recoverable from the Department of Income-tax for which the Company has filed tax returns for refund. The Company expects to realize such refund of withholding taxes within the next 12 months. |
| | |
| | Non – current trade receivables is ₹. Nil (March 31, 2022: ₹. 1,990) |
| | Prepayments for current assets |
Prepayments for current assets comprise of the following:
| | | | | | |
Prepayments for purchase of bandwidth | | | | | | | | |
Prepayments related to insurance | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Other Investments comprise investment in unquoted equity instruments classified as financial assets at FVTOCI and investment in unquoted debt securities classified as financial assets at amortised cost. The details of such investments are given below:
| | | | | | |
Investment in equity instruments – unquoted | | | | | | |
Investment in equity shares of Vashi Railway Station Commercial Complex Limited | | | | | | | | |
Investment in equity shares of Sarayu Clean Gen Private Limited | | | | | | | | |
Investment in The Gizmo App Company | | | | | | | | |
Investment in Tasoula Energy Private Limited | | | | | | | | |
Investment in Padvest Corporation | | | | | | | | |
Investment in Digifresh Corporation | | | | | | | | |
Investment in VEH Srishti Energy Private Limited | | | | | | | | |
Investment in Chatter Inc | | | | | | | | |
Investment in Passerine technologies Inc | | | | | | | | |
Investment in debt securities – unquoted | | | | | | | | |
Investment in Elevo Corporation (Erstwhile Attala Systems Corporation) # | | | | | | | | |
| | | | | | | | |
# Unsecured convertible promissory note of $
2,789 with Attala Systems Corporation, of which $ 750 (₹ 55,100), $ 375 (₹ 27,600), $375 (₹ 27,600), $ 500 (₹ 36,800), $ 214 (₹ 15,700) and $ 575 (₹ 42,200) matures on 17th October 2019, 4th January 2020 , 4th April 2020 , 30th October 2020, 1st January 2021 and 27th November 2021 respectively. The note bears interest at a rate of five percent (5%). On 15th October 2019, the note has been amended to extend the maturity date to 30th October 202
3
. The note bears interest at a rate of five percent (5%). The promissory note is convertible to equity securities under specific terms based on triggering events as defined in the agreement.
| | | | | | |
| | | | | | | | |
| | | | | | | | |
Issued for consideration other than cash | | | | | | | | |
Exercise of share options | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
In fiscal 2015, the authorized share capital of the Company was enhanced by an amount of ₹ 189,000. Consequently the
authorized share capital is increased to ₹ 2,040,000 divided into 204,000,000 Equity Shares, having a par value ₹ 10 per share.
The holders of ordinary shares are entitled to receive dividends from time to time and are entitled to vote at meetings of the Group. All shares rank equally with regard to Group’s residual assets.
The directors have not recommended any dividend
for paid up Equity Share of ₹ 10 each for the year 2022-23 (2021-22: ₹ Nil)
.
Also refer note 35 – Issue of share on private basis to existing promoter group and Note 27 – Share-based payment
Fully paid Compulsorily Convertible debentures
| | | | | | |
| | | | | | |
Compulsorily convertible Debentures issued to Kotak Special Securities Fund | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
During the financial year 2021-22, Kotak Special Situations Fund (KSSF) subscribed to 2,00,00,000 (two crore) Series 1 Compulsorily Convertible Debentures (CCDs) with face value of
₹ 100 each amounting to ₹
2,000
million
("series 1 CCD") and 1% of 2,00,00,000 (two crore) Series 2 Compulsorily Convertible Debentures (CCD) with face value of
₹ 100 each amounting to ₹
2,000
millions
These CCD's carry a coupon rate of 6% p.a payable half-yearly. The CCDs shall be fully, mandatorily and compulsorily converted into equity shares by October 1, 2031 and the conversion ratio shall be decided based on the equity valuation of the next financial year following the financial year of drawdown of CCD money
During the year, the Company has valued the share price and fixed the conversion ratio, at 0.8112 in relation to series 1 CCDs
subscribed
by Kotak Special Situations Fund (KSSF). Since the fixed
-
to
-
fixed test is satisfied as per IAS 32 the above CCDs are presented as Equity (refer note 19)
Share based payment reserve
Share based payment reserve represents the stock compensation expense recognized in the statement of changes in equity.
Share Premium used to record the premium on issue of shares. The reserve is
utilized
in accordance with the provisions of the Act
Other components of equity:
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.
The fair value reserve comprises the cumulative net change in the fair value of investments classified as at FVTOCI until the investments are derecognized or impaired.
c) Remeasurements of the net defined benefit liability/asset
Remeasurements of the net defined benefit liability/asset represent the cumulative actuarial gain / loss on account of Change in demographic assumptions, change in financial assumption and experience variance and remeasurement in return on plan assets, excluding amounts recognized in net interest expense/ income.
The components of gratuity costs recognized in the consolidated income statement for the years ending March 31, 2023, 2022, and March 31, 2021 consist of the following:
Details of employee benefit obligation and plan asset are as follows:
| | | | | | |
Projected benefit obligation at the end of the year | | | | | | | | |
Plan assets at the end of the year | | | | | | | | |
Funded status amount of liability recognised in the Balance Sheet | | | | | | | | |
The
following table set out the status of the gratuity plan:
Change in defined benefit obligation | | | | | | | | | |
Projected benefit obligation at the beginning of the year | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Remeasurements - Actuarial (gain) / loss | | | | | | | | | | | | |
| | | | | | | | | | | | |
Projected benefit obligation at the end of the year | | | | | | | | | | | | |
| | | | | | | | | |
Fair value of plan assets at the beginning of the year | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Return on plan assets, excluding amount recognised in net interest expense | | | | | | | | | | | | |
Fair value of plan assets at the end of the year | | | | | | | | | | | | |
| | | | | | | | | | | | |
Actual return on plan assets | | | | | | | | | | | | |
Actuarial assumptions at end of the year
:
The principal actuarial assumptions as on March 31, 2023, 2022, and 2021 were as follows:
| | | | | | | | | |
| | | |
| | | |
| | | | |
Long-term rate of compensation increase | | | |
| | | |
| | | |
|
Expected long term rate of return on plan assets | | | | | | | |
| | | | |
Average future working life time | | | | | | | | | | | | |
Discount rate:
The discount rate is based on prevailing market yields of Indian Government securities as at the end of the year for the estimated term of the obligations
.
Long term rate of compensation increase:
The estimates of future salary increase considered take into account inflation, seniority, promotion and other factors.
Expected long term rate of return on plan assets:
This is based on the average long term rate of return expected on investments of the fund during the estimated term of the obligations.
Salary escalation rate: The estimates of future salary increases considered take into account the inflation, seniority, promotion and other relevant factors.
Assumptions regarding future mortality are based on published statistics and mortality tables.
The Group assesses these assumptions with the projected long-term plans of growth and prevalent industry standards.
Contributions
: The Group expects to contribute ₹157,682 to its gratuity fund during the year ending March 31, 2023.
The expected benefit payments to be made in the next few years are as under:
Plan assets:
The Gratuity plan’s weighted-average asset allocation on March 31, 2023 and March 31, 2022, by asset category is as follows:
| | | | | | |
Funds managed by insurers | | | | | | | | |
Remeasurements of the net defined benefit liability recognized in other comprehensive income
Amount recognized in other comprehensive income for the years ending March 31, 2023, 2022, and 2021 are as follows:
| | | | | | | | | |
Remeasurements of the net defined benefit liability | | | | | | | | | | | | |
| | | | | | | | | | | | |
- Change in demographic assumptions | | | | | | | | | | | | |
- change in financial assumptions | | | | | | | | | | | | |
| | | | | | | | | | | | |
- return on plan assets, excluding amounts recognized in net interest expense/ income | | | 8,179 | | | | 1,172 | | | | 1,999 | |
| | | | | | | | | | | | |
Sensitivity Analysis of significant actuarial assumption
Sensitivity analysis for the defined benefit obligations will increase/ decrease by the amounts mentioned below if there is a variation of 100 basis points in the discount rate and salary escalation rate.
| | | | | | |
| | | | | | | | | | | | |
Present Value of Defined Benefit Obligation | | | | | | | | | | | | | | | | |
The present value of defined benefit obligation has been arrived at using the same method as is used for valuing the defined benefit obligation as per the current assumptions. The increase/decrease in defined benefit obligation has been arrived assuming the other assumptions are constant though such increase/decrease do not happen in isolation in real scenarios.
Contributions to defined contribution plans
In accordance with Indian law, all employees receive benefits from a provident fund, which is a defined contribution plan. Both the employee and employer make monthly contributions to the plan, each equal to a specified percentage of employee’s basic salary. The Group has no further obligations under the plan beyond its monthly contributions. The Group contributed ₹ 194,451,
₹ 135,589
₹ 114,374 for the years ended March 31, 2023, 202
2
21
. The Group has contributed to 401(K) plans on behalf of eligible employees amounting to ₹
17,537
(March 31, 20
22
: ₹ 14,339) during the year ended March 31,
202
3
.
| | | | | | |
| | | | | | | | |
| | | | | | | | |
Financial liabilities included in other liabilities | | | | | | | | |
| | | | | | |
| | | | | | | | |
Term bank loans (Refer note (a), (b), (c), (d) below) | | | | | | | | |
Other working capital facilities (Refer note (h), (i), (j) ,(l),(m), (n), (o), (p) below) | | | | | | | | |
Borrowings from others (Refer note (e), (f), (g) below) | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Term bank loans (Refer note (a), (b), (c), (d) below) | | | | | | | | |
Borrowings from others (Refer note (e), (f), (g) below) | | | | | | | | |
| | | | | | | | |
(a) Of the above, facilities amounting to ₹ 1,635 Million (Previous Year : ₹ Nil) by the Company is primarily secured by way of pari-passu charge on the project Receivables and charge on movable fixed assets disbursed under Noida DC Project.
(b) Of the above, facilities amounting to ₹ 747 Million (Previous Year : ₹ Nil) by the Company is primarily secured by way of pari-passu charge on the project Receivables and charge on movable fixed assets disbursed under Chennai DC Project.
(c) Of the above, facilities amounting to ₹ 2,804 Million (Previous Year : ₹ Nil) by the Company is primarily secured by way of pari-passu charge on the project Receivables and charge on movable fixed assets disbursed under Rabale T5 DC Project.
(d) Of total term loan balance ₹ 3,867 Million (previous year ₹ 4,282 Million) is primarily secured by charge on movable fixed assets funded by term loan and also secured by project receivables. Of the total term loan balance, an amount of ₹ 306 Million (previous year ₹ 721 Million) including current maturity is primarily secured against the specific project receivables of the company and ₹ 2,509 Million (previ
year ₹ 331 Million) is secured by moveable fixed assets funded out of Term Loan.
Of the total term loan balance, an amount of ₹ 1,000 Million (previous year ₹ Nil) is also primarily secured by the charge on immovable fixed assets, both present and future (except the assets exclusively charged to other lenders) with Second pari-passu charge on entire current assets of the Borrower, including trade/ bills receivables, book debts, etc. both present & future, excluding the Cash margin lien marked or Current Assets specifically funded by other lenders.
(e) The company has entered into External Commercial Borrowing (ECB) facility agreement for $ 5 Million and drawn down $ 5 Million out of sanctioned loan and repaid $ 0.05 Million in FY 2021-22 and $ 0.1 Million in FY 2022-23. The Company has also entered into agreement for currency swap (from USD to INR) to fully hedge foreign currency exposure towards principal repayment and interest rate swap from floating to fixed.
(f) The term loans bear interest rate ranging from 7.20%
to 10.84%
repayable in quarterly instalments within a tenor of 3 to 6 years after moratorium period ranging from 6 months to 2 years in certain cases.
(g). During the financial year 2021-22, Kotak Special Situations Fund (KSSF) subscribed to 2,00,00,000 (two crore) Series 1 Compulsorily Convertible Debentures (CCDs) with face value of
100 each amounting to ₹ 2,000 Million and 1% of 2,00,00,000 (two crore) Series 2 Compulsorily Convertible Debentures (CCD) with face value of
100 each amounting to ₹ 200.
During the year under review, Kotak Special Situations Fund (KSSF) subscribed to additional 1,98,00,000 Series 2 Compulsorily Convertible Debentures (CCD) with face value of
100 each amounting to ₹ 1,980 Million. Further, the Company has the option and right to require KSSF to acquire additional compulsory convertible debentures of the Company (“Additional CCDs”) in one or more tranches during FY 2023, FY 2024, FY 2025 or by October 1, 2026 for up to an aggregate subscription amount of ₹ 6,000 Million. The CCDs are secured by secondary charge over identified movable assets of Data Center facility.
These CCD's carry a coupon rate of 6%
p.a
payable
half-yearly.
The Tranche - I, CCDs shall be fully, mandatorily and compulsorily converted into equity shares by October 1, 2031 and the conversion ratio is decided based on the equity valuation as at March 31, 2023 as 0.8112.
Since the fixed to fixed test is satisfied as per IAS 32 the above CCDs are presented as Equity (refer note 1
6a
)
(h). The Company has adjusted the processing charges paid with respect to borrowings from borrowings from banks ₹ 185 Million (Previous year ₹ 114 Million)
(i). These bear interest rate ranging from 8.3%
p.a
to 10.50%
p.a
(Previous Year: 8.3%
p.a
to 10.50%
p.a
) and repayable over a period of 12 to 60 months on equated monthly / quarterly instalments.
(j). Of the above, facilities amounting to ₹ 1,659 Million (Previous Year : ₹ 1,655 Million), availed by the Company are primarily secured by way of pari-passu charge on the entire current assets of the Company to all working capital bankers under consortium.
(k). The above facilities amounting to ₹ 732 Million (previous year ₹ 591 Million), availed by the Company are primarily secured by way of pari-passu charge on the entire current assets of the Company to all working capital bankers under consortium.
l. The above facilities amounting to ₹ 715 Million (previous year ₹ 656 Million), availed by the Company are primarily secured by way of pari-passu charge on the entire current assets of the Company to all working capital bankers under consortium.
(l). In addition to the above, out of these loans repayable on
demand
from banks,
(i) exposure amounting to ₹ 2,586 Million (previous year ₹ 2,222 Million) is secured collaterally by way of pari-passu charge on the unencumbered movable fixed assets of the Company, both present and future. |
(ii) exposure amounting to ₹ 1,334 Million (previous year ₹ 1,072) is secured collaterally by way of equitable mortgage over the properties at Tidel Park, Chennai, Vashi 6th floor, Vile Parle at Mumbai. |
(iii) exposure amounting to ₹ 470 Million (previous year ₹ 680 Million) is collaterally secured by equitable mortgage over the land and building at Noida and also covered by WDV of specific movable fixed assets funded out of their Term loan (since closed) at Noida Data Center, Uttar Pradesh. |
(iv) the exposure amounting to ₹ 876 Million (previous year ₹ 950 Million) is collaterally secured by equitable mortgage over the Vashi 5th floor property at Mumbai. |
(m). Of fhe above, facilities amounting to ₹ Nil (previous year ₹ 250 Million) are primarily secured by way of pari-passu charge on current assets of the Company, both present and future. |
(n). Of the above, facilities amounting to ₹ 374 Million (previous year ₹ 400 Million) are secured by way of pari-passu charge on current assets. Out of which ₹ 25 Million (previous year ₹ 400 Million) has first pari-passu charge on unencumbered movable fixed assets of the Company. |
(o). These working capital facilities bear interest ranging from 5.4% p.a. to 9.30% p.a . [Previous year: 5.4% p.a. to 9.45% p.a.] and these facilities are subject to renewal annually. |
(p). The loans in the nature of Buyers Credit bear interest rate 0.67% to 1.10% (previous year 0.79% to 1.73% ). |
( q ). The Company has adjusted the processing charges paid with respect to borrowings from borrowings from banks ₹ 53 Million (Previous year ₹ 56 Million) |
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Financial liabilities included in trade and other payables | | | | | | | | |
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Installation service revenue | | | | | | | | | | | | |
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Note: Revenue disaggregation as per business segment and geography has been included in segment information (See Note 30).
| | Performance obligations and remaining performance obligations |
The Group has applied the practical expedient provided in the standard and accordingly not disclosed the remaining performance obligation relating to the contract where the performance obligation is part of a contract that has an original expected duration of one year or less and has also not disclosed the remaining performance obligation related disclosures for contracts where the revenue recognized corresponds directly with the value to the customer of the entity's performance completed to date.
The following table provides revenue expected to be recognized in the future related to performance obligation that are unsatisfied (or partially satisfied) at the reporting date:
| | Cost of goods sold and services rendered |
Cost of goods sold and services rendered information is presented before any depreciation or amortization that is direct and attributable to revenue sources. The Group’s asset base deployed in the business is not easily split into a component that is directly attributable to a business and a component that is common / indirect to all the businesses. Since a gross profit number without depreciation and amortization does not necessarily meet the objective of such a disclosure, the Group has not disclosed gross profit numbers but disclosed all expenses, direct and indirect, in a homogenous group leading directly from revenue to operating income.
| | Selling, general and administrative expenses |
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Marketing and promotion expenses | | | | | | | | | | | | | |
Administrative and other expenses*# | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
# Includes Contract associates costs | | | | | | | | | | | | | |
Attributable to cost of goods sold and services rendered | | | | | | | | | | | | | |
Attributable to selling, general and administrative expenses | | | | | | | | | | | | | |
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Contribution to provident fund and other funds | | | | | | | | | | | | |
| | | | | | | | | | | | |
Employee stock compensation expense | | | | | | | | | | | | |
| | | | | | | | | | | | |
Attributable to cost of goods sold and services rendered | | | | | | | | | | | | |
Attributable to selling, general and administrative expenses | | | | | | | | | | | | |
| | | | | | | | | | | | |
The Group had issued stock options under Associate Stock Option Plan (ASOP) 1999, ASOP 2000, ASOP 2002, ASOP 2005, ASOP 2007 and ASOP 2014. The Compensation Committee grants the options on the basis of performance, criticality and potential of the employees as identified by the management. Each option entitles the holder to purchase one American Depository Share (ADS) at an exercise price determined by the Compensation committee on the date of the grant. There are no options outstanding in respect of ASOP 1999, ASOP 2000, ASOP 2002, ASOP 2005 and ASOP 2007 as of March 31, 2023. The plan details of ASOP 2014 are as follows:
| Associate Stock Option Plan 2014 |
During July 2014, the shareholders of the Company approved a new scheme for allotment of shares to employees i.e. Associate Stock Option Plan 2014. 2,50,00,000 shares are reserved for this plan. Consequently 58,70,800 options were granted to the employees on January 20, 2015. The Company has granted additional 25,000, 1,95,000, 4,65,000, 72,20,000. 3,35,000, 1,50,000, 5,25,000 and 1,84,300 options to employees during the year 2022-23, 2021-22, 2020-21, 2019-20, 2018-19, 2017-18, 2016-17 and 2015-16 respectively.
The options vest in the following manner:
4,304,600 Options (Option Plan I): | | 3/5th of the options vest at the end of one year from the date of grant. The remaining 2/5th vests at the end of every half year during second and third years from the date of grant in four equal instalments |
6,612,700 Options (Option Plan II): | | 2/5th of the options vest at the end of one year from the date of grant. The remaining 3/5th vests at the end of every half year during second, third and fourth years in six equal instalments |
4,052,800 Options (Option Plan III): | | 2/5th of the options vest at the end of two years from the date of grant. The remaining 3/5th vests at the end of every half year during third, fourth and fifth years in six equal instalments. |
The
stock options can be exercised within a period of twelve months from the date of last vesting.
As the number of stock options and the price of those options were made known to each allottee, the Plan has been considered as a fixed price grant. Stock option activity under the ASOP 2014 Plan is as follows:
| | | | | | | | | | | | | | | | | | |
No. of options granted, exercised and forfeited | | | | | | | | | | | | | | | | | | |
Outstanding at the beginning of the year | | | | | | | | | | | | | | | | | | | | | | | | |
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Forfeited during the year | | | | | | | | | | | | | | | | | | | | | | | | |
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Exercised during the year | | | | | | | | | | | | | | | | | | | | | | | | |
Outstanding at the end of the year | | | | | | | | | | | | | | | | | | | | | | | | |
Exercisable at the end of the year | | | | | | | | | | | | | | | | | | | | | | | | |
The fair value of stock options granted has been measured using the Black Scholes model at the date of the grant. The Black Scholes model includes assumptions regarding dividend yields, expected volatility, expected term (or “option life”) and risk free interest rates. In respect of the options granted, the expected term is estimated based on the vesting term, contractual term as well as expected exercise behavior of the employees receiving the option. Expected volatility of the option is based on historical volatility, during a period equivalent to the option life, of the observed market prices of the Company’s publicly traded equity shares. Share prices for the year 2011-12 have been eliminated in determining volatility as there had been extra ordinary price movements during the said period on account of capital infusion by promoters. Dividend yield of the options is based on the recent dividend activity. Risk-free interest rates are based on the Government securities yield in effect at the time of the grant. These assumptions reflect management’s best estimates, but these assumptions involve inherent market uncertainties based on market conditions generally outside the Company’s control. As a result, if other assumptions had been used in the current period, stock-based compensation expense could have been materially impacted. Further, if management uses different assumptions in the future periods, stock compensation expense could be materially impacted in future years.
The estimated fair value of stock options is charged to income on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award were, in substance, multiple awards.
A summary of information about fixed price stock options outstanding with respect to ASOP 2014 is furnished below:
The assumptions used in Black Scholes model to arrive at the fair value on grant date for the options granted during the year are summarised below:
| | Financial income and expense |
| | | |
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Interest income on bank deposits | | | | | | | 45,060 | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Interest expense on lease obligations | | | | | | | | | | | | |
Bank charges (including letter of credit, bill discounting and buyer’s credit charges) | |
| | | | | | | | | | |
Interest expense on borrowings | | | | | | | | | | | | |
| | | | | | | | | | | | |
Net finance income / (expense) recognized in profit or loss | | | | | | | | | | | | |
The calculation of basic earnings per share for the years ended March 31, 2023, 2022, and 2021 is based on the profit / (loss) attributable to ordinary shareholders of ₹674,522, ₹1,257,945, and ₹1,531,862 respectively and a weighted average number of shares outstanding of 182,803,189, 182,468,672, and 179,533,536 respectively, calculated as follows:
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| | | | | | | | | | | | |
Weighted average number of shares – basic | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Weighted average number of shares – diluted | | | | | | | | | | | | |
Diluted earnings per share | | | | | | | | | | | | |
Weighted average number of ordinary shares basic
| | | |
| | | | | | | | | |
Issued fully paid ordinary shares on April 01 | | | | | | | | | | | | |
Effect of shares issued on exercise of stock options | | | | | | | | | | | | |
Effect of partly paid shares | | | | | | | | | | | | |
Weighted average number of equity shares and equivalent shares outstanding | | | | | | | | | | | | |
Weighted average number of ordinary shares diluted
| | | |
| | | | | | | | | |
Weighted average number of ordinary shares (basic) | | | | | | | | | | | | |
Effect of stock options (Note 1) | | | | | | | | | | | | |
Weighted average number of equity shares outstanding (diluted) | | | | | | | | | | | | |
Note 1:
The Company has issued Associate Stock Options of which 69,72,978 (Previous year : 72,32,978) options are outstanding as at March 31, 2023. These could potentially dilute basic earnings per share in future. Refer Note (
27
).
The operating segments of the Group has been reclassified in the previous year with effect from April 1, 2021 pursuant to the business
reorganization
done in the 2020-21 pursuant to Business Transfer Agreement (BTA) dated January 28, 2021. Consequently, Group's operating segments are as follows:
a. Network centric services | Consists of domestic data, international data, wholesale voice |
| |
| Consists of co-location services, cross connects and other allied managed services |
| |
| Consists of Cloud and Managed Services, Network Managed Services, Applications Integration Services, Technology Integration Services |
Network-centric services -
The Network services consist of network services addressing the domestic connectivity needs of Indian enterprises and international inward and outward connectivity needs of International Enterprises. The services include a comprehensive range of Internet protocol based Virtual Private Network, offerings, including intranets, extranets, and remote access applications to both small and large corporate customers. The Group provides MPLS-enabled IP VPN’s through entire network. The Group also provides last mile connectivity to customers.
The cable landing station and investment in submarine cable consortium are other assets extended to international partners for international inward and outward connectivity needs. The cable landing station currently lands 2 major submarine cables; namely Gulf Bridge International (GBI) and the Middle Eastern and North African cable (MENA)
The Group operates 11 Concurrently Maintainable Data Centers, of which six are located in Mumbai (Bombay), one each at Noida (Delhi), Chennai (Madras), Bengaluru, Kolkata and Hyderabad to host mission-critical applications. The Group offers co-location services which allow customers to bring in their own rack-mountable servers and house them in shared racks or hire complete racks, and even rent ‘secure cages’ at the hosting facility as per their application requirements. It also offers a wide variety of managed hosting services, such as storage, back-up and restoration, performance monitoring and reporting hardware and software procurement and configuration and network configuration under this business line.
The Group offers following services under Digital Services segment:
On-demand hosting (cloud) services offer end-customers with the solutions to Enterprises. On-demand cloud services giving companies the option to “pay as you go” basis.
Remote and Onsite Infrastructure Management services which provide management and support of customer operating systems, applications, and database layers.
Network Operations Center (NOC) services, managed SDWAN and managed Wi-Fi solutions.
Data Centre Build, Network Integration, Information security and End User computing.
Web-applications which include sales force automation, supply chain management, intranet and extranets, workflow engine and knowledge management systems.
Online portals, such as
www.sify.com with content on technology and food (Sify Bawarchi). The Group also offers value-added services to organizations such as website design, development, content management, digital certification services, Online assessment tools, search engine optimization, including domain name management, secure socket layer (SSL) certificate for websites, and server space in required operating system and database. It provides messaging and collaboration services and solutions such as e-mail servers, LAN mail solutions, anti-spam appliances, bulk mail services, instant messaging, and also offer solutions and services to enable data and access security over the Internet, Infrastructure-based services on demand, including on-line testing engine and network management. On-line testing services include test management software, required servers and proctored examination facilities at Sify’s franchisee points. On-line exam engine offered allows a secure and flexible way of conducting examinations involving a wide range of question patterns.
The Chief Operating Decision Maker (“CODM”), i.e., The Board of Directors and the senior management, evaluate the Group’s performance and allocate resources to various strategic business units that are identified based on the products and services that they offer and on the basis of the market served. The measure of profit / loss reviewed by the CODM is “Earnings/loss before interest, taxes, depreciation and amortization” also referred to as “segment operating income / loss”. Revenue in relation to segments is categorized based on items that are individually identifiable to that segment.
Bandwidth costs, which form a significant part of the total expenses, is allocated to Network Services. Manpower costs of Technology resources rendering services to support Infrastructure operations, Managed services and Application services, are identified to respective operating segments specifically. The Group believes that the resulting allocations are reasonable.
Certain expenses, such as depreciation, technology infrastructure and administrative overheads, which form a significant component of total expenses, are not allocable to specific segments as the underlying services are used interchangeably. Management believes that it is not practical to provide segment disclosure of these expenses and, accordingly, they are separately disclosed as “unallocated” and adjusted only against the total income of the Group.
A significant part of the Property, plant and equipment used in the Group’s business are not identifiable exclusively to any of the reportable segments and can be used interchangeably between segments. Management believes that it is not feasible to provide segment disclosures relating to total assets since a meaningful segregation of the available data is onerous.
The Group’s operating segment information for the years ended March 31, 2023, 2022
and
2021 are presented below:
Year ended March 31, 20
23
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Segment operating income / (loss) | | | | | | | | | | | | | | | | |
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Support Service Unit Costs | | | | | | | | | | | | | | | | |
Depreciation and amortization | | | | | | | | | | | | | | | | |
Other income / (expense), net | | | | | | | | | | | | | | | | |
Finance income | | | | | | | | | | | | | | | | |
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Profit / (loss) before tax | | | | | | | | | | | | | | | | |
Income tax (expense) / benefit | | | | | | | | | | | | | | | | |
Profit / (loss) for the year | | | | | | | | | | | | | | | | |
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*Bank charges of ₹ 147,089 ($ 1,789) has been allocated to respective segments in operating expenses
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Allocated segment expenses
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Segment operating income / (loss)
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Support Service Unit Costs
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Depreciation and amortization
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Other income / (expense), net
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Finance income
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Profit / (loss) before tax
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Income tax (expense) / benefit
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Profit / (loss) for the year
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Allocated segment expenses
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Segment operating income / (loss)
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Support Service Unit Costs
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Depreciation and amortization
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Other income / (expense), net
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Finance income
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Profit / (loss) before tax
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Income tax (expense) / benefit
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Profit / (loss) for the year
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The Group has two geographic segments India and rest of the world. Revenues from the geographic segments based on domicile of the customer are as follows:
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Year ended March 31, 2023 | | | | | | | | | | | | |
Year ended March 31, 2022 | | | | | | | | | | | | |
Year ended March 31, 2021 | | | | | | | | | | | | |
The Group does not disclose information relating to non-current assets located in India and rest of the world as the necessary information is not available and the cost to develop it would be excessive.
During the year under review revenue from one customer of the Group's Data center services segment is ₹ 3,852 million which is more than 10% of the Group's total revenue.
|
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Claims against the Group not acknowledged as debts include demands from Indian Income Tax authorities for payment of tax amounting to ₹ Nil (previous year: ₹ Nil).
|
|
|
Contingencies due to certain Service Tax claims as at March 31, 2023 amounted to ₹ 416 million (previous year: ₹ 416 million).
|
|
|
Contingencies due to certain Sales Tax claims as at March 31, 2023 amounted to ₹ 226 million (previous year: ₹ 226 million)*.
|
|
|
The Group is subject to legal proceedings and claims which are arising in the ordinary course of business. The management does not reasonably expect that these legal actions, when ultimately concluded and determined, will have material and adverse effect on the Group's results of operations or financial conditions.
|
*Out
of the above, an amount of ₹1.8 million has been paid under protest.
Sify Infinit Spaces Limited (SISL), wholly owned subsidiary of the company has issued Compulsorily Convertible Debentures (CCD) to Kotak Special Situations Fund (KSSF) with initial subscription of ₹ 2,020
with subsequent subscription of ₹ 1,980
million
during the year 2021-2022 and 2022-23 and an option to require additional ₹ 6,000
million
. This Debenture Subscription Agreement is supplemented by a Put Option Agreement with the Company to ensure KSSF has protective rights in case there is contract breach or conditions for conversion is not met over the term of the instrument..
The Group has entered into a contract with Emirates Integrated Telecom (‘the Emirates’) for the construction and supply of undersea cable capacity from the Europe India Gateway. As per the contract with Emirates, the Group is required to pay its share of decommissioning costs, if any, that may arise in the future. No provision has been made by the Group for such decommissioning costs as the amount of provision cannot be measured reliably as of March 31, 2023. The capacity under the mentioned facility would be upgraded over a period of time.
Export obligation under EPCG : Effective 2012-13, the Company has participated in the Export Promotion Capital Goods Scheme (“the scheme”) under which capital equipment’s are permitted to be imported against a specific license at a substantially reduced customs duty, subject to fulfilment of obligation to export services rendered by use of capital equipment imported under the scheme to the extent of over 6 times the value of duty saved over a period of 6 years from the date of obtaining the license. In case of failure to meet the export obligation, the company would be liable to pay the difference between the normal duty and the duty saved under the scheme along with interest.
As of March 31, 2023, the company is holding
NIL
(previous year : 27) licenses with a corresponding export obligation of
NIL
million (previous year : ₹ 2,453 million). Considering the track record of the exports, the Company believes it would be able to meet the export obligation within the time frame and would not be exposed to any liability on account of the above scheme.
|
|
Proceedings before Department of Telecommunication
|
TDSAT has by its Order dated 28.02.2022 quashed the demands made by D
O
T seeking license fee, interest on license fee, penalty & interest on penalty on the revenue accruing from other businesses other than the licensed based activities from 2005-06 onwards. This Order was passed in favor of one of the Service Provider having similar line of business and the D
O
T is yet to prefer appeal before Supreme Court.
The Company has been paying AGR on the licensed based 166
a
ctivities
and challenged the demands made by
DOT
on the revenue arising from other Business activities (Non Licensed businesses) and the petitions are pending before Madras High Court.
Supreme Court had by its Order dated 10.06.2020, accepted the stand of the
DOT
that the licenses of PSUs are different and the judgement of 24.10.2019 could not be made the basis for raising demands against PSUs as they are not in the actual business of providing Mobile Services to the General Public. Sify also has licenses similar to PSU. TDSAT also held that there is no scope to differentiate between 2 sets of licensees (PSU & Others) having same or similar licenses only on the basis of ownership, private or public. The statutory rights and liabilities must remain the same for both the classes in so far as they arise from the licenses/agreements under consideration.
DOT
had issued separate licenses to Sify Technologies Ltd (Sify) for providing Internet, National Long Distance & International Long Distance services.. The license fee was payable to the
DOT
on the Adjusted Gross Revenue (AGR) as per the terms of each license. Sify has been regularly paying license fee on the revenue arising out of services as per the license conditions.
DOT
has raised demands on service providers providing Internet, NLD, ILD services etc. demanding license fee on the revenue made by the service providers from other business income such as Data Centre, Cloud, application services, power, gas, etc.
DOT
contended that all the income of the company irrespective of the business was required to be considered as part of
‘
income
’
for the purpose of calculation of the license fee. The company filed a Writ Petition before
the
Hon’ble Madras High Court challenging the demand made by DoT on the Income accruing from other business units and the demands have been stayed by the Court. The case is pending for final hearing.
The Service providers which had different license conditions for ISP, NLD & ILD and having revenue from other business units approached the Hon’ble Supreme Court stating that Hon’ble Supreme Court judgement dated 24.10.2019 on the access Telecom Service Providers is not applicable to other services providers as license conditions were different from the Access Telecom Service Providers. The Hon’ble Supreme Court observed that if the license conditions of Other Service Providers including ISP, NLD & ILD are different from the license conditions of the Mobile Access Providers, then the other service providers should adjudicate the license fee issue before the appropriate forum. Meanwhile DoT withdrew the demands against Public Sector Undertaking on account of different license conditions.
The Company which had approached the Hon’ble High Court of Madras (Court) in 2013 by filing a writ petition prohibiting Department of Telecommunications (DOT) from levying a license fee on non-licensed activities obtained stay of the demands. The Hon’ble Court restrained DoT from recovering the license fee in respect of non- telecom activities and the case is pending for hearing
The Company believes that it has adequate legal defenses against the demand raised by DoT and that the ultimate outcome of these actions will not have a material adverse effect on the Company
s financial position and result of operations. ISPAI, association representing the internet service providers including the company issued a letter to DoT stating that the Hon’ble Supreme Court judgement dated 24.10.2019 is not applicable to Internet Service Providers and the license conditions are different.
The Company which had received notices for earlier years from DoT claiming Licence fee on the total Income (including income from Non Licensed activities) has already responded to these notices stating that licence fees are not payable on income from non-licensed activities. The Company believes that it has adequate legal defenses against these notices and that the ultimate outcome of these actions may not have a material adverse effect on the Company
s financial position and result of operations.
DoT in its written submission made before the Hon’ble Supreme Court had clearly mentioned that non telecom revenue would stand excluded from the purview of the gross revenue. In 2017, the Hon’ble Tripura High Court held that Service Providers are not liable to pay license fee on the income accruing from other businesses.
(ii) The present license for ISP under Unified License issued by DOT on June 2, 2014 provides for payment of License fee on pure internet services. However, the Company through Internet Service Providers Association of India (ISPAI) challenged the said clause before TDSAT and has not made payment in this regard. TDSAT setaside the demand made by the DoT and passed the order in favour of the ISP. DoT has challenged the Order of the TDSAT and the appeal is pending before Supreme Court. The Company has appropriately accounted for any adverse effect that may arise in this regard in the books of account. However TDSAT by its order dated 18.10.2019 held that license fee is not chargeable on the Internet Service Providers. DoT has filed appeal before Supreme Court and the appeal is pending for final hearing. However the company has started paying AGR on pure internet effective from 01.04.2022 pursuant to the notification issued by DoT.
b) The company is party to additional legal actions arising in the ordinary course of business. Based on the available information as on March 31, 2023, the Company believes that it has adequate legal defences for these actions and that the ultimate outcome of these actions will not have a material adverse effect on the Company's financial position and results of operations.
c) The Company has received an order passed under section 7A of the Employees Provident Fund & Miscellaneous Provisions Act, 1952 from Employees Provident Fund Organisation (EPFO) claiming provident fund contribution aggregating to ₹ 6.4
on special allowances paid to employees. The company has filed a writ petition before High court of Madras and obtained the stay of demand. In February 2019, the Supreme Court held, in a similar case, that Special allowances paid by the employer to its employee will be included in the scope of basic wages and subject to provident fund contribution. However, the Supreme Court has not fixed the effective date of order
d) During the financial year 2019-20, Directorate General of Goods and Services Tax Intelligence (DGGI) did an inspection based on the analysis of service tax returns filed by the company in the past. The company has been
services relating to e-Learning and Infrastructure Management Services provided to foreign customers billed in convertible foreign currency under OIDAR services while filing its half-yearly service tax return. However, based on the Place of Provision of Services Rules then applicable under the Finance Act, 1994, Service Tax has to be paid for OIDAR services provided to foreign customers even if the conditions for qualifying as export of services are met. Hence, the DGGI contended that Service Tax should be paid on the services classified as OIDAR services in the returns. The total contended during the period April 2014 to November 2016 of Service Tax was ₹ 161.8
and the Interest & Penalty as applicable. The company believes that the services relating to e-learning and infrastructure management services will not fall under OIDAR services and also the activities covered under E-learning and IMS does not meet the conditions for taxation under the provisions applicable as OIDAR and hence there is no liability. However, during the investigation, the Company has paid ₹ 64.6
under protest to continue the proceeding with the relevant adjudicating authorities. Thereafter, the DGGI has issued Show Cause Notice and the company has replied on the same. The matter is pending with the Adjudicating Authority. The company believes that no provision is required to be made against this demand.
| | Related party transaction: |
The related parties where control / significant influence exists are subsidiaries and associates. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director whether executive or otherwise. Key management personnel include the board of directors and other senior management executives. The other related parties are those with whom the Group has had transaction during the years ended March 31, 2023, 2022 and 2021are as follows:
| | | | | |
| | | | | | | | | |
| | | | | | | | | | | | |
Infinity Satcom Universal Private Limited | | | | | | | | | | | | |
Raju Vegesna Infotech & Industries Private Limited (Subsidiary of Infinity Satcom Universal Private Limited) | | | | | | | | | | | | |
Ramanand Core Investment Company Private Limited (Subsidiary of Raju Vegesna Infotech & Industries Private Limited) | | | | | | | | | | | | |
| | | | | | | | | | | | |
Sify Technologies (Singapore) Pte. Limited | | | | | | | | | | | | |
Sify Technologies North America Corporation | | | | | | | | | | | | |
Sify Data and Managed Services Limited | | | | | | | | | | | | |
Sify Infinit Spaces Limited | | | | | | | | | | | | |
Sify Digital Services Limited | | | | | | | | | | | | |
Print House (India) Private Limited | | | | | | | | | | | | |
Patel Auto Engineering Private Limited | | | India | | | | | | | | | |
| | | | | | | | | | | | |
Raju Vegesna Foundation | | | | | | | | | | | | |
The following is a summary of the related party transactions for the year ended March 31, 2023:
| | | | | | | | | |
Consultancy services received | | | | | | | | | | | | |
| | | | | | | | | | | | |
Salaries and other short term benefits* | | | | | | | | | | | | |
| | | | | | | | | | | | |
Contributions to defined contribution plans* | | | | | | | | | | | | |
Share based payment transactions* | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Amount of outstanding balances | | | | | | | | | | | | |
9% Cumulative Non-convertible preference shares# | | | | | | | | | | | | |
Advance lease rentals and refundable deposits made** | | | | | | | | | | | | |
| | | | | | | | | | | | |
All transactions between Sify Technologies Limited and its subsidiaries up to March 31, 2023 of this Annual Report have been in the ordinary course of business
The following is a summary of the related party transactions for the year ended March 31, 2022:
| | | | | | | | | | | | |
Consultancy services received | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Salaries and other short term benefits* | | | | | | | | | | | | | | | | |
Contributions to defined contribution plans* | | | | | | | | | | | | | | | | |
Share based payment transactions* | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Preference shares issued# | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Amount of outstanding balances | | | | | | | | | | | | | | | | |
Advance lease rentals and refundable deposits made** | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
The following is a summary of the related party transactions for the year ended March 31, 2021:
| | | | | | | | | | | | |
Consultancy services received | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Salaries and other short term benefits* | | | | | | | | | | | | | | | | |
Contributions to defined contribution plans* | | | | | | | | | | | | | | | | |
Share based payment transactions* | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Preference shares issued# | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Amount of outstanding balances | | | | | | | | | | | | | | | | |
Advance lease rentals and refundable deposits made** | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
* Represents salaries and other benefits of Key Management Personnel comprising of Mr. Kamal Nath - Chief Executive Officer (Sify Technologies Limited), Mr. M P Vijay Kumar – Whole Time Director and Chief Financial Officer and Mr. C R Rao - Chief Operating Officer.
**During the year 2011-12, the Group had entered into a lease agreement with M/s Raju Vegesna Infotech and Industries Private Limited, the holding Group, to lease the premises owned by it for a period of three years effective February 1, 2012 on a rent of ₹ 0.075 million (Rupees Seventy Five Thousand) per month. Subsequently, the Group entered into an amendment agreement with effect from April 1, 2013, providing for automatic renewal for a further period of two blocks of 3 years with an escalation of 15% on the last paid rent after the end of every three years. Subsequently on account of expiry of the said agreement, the Group entered into a fresh agreement for a period of three years effective February 01, 2021 on a rent of ₹ 0.114 million (Rupees One Lakh Fourteen Thousand Only) per month.
During the year 2011-12, the Group had also entered into a lease agreement with M/s Raju Vegesna Developers Private Limited, a Group in which Mr Ananda Raju Vegesna, the then Executive Director of the Group and Mr Raju Vegesna, Chairman and Managing director of the Group exercise significant influence, to lease the premises owned by it for a period of three years effective February 1, 2012 on a rent of ₹ 0.030 million (Rupees Thirty Thousand) per month. The agreement provides for the automatic renewal for further period of two blocks of 3 years with an escalation of 15% on the last paid rent after the end of every three years.Subsequently on account of expiry of the said agreement, the Group entered into a fresh agreement for a period of three years effective February 01, 2021 on a rent of ₹ 0.046 million (Rupees Forty Six Thousand) per month..
During the year 2010-11, the Group had entered into a lease agreement with Ms Radhika Vegesna, daughter of Mr Anand Raju Vegesna, the then Executive Director of the Group, to lease the premises owned by her for a period of three years effective June 1, 2010 on a rent of ₹ 0.3
(Rupees Three Lakhs) per month and payment of refundable security deposit of ₹ 2.6
. This arrangement will automatically be renewed for a further period of two blocks of three years with all the terms remaining unchanged. Subsequently on account of expiry of the said agreement, the Group entered into a fresh agreement for a period of three years effective June 1, 2019 on a rent of ₹ 0.556
million
(Rupees Five Lakhs Fifty Six Thousand) per month and payment of additional refundable security deposit of ₹ 3.0
million
. This arrangement will automatically be renewed for a further period of two blocks of three years with all the terms remaining unchanged.
# ₹ 500 million towards Cumulative Non-convertible Redeemable preference shares issued by Print house (India) Private limited to Ramanand Developers private limited with the tenure of 20 years from the date of allotment which will carry a preferential dividend of 9% per annum, payable till redemption.
Financial instruments by category
The carrying value and fair value of financial instruments by each category as of March 31, 2023 were as follows:
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Derivative financial instruments | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Derivative financial liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
Other financial liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
6% Compulsory Convertible Debentures | | | | | | | | | | | | | | | | | | | | | | | | |
9% Cumulative Non-convertible preference shares | | | | | | | | | | | | | | | | | | | | | | | | |
The carrying value and fair value of financial instruments by each category as of March 31, 2022 were
as
follows:
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Derivative financial liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
6% Compulsory Convertible Debentures | | | | | | | | | | | | | | | | | | | | | | | | |
9% Cumulative Non-convertible preference shares | | | | | | | | | | | | | | | | | | | | | | | | |
Details of financial assets hypothecated as collateral
The carrying amount of financial assets as at March 31, 2023 and 2022 that the Group has provided as collateral for obtaining borrowings and other facilities from its bankers are as follows:
| | | |
| | | | | | |
Cash and cash equivalents | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Derivative financial instruments
Foreign exchange forward contracts and options are purchased to mitigate the risk of changes in foreign exchange rates associated with certain payables, receivables and forecasted transactions denominated in certain foreign currencies. These derivative contracts do not qualify for hedge accounting under IFRS 9 and are initially recognized at fair value on the date the contract is entered into and subsequently re-measured at their fair value. Gains or losses arising from changes in the fair value of the derivative contracts are recognized immediately in profit or loss. The counterparties for these contracts are generally banks or financial institutions. The following table gives details in respect of the notional amount of outstanding foreign exchange contracts as at March 31, 2023 and 2022
The Company recognized a net loss on the forward contracts of ₹ (1,387) (March 31, 2022: ₹ 2,206 – Net gain) for the year ended March 31, 2023.
The forward exchange contracts and option contracts mature between one and twelve months. The table below summarizes the notional amounts of derivative financial instruments into relevant maturity groupings based on the remaining period as at the end of the year:
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | | | |
Later than one month and not later than three months | | | | | | | | |
Later than three months and not later than six months | | | | | | | | |
Later than six months and not later than one year | | | | | | | | |
The Group has entered into Cross Currency Swaps in order to hedge the cash flows arising out of the Principal and Interest payments of the underlying External Commercial Borrowing denominated in USD. The period of the swap contracts is co terminus with the period of the underlying ECB. As per the terms of the arrangement, the Company shall pay INR fixed and receive fixed USD principal and interest cash flows during the term of the contract. The swap arrangement is marked to market at the end of every period and losses are recognised in the Statement of Income. The swap contracts outstanding balances as on March 31, 2023 and March 31, 2022 is as follows.
| | Value of the outstanding INR | | | Value of the outstanding USD | | | Mark to Market losses/ (gain) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Value of the outstanding INR | | | Value of the outstanding USD | | | Mark to Market losses/ (gain) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
The maturity of these contracts extends for five years and six months. The table below summarizes the cash flows (principal) of these derivative financial instruments into relevant maturity groupings based on the remaining period as at the end of the year:
The Group recognized a net loss on the cross currency swaps of ₹ Nil [Previous year : ₹ Nil for the year ended March 31, 2023.
The Group has entered into Interest Rate Swaps in order to hedge the cash flows arising out of the Interest payments of the underlying ECB. The period of the swap contract is co terminus with the period of the underlying ECB. As per the terms of the arrangement, the Company shall pay fixed rate of interest (8.9%) and receive variable rate of interest equal to LIBOR + 2.5% on notional amount. The swap arrangement is marked to market at the end of every period and losses are recognised in the Statement of income.
The maturity of these contracts extends for five years and six months. The table below summarizes the cash flows (interest) of these derivative financial instruments into relevant maturity groupings based on the remaining period as at the end of the year:
* Amount below rounding off norm adopted by the Group
Total notional amount outstanding as of March 31, 202
3
is US $ 3,500 (March 31, 20
22
: US $ 4,500)
.
Net gain on account of interest rate swaps amount to ₹ 25,263 for the year ended March 31, 202
3
(March 31, 20
22
: ₹ 16,879 – Net gain).
The details of assets and liabilities that are measured on fair value on recurring basis are given below:
| | Fair value as of March 31, 2023 | | | Fair value as of March 31, 2022 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Derivative financial assets – gain on outstanding forward/options contracts | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Derivative financial liabilities – loss on outstanding forward/options contracts | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative financial liabilities - loss on outstanding cross currency swaps | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative financial liabilities - loss on outstanding interest rate swaps | | | | | | | | | | | | | | | | | | | | | | | | |
| | Level 1 – unadjusted quoted prices in active markets for identical assets and liabilities. |
| | Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices). |
| | Level 3 – unobservable inputs for the asset or liability. |
Interest income/ (expenses), gains/ (losses) recognized on financial assets and liabilities
Recognized in profit or loss
| | | |
| | | | | | | | | |
Financial assets at amortised cost | | | | | | | | | | | | |
Interest income on bank deposits | | | | | | | | | | | | |
Interest income from other financial assets | | | | | | | | | | | | |
Impairment loss of trade receivables | | | | | | | | | | | | |
| | | | | | | | | | | | |
Financial assets at fair value through profit or loss | | | | | | | | | | | | |
Net change in fair value of derivative financial instruments gain/(loss) | | | | | | | | | | | | |
| | | | | | | | | | | | |
Financial liabilities at amortised cost | | | | | | | | | | | | |
Interest expenses on lease obligations | | | | | | | | | | | | |
Interest expenses on borrowings from banks, others and overdrafts | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Financial Risk Management |
The Group has exposure to the following risks from its use of financial instruments:
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board of Directors has established a risk management policy to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management systems are reviewed periodically to reflect changes in market conditions and the Group’s activities. The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the risk management framework. The Group Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
Credit risk
: Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s trade receivables, treasury operations and other activities that are in the nature of leases.
Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. Management considers that the demographics of the Group’s customer base, including the default risk of the industry and country in which customers operate, has less of an influence on credit risk. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of the customers to which the Group grants credit terms in the normal course of the business.
Cash and cash equivalents and other investments
In the area of treasury operations, the Group is presently exposed to counter-party risks relating to short term and medium term deposits placed with public-sector banks, and also to investments made in mutual funds.
The Chief Financial Officer is responsible for monitoring the counterparty credit risk and has been vested with the authority to seek Board’s approval
to
hedge such risks in case of need.
The gross carrying amount of financial assets, net of any impairment losses recognized represents the maximum credit exposure. The maximum exposure to credit risk as of March 31, 2023 and 2022 was as follows:
| | | | | | |
Cash and cash equivalents | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Impairment for financial assets
Allowances for impairment for trade receivables have been provided based on Expected Credit Loss Method adopting a simplified approach provided in IFRS 9. The ag
e
ing analysis of trade receivables has been considered from the
due date
for the practical expedient
. The ageing of trade receivables, net of allowances, is given below:
See note 13 for the activity in the allowance for impairment of trade account receivables.
Liquidity risks
: Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Typically the Group ensures that it has sufficient cash on demand to meet expected operational expenses, servicing of financial obligations. In addition, the Group has concluded arrangements with well reputed Banks, and has unused lines of credit that could be drawn upon should there be a need. The Company is also in the process of negotiating additional facilities with Banks for funding its requirements.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:
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Non-derivative financial liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
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6% Compulsory Convertible Debentures | | | | | | | | | | | | | | | | | | | | | | | | |
9% Cumulative Non-convertible preference shares | | | | | | | | | | | | | | | | | | | | | | | | |
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Non-derivative financial liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
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Market risk:
Market risk is the risk of loss of future earnings or fair values or future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign exchange rates and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables. The Group is exposed to market risk primarily related to foreign exchange rate risk (currency risk), interest rate risk and the market value of its investments. Thus the Group’s exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currencies.
Currency risk
: The Group’s exposure in US $, Euro and other foreign currency denominated transactions gives rise to Exchange Rate fluctuation risk. Group’s policy in this regard incorporates:
| | Forecasting inflows and outflows denominated in US$ for a twelve-month period |
| | Estimating the net-exposure in foreign currency, in terms of timing and amount |
| | Determining the extent to which exposure should be protected through one or more risk-mitigating instruments to maintain the permissible limits of uncovered exposures. |
| | Carrying out a variance analysis between estimate and actual on an ongoing basis and taking stop-loss action when the adverse movements breach the 5% barrier of deviation, subject to review by Audit Committee. |
The Group’s exposure to foreign currency risk as of March 31, 2023 was as follows:
All amounts in respective currencies as mentioned (in thousands)
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Cash and cash equivalents | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Net balance sheet exposure | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The Group’s exposure to foreign currency risk as of March 31, 2022 was as follows:
All amounts in respective currencies as mentioned (in thousands)
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Cash and cash equivalents | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Net balance sheet exposure | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
All amounts in respective currencies as mentioned (in thousands)
A 10% strengthening of the rupee against the respective currencies as of March 31, 2023 and 2022 would have increased / (decreased) other comprehensive income and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2022.
| | Other comprehensive income | | | | |
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A 10% weakening of the rupee against the above currencies as of March 31, 2023 and 2022 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.
Interest Rate Risk:
Interest rate risk is the risk that an upward movement in interest rates would adversely affect the borrowing costs of the group.
At the reporting date the interest rate profile of the Group’s interest –bearing financial instruments were as follows:
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- Fixed deposits with banks | | | | | | | | |
- Investment in debt securities | | | | | | | | |
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Variable rate instruments | | | | | | | | |
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Fair value sensitivity for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore a change in interest rates at the reporting date would not affect profit or loss.
Cash flow sensitivity for variable rate instruments
An increase of 100 basis points in interest rates at the reporting date would have increased / (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis has been performed on the same basis as 2022.
A decrease of 100 basis points in the interest rates at the reporting date would have had equal but opposite effect on the amounts shown above, on the basis that all other variables remain constant.
| | Issue of shares on a private placement basis to the existing promoter group |
On August 4, 2010, the Board of Directors of the Group proposed the issuance, in a private placement, of upto an aggregate of 12,50,00,000 of the company’s equity shares, par value ₹10 per share (“Equity shares”), for an aggregate purchase price of ₹ 40,000, to a group of investors affiliated with the Group’s promoter, including entities affiliated with Mr Raju Vegesna, the Group’s Chairman and Managing Director and Mr Ananda Raju Vegesna, Executive Director and brother of Mr Raju Vegesna (the “Offering”). The company’s shareholders approved the terms of the Offering at the Company’s Annual General Meeting held on September 27, 2010.
On October 22 2010, the company entered into a Subscription Agreement with Mr Ananda Raju Vegesna, acting as representative of the acquirers in connection with the offering. Accordingly, the company issued 12,50,00,000 equity shares to Raju Vegesna Infotech and Industries Private Limited, a company affiliated with the promoter group on October 30, 2010. The above shares were subsequently transferred by Raju Vegesna Infotech & Industries Private Limited to Ramanand Core Investment Company Private Limited.
On August 14, 2011, the Company received a letter from RVIIPL expressing its intention to transfer the above partly paid shares to its wholly owned subsidiary M/s Ramanand Core Investment Company Private limited (“RCICPL”). The Company, on August 26, 2011, registered such transfer of partly paid shares in the name of RCICPL.
On September 7, 2011, the parties entered into an amendment to the Subscription Agreement (the “Amendment”) extending the validity of the agreement period to September 26, 2013. This Amendment provides the Board of Directors of the Company with additional time to call upon the purchasers to pay the balance money, in accordance with the terms of the Subscription Agreement.
During the year ended March 31, 2019, the Company has called–up and received a sum of ₹ 10 per share and hence the shares have become fully paid up.
As of March 31, 2023, entities affiliated with our CEO, Chairman and Managing Director, Raju Vegesna, beneficially owned approximately
84.26%
of our outstanding equity shares.
| | Corporate Social Responsibility (CSR) expenditure |
Section 135 of the Companies Act, 2013, requires Company to spend towards Corporate Social Responsibility (CSR).
The Company is expected to spend ₹
33,090
towards CSR in compliance of this requirement. A sum of ₹
33,090
has been spent during the current year towards CSR activities as per details given below.
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VIRRD Trust, Dwarakha Tirumala | | | | | | | | |
Voluntary Health Services Hospital, Taramani | | | | | | | | |
Raju Vegesna Foundation, Visakapatanam | | | | | | | | |
Shree Anand Charitable Trust, Mumbai | | | | | | | | |
Sri Hanuman Mani Education & Culture Trust | | | | | | | | |
Dr Ambedkar Yuvajana Sangham Trust | | | | | | | | |
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Nayaki vidya mandir school | | | | | | | | |
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The Group's capital comprises equity share capital, share premium, and other equity attributable to equity holders. The primary objective of Group's capital management is to maximize shareholders value. The Group manages its capital and makes adjustment to it in light of the changes in economic and market conditions. The Group does so by adjusting dividend paid to shareholders. The total capital as on March 31, 2023 is ₹ 17,145,688 (Previous Year: ₹ 14,476,203
No changes were made in the objectives, policies or processes for managing capital of the Group during the current and previous year.
| Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on October 17, 2007 and incorporated herein by reference. |
| Previously filed as an exhibit to Amendment No. 1 to the Registration Statement on Form F-1 filed with the Commission on October 4, 1999 and incorporated herein by reference. |
| Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on October 17, 2007 and incorporated herein by reference. |
| Previously filed as an exhibit to the Registration Statement on Form F-6 filed with the Commission on May 11, 2009 and incorporated herein by reference. |
| Previously filed as an exhibit to the Annual Report on Form 20-F filed with the Commission on June 29, 2004 and incorporated herein by reference. |
| Previously filed as an exhibit to Amendment No. 2 to the Registration Statement on Form F-1 filed with the Commission on October 13, 1999 and incorporated herein by reference. |
| Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on November 30, 2004 and incorporated herein by reference. |
| Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on November 21, 2005 and incorporated herein by reference. |
| Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on December 7, 2005 and incorporated herein by reference. |
| Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on December 23, 2005 and incorporated herein by reference. |
| Previously filed as an exhibit to the Annual Report on Form 20-F filed with the Commission on June 30, 2006 and incorporated herein by reference. |
| Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on April 14, 2008 and incorporated herein by reference. |
| Previously filed as an exhibit to the Report on Form 20-F filed with the Commission on October 11, 2008 and incorporated herein by reference. |
| Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on January 23, 2009 and incorporated herein by reference. |
| Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on November 15, 2010 and incorporated herein by reference. |
| Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on September 8, 2011 and incorporated herein by reference. |
| Previously filed as an exhibit to the Report on Form 20-F filed with the Commission on June 19, 2015 and incorporated herein by reference. |
The Company hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
| | SIFY TECHNOLOGIES LIMITED |
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| | Whole time director and Chief Financial Officer |