NSDL e-Governanc Management Discussions
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our Restated Consolidated Financial Information beginning on page 195.
This Red Herring Prospectus may include forward-looking statements that involve risks and uncertainties, and our actual financial performance may materially vary from the conditions contemplated in such forward-looking statements as a result of various factors, including those described below and elsewhere in this Red Herring Prospectus. For further information, see "Forward-Looking Statements" beginning on page 16. Also read "- Significant Factors Affecting our Results of Operations" beginning on page 270, for a discussion of certain factors that may affect our business, financial condition or results of operations.
Unless otherwise indicated or the context otherwise requires, the financial information for Fiscals 2021, 2022 and 2023 and for the three months ended June 30, 2022 and June 30, 2023 included herein is derived from the Restated Consolidated Financial Information, included in this Red Herring Prospectus. For further information, see "Restated Consolidated Financial Information " on page 195.
Unless otherwise indicated, industry and market data used in this section has been derived from industry publications, in particular, the report titled "Assessment of large-scale IT infrastructure demand in India " dated December 2021 read with the first addendum to the report dated April 2023 and the second addendum to the report dated September 2023 (the "CRISIL Report"), prepared and issued by CRISIL, appointed by us on May 12, 2021 and exclusively commissioned and paid for by us in connection with the Offer. A copy of the CRISIL Report is available on the website of our Company at available at https://www.proteantech.in/ipo-offer-documents. The data included herein includes excerpts from the CRISIL Report and may have been re-ordered by us for the purposes of presentation. There are no parts, data or information (which may be relevant for the proposed issue), that has been left out or changed in any manner. For more information, see "Risk Factors -18. Industry information included in this Red Herring Prospectus has been derived from an industry report exclusively commissioned by and paid for by us for such purpose. " beginning on page 35. Also see, "Certain Conventions, Presentation of Financial, Industry and Market Data - Industry and Market Data " beginning on page 13.
OVERVIEW
We are one of the key IT-enabled solutions companies in India (Source: CRISIL Report) engaged in conceptualizing, developing and executing nationally critical and population scale greenfield technology solutions. We collaborate with the government and have extensive experience in creating digital public infrastructure and developing innovative citizen-centric e-governance solutions. We were originally setup as a depository in 1995 and created a systemically important national infrastructure for capital market development in India. We have been the chief architect and implementer for some of the most critical and large- scale technology infrastructure projects in India. (Source: CRISIL Report) We believe our solutions have led to identification of bottlenecks in government services, increased transparency and efficiency, redefined delivery of public services and led to a reduction in service delivery costs. We were among the leading Indian companies in the e-governance sector in terms of profitability, operating income, operating profit and operating profit margin in Fiscal 2023 (Source: CRISIL Report) We are a professionally managed company and are led by an experienced senior management team whose expertise and industry experience have helped us grow our operations and innovate our services.
Since inception and as of June 30, 2023, we have implemented and managed 19 projects spread across seven ministries and autonomous bodies ushering change in public delivery of services. Our primary engagement has been with following ministries:
We have been instrumental in establishing public digital infrastructure and creating e-governance interventions impacting
multiple sectors of the Indian economy. Some of our key interventions include:
• Modernising the direct tax infrastructure in India through projects like Permanent Account Number ("PAN") issuance, the Tax Information Network ("TIN") including Online Tax Accounting Systems ("OLTAS").
• Strengthening the old age security system in the country by building the core IT infrastructure as a Central Record keeping Agency ("CRA") for the National Pension System ("NPS").
• Enabling the universal social security system for all Indians, particularly the workers in the unorganized sector by creating technology infrastructure as a CRA for the Atal Pension Yojana ("APY").
• Contributing to the India Stack, a set of application programming interface ("API") that allows governments, businesses, startups and developers to utilise a unique digital infrastructure to prepare solutions that are presence-less, paperless and enable cashless service delivery. We have also enabled the BFSI sector by providing Aadhaar-based identity authentication and e-Sign services, as a licensed certifying authority empaneled by the Controller of Certifying Authorities. We were appointed as a registrar for enrolling citizens for Aadhaar.
• Improving accessibility to education and skill financing through creation of efficient digital marketplaces enabling discovery of financial resources through platforms such as Vidya Lakshmi, and Vidyasaarathi.
• Contributing to and supporting open digital building blocks such as Open Network for Digital Commerce ("ONDC") for use-cases across sectors like e-commerce, mobility, healthcare, agriculture and education. We are one of the key and early contributors to the open source community and protocols that are powering ONDC. (Source: CRISIS Report)
In our experience, these projects have resulted in reduction of turnaround time by digitizing processes, ensuring better compliance with government policies and enhancing transparency by providing real-time reports and dashboards tostakeholders. For further information on our key projects, see "Our Business - Key Projects beginning on page 145.
We have over the years successfully adapted to technology advancements through continuous investments in new technologies and capabilities and by developing sophisticated technology architecture. We have domain knowledge for various industries that allows us to develop functionalities that address specific requirements of end-users, businesses and public entities. While executing large and complex projects, we leverage our comprehensive program management expertise. Our clients benefit from our delivery model, significant experience across various technologies, industry knowledge, project management expertise and proprietary software engineering tools developed in-house.
Our business model has resulted in positive cash flows over the years and our cash flows from our operating activities were Rs 1,001.19 million, Rs 942.69 million, Rs 1,370.21 million, Rs 109.40 million and Rs (79.04) million in Fiscals 2021, 2022 and 2023 and in the three months ended June 30, 2022 and June 30, 2023, respectively. We have been profitable since Fiscal 1999 and have consistently declared and paid dividends since Fiscal 2001. The table below set out our key financial metrics for the periods indicated:
| Particulars | Fiscal | Three months ended June 30, 2022 | Three months ended June 30, 2023 | ||
| 2021 | 2022 | 2023 | |||
| (Rs million except percentages) | |||||
| Profit for the year/period | 921.87 | 1,439.37 | 1,070.42 | 212.71 | 322.11 |
| Revenue from operations | 6,031.32 | 6,909.09 | 7,422.06 | 1,567.48 | 2,204.03 |
| ROE | 13.81% | 18.27% | 12.49% | 2.62%* | 3.63%* |
| ROCE | 16.93% | 22.91% | 16.13% | 3.29%* | 4.60%* |
* on an unannualized basis
We are a professionally managed company and are led by an experienced senior management team whose expertise and extensive industry experience has helped us grow our operations and innovate our services over the years. Our Shareholders include financial institutions such as NSE Investments Limited, 360 ONE Special Opportunities Fund (formerly known asIIFL Special Opportunities Fund), SUUTI, Citicorp Finance India Limited and certain public and private sector banks such as State Bank of India, Punjab National Bank, Union Bank of India, Bank of Baroda and Canara Bank, HDFC Bank Limited, Axis Bank
Limited, Deutsche Bank A.G, The Hong Kong and Shanghai Banking Corporation Limited, Standard Chartered Bank, among others.
We have embraced an impact weighted framework to guide all business decisions with a focus on Environment, Social and Governance ("ESG") framework and committed to build a value system guiding us to contribute towards a sustainable and responsible future. We understand our responsibility towards the society at large and therefore, our business model focuses on the foundation of social capitalism. We are also cognizant of other important sustainability aspects and endeavour to continuously enhance our operations towards factors influencing ESG. An independent agency has been conducting comprehensive impact diagnostic assessment on an independent basis in the past few years and we have taken all reasonable efforts to incorporate their audit findings into our strategic planning process. The assessment by an independent agency helps us identify opportunities to improve further towards global and national sustainability goals.
PRESENTATION OF FINANCIAL INFORMATION
Our restated consolidated balance sheet as at March 31, 2021, 2022 and 2023, and as at June 30, 2022 and June 30, 2023 and the restated consolidated statement of profit and loss (including other comprehensive income), the restated consolidated cash flow statement, restated consolidated statement of changes in equity and notes forming part of the restated consolidated financial information for the years ended March 31, 2021, March 31, 2022 and March 31, 2023 and for the three months ended June 30, 2022 and June 30, 2023 together with the summary of significant accounting policies and explanatory information thereon (collectively, the "Restated Consolidated Financial Information"), have been compiled from our audited financial statements as at and for the years ended March 31, 2021, 2022 and 2023, and as at and for the three months ended June 30, 2022 and June 30, 2023 prepared in accordance with the Ind AS prescribed under Section 133 of the Companies Act, read with Companies (Indian Accounting Standards) Rules, 2015, as amended and other relevant provisions of the Companies Act. In addition, in accordance with the SEBI ICDR Regulations and the Guidance Note on "Reports in Company Prospectuses (Revised 2019)" issued by ICAI, certain adjustments have been incorporated for alignment of accounting policies, rectificatio n of errors and regroupings/reclassifications across the different periods for the preparation of the Restated Consolidated Financial Information for the years ended March 31, 2023, March 31, 2022 and March 31, 2021 and for the three months ended June 30, 2022 and June 30, 2021 based on the accounting policies and grouping/classifications followed by the Company for preparation of its audited consolidated financial statements as at and for the three months ended June 30, 2023.
SIGNIFICANT FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Diversified offerings and solutions and pricing
Our revenue, gross margins and profit vary among our offerings. Among the risks associated with the introduction of new offerings and solutions are delays in development, cost of development, delays in implementation, reduction in pricing, difficulty in predicting demand for new offerings and solutions, quality or other defects. In addition, our business depends on our ability to ensure payment from our clients for our offerings, and we maintain provisions against receivables and unbilled services and deploy stringent follow up procedures for customer receivables.
Our revenue growth and margin performance depends on the potential demand for our solutions and from the verticals in which we operate. As particular markets experience more (or less) growth, we would expect these trends to be reflected in our results in those areas. The growth in the healthcare industry is supported by increased demand due to the COVID-19 pandemic and government initiatives like access-free drugs and diagnostics under the Ayushman Bharat programme, increased spending under healthcare, and increased penetration of insurance and increased awareness about regular health check-ups. The degree of adoption of digitization depends on the digital maturity of the market/ vertical, regulatory compliances, and prioritization of IT budgets on digital spend compared to legacy solutions.
We negotiate pricing terms for a composite project, including our products and integration and maintenance services, utilizing a range of pricing structures including cost or project-based, transaction or services-based or on a hybrid model with features of both such pricing models. Our pricing is dependent on our internal forecasts and predictions about our offerings and solutions and associated services and the demand for such solutions by our clients, which may be based on limited data and could prove to be inaccurate. In addition, our pricing, cost and profit margin estimates on certain offerings and solutions, frequently include anticipated long-term research and development and investment costs that we expect to incur. In addition, certain of our offerings and solutions, and services require investment in hardware and software in the early stages that is expected to be recovered through subsequent billings, occasionally over the life of the agreement. Our projects often involve the construction of new technology products and communications networks and the development and deployment of advanced technologies.
Continuing relationship with existing clients and expansion of client base
We partner with the government and have over 25 years of experience in creating digital public infrastructure and developing innovative citizen-centric e-governance solutions. Our IT enabled e-governance services generated revenue from operations of Rs 6,031.32 million, Rs 6,909.09 million, Rs 7,422.06 million, Rs 1,567.48 million and Rs 2,204.03 million in Fiscals 2021, 2022 and
2023 and in the three months ended June 30, 2022 and June 30, 2023, respectively, and accounted for all of our total revenue from operations in each period. The termination of a major contract or loss of a major client or a significant reduction in the service performed on a major contract or for a major client could result in a reduction of such revenue. Further, given that our clients are government agencies, are subject to additional regulatory or other scrutiny associated with commercial transactions with government owned or controlled entities and agencies and there may be delays associated with collection of receivables from government owned or controlled entities.
As our client relationships mature and deepen, we seek to maximize our revenues and profitability by expanding the scope of our offerings with the objective of winning more business from our clients. Many of our existing clients typically expand their scope of our services by either expanding our services from one location to additional locations in which they operate, or by gradually engaging us for other services to aid in their digital transformation journey. We believe that our ability to strengthen our existing client relationships will be an important factor in our future growth and in our ability to continue increasing our profitability.
We intend to further grow our sales force to provide broader client coverage. Further, our ability to grow our client base and drive market adoption of our services is also affected by the pace at which organizations digitally transform. We believe the degree to which prospective clients recognize the need for our offerings to maximize their business process would lead to a higher budget allocation for purchasing and engaging our services. This will drive our ability to acquire new clients and increase sales to existing clients which, in turn, will drive our revenue growth and will affect our future financial performance.
Increased marketing and branding focus
In order to compete effectively and grow our business, particularly to implement our growth strategy of diversifying our offerings into new sectors and expanding into new geographies, we continue to invest significant resources on further strengthening our brand through extensive brand building and marketing campaigns. While we continue to focus on strengthening our services portfolio, we will need to continue to invest significant resources in marketing activity to further establish our brand, which will impact our expenditure and profitability. Some of the factors which require us to increase our brand building activities include: increased spending from our competitors, the increasing costs of supporting multiple offerings and services and complex technology solutions, expansion into geographies and products where our offerings are less well known as well as inflation in pricing. We have incurred significant financial and human resources on the establishment and maintenance of our service offerings, and we will continue to invest in, and devote resources to, advertising and marketing, as well as other brand building efforts to enhance consumer awareness of our brand and the services and technology solutions we offer. In addition, we have recently changed the name of our Company and expect to undertake additional marketing and brand building activities to promote our Company. We believe that the increased brand awareness and marketing of our products in recent years have resulted in an increase in revenues from our e-governance offerings in recent periods and we expect this trend to continue.
Operating costs
Processing charges contribute a significant portion of our total expenses on account of printing, postage and service charges paid to facilitation centers for PAN, TAN, e-TDS, Aadhar and CRA services. Processing charges were t 3,136.80 million, t 3,363.04 million, t 3,256.95 million, t 747.99 million and t 1,021.69 million in Fiscals 2021, 2022 and 2023 and in the three months ended June 30, 2022 and June 30, 2023, respectively, and accounted for 58.52%, 57.53%, 50.62%, 53.62% and 53.37% of our total expenses, respectively. Employee benefit expense is a component of our total expense. As we expand our business operations, we expect to incur additional employee costs resulting from an increase in the number of personnel as well as the employment of technically qualified employees. The information technology industry is highly competitive, and it can be difficult and expensive to attract and retain talented and experienced employees.
Competition
Our business is highly competitive, and our success is dependent upon our ability to compete against other IT companies, as well as service providers, including some that have greater resources than we have. Some of our competitors have longer operating histories, greater financial, technical, product development and marketing resources and greater name recognition. Such competitors could use these resources to market or develop solutions that are more effective or less costly than our solutions or that could render any or all of our solutions obsolete. Competitive pressures could also affect the pricing of our solutions. Greater competition for particular solutions could have a negative impact on pricing. We will continue to seek to distinguish our offerings by providing quality solutions at competitive prices. In addition, we may face pressure to increase our advertising and sales promotion expenses significantly, which would adversely affect our profitability.
On March 14, 2020, the Government of India declared COVID-19 as a "notified disaster" and initiated a nation-wide lockdown beginning March 25, 2020 for three weeks which was extended to May 31, 2020. The lockdown was periodically extended to varying degrees by state governments and local administrations. The lockdown, including shutdown of public transportation, hampered our business and field operations. A second wave of COVID-19 beginning in March 2021 became more severe and widespread than the first wave during 2020, with many geographies experiencing shortages of vaccines, hospital beds and oxygen. This second wave has also resulted in additional lockdowns throughout India. As a result of this second wave of COVID-19 cases and associated lockdowns, our business and field operations were similarly hampered. Our profitability was marginally impacted as certain clients sought price reductions or discounts. We experienced a decline in our revenue from operations in Fiscal 2021 which was Rs 6,031.32 million. We also witnessed an increase in provision for doubtful debts to Rs 410.20 million in Fiscal 2021 due to an increase in expected credit risk loss on long outstanding trade receivables.
CHANGES IN ACCOUNTING POLICIES IN THE LAST THREE FINANCIAL YEARS
There have been no changes in the accounting policies of the Company during the last three financial years.
Ind AS 116
On March 30, 2019, the Ministry of Company Affairs ("MCA") notified that Ind AS 116 - Leases would be effective for accounting periods beginning on or after April 1, 2019 which prescribes the accounting of the lease contracts entered in the capacity of the lessee and a lessor. We have applied Ind AS 116 for preparing the Ind AS audited financial statements for the period beginning from April 1, 2019. For the purpose of preparing Restated Consolidated Financial Information, Ind AS 116 has been applied retrospectively with effect from April 1, 2018. Effective April 1, 2018, we have recognised lease liability measured at an amount equal to present value of remaining lease payments and corresponding right of use asset at an amount equivalent to lease liability adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet immediately before April 1, 2018.
The adoption of this new standard has resulted in us recognising a right-of-use assets and related lease liability in connection with all former operating leases except for those identified as low-value or having a remaining lease term of less than 12 months from the date of initial application.
NON-GAAP MEASURES
EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Return on Equity, Return on Capital Employed, Net Worth, Return on Net Worth and Net Asset Value Per Equity Share (together, "Non-GAAP Measures"), presented in this Red Herring Prospectus is a supplemental measure of our performance and liquidity that is not required by, or presented in accordance with, Ind AS, Indian GAAP, IFRS or US GAAP. Further, these Non-GAAP Measures are not a measurement of our financial performance or liquidity under Ind AS, Indian GAAP, IFRS or US GAAP and should not be considered in isolation or construed as an alternative to cash flows, profit/ (loss) for the years/ period or any other measure of financial performance or as an indicator of our operating performance, liquidity, profitability or cash flows generated by operating, investing or financing activities derived in accordance with Ind AS, Indian GAAP, IFRS or US GAAP. In addition, these Non-GAAP Measures are not standardised terms, hence a direct comparison of these Non-GAAP Measures between companies may not be possible. Other companies may calculate these Non-GAAP Measures differently from us, limiting its usefulness as a comparative measure. Although such Non-GAAP Measures are not a measure of performance calculated in accordance with applicable accounting standards, our Companys management believes that they are useful to an investor in evaluating us as they are widely used measures to evaluate a companys operating performance.
Reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to Profit for the year /period
The table below reconciles restated profit for the year / period to EBITDA and Adjusted EBITDA. EBITDA is calculated as restated profit for the year / period plus tax expense, finance cost, depreciation and amortization expenses. Adjusted EBITDA calculated as EBITDA less other income, while Adjusted EBITDA Margin is the percentage of Adjusted EBITDA divided by revenue from operations.
| Particulars | Fiscal | For the three months ended June 30, 2022 | For the three months ended June 30, 2023 | ||
| 2021 | 2022 | 2023 | |||
| (Rs million) | |||||
| Profit for the year / period (A) | 921.87 | 1,439.37 | 1,070.42 | 212.71 | 322.11 |
| Total tax Expense (B) | 238.17 | 416.86 | 333.76 | 58.90 | 95.12 |
| Profit before tax (C=A+B) | 1,160.04 | 1,856.23 | 1,404.18 | 271.61 | 417.23 |
| Adjustments: | |||||
| Add: Finance Costs (D) | 9.45 | 4.83 | 9.27 | 2.65 | 2.17 |
| Add: Depreciation and Amortization | 167.91 | 169.95 | 182.85 | 41.64 | 49.10 |
| Particulars | Fiscal | For the three months ended June 30, 2022 | For the three months ended June 30, 2023 | ||
| 2021 | 2022 | 2023 | |||
| (Rs million) | |||||
| Expense (E) | |||||
| Earnings before interest, taxes, depreciation and amortization expenses (EBITDA) (G= C+D+E) | 1,337.40 | 2,031.01 | 1,596.30 | 315.90 | 468.50 |
| Less: Other income (F) | 488.95 | 792.67 | 416.66 | 99.13 | 127.62 |
| Adjusted Earnings before interest, taxes, depreciation and amortization expenses (Adjusted EBITDA) (H= G-F) | 848.45 | 1,238.34 | 1,179.64 | 216.77 | 340.88 |
| Revenue from operations (I) | 6,031.32 | 6,909.09 | 7,422.06 | 1,567.48 | 2,204.03 |
| Adjusted EBITDA Margin (EBITDA as a percentage of Revenue from operations) (J = H/I) | 14.07% | 17.92% | 15.89% | 13.83% | 15.47% |
PRINCIPAL COMPONENTS OF INCOME AND EXPENDITURE
Set forth below are the principal components of income and expenditure from our continuing operations:
Total Income
Our total income comprises (i) revenue from operations, and (ii) other income.
Revenue from Operations
Revenue from operations comprises sale of services that includes transactional fees, accounts maintenance fees and other operational income.
Other Income
Other income includes (i) interest income on assets measured at amortized cost (including interest on financial assets carried at amortised cost, interest on bank deposits, interest on overdue trade receivables, interest on security deposits and on others); (ii) dividend income; (iii) support charges; (iv) rent income; (v) miscellaneous income and (vi) profits on sale of investments carried on amortised cost.
Expenses
Our expenses comprise (i) employee benefits expenses; (ii) finance costs; (iii) depreciation and amortisation expense; and (iv) other expenses.
Employee Benefits Expenses
Employee benefits expenses comprises (i) salaries, wages and bonus; (ii) share based payment expense towards ESOP 2017; (iii) contribution to provident and other funds and (iv) staff welfare expenses.
Finance Costs
Finance cost changes in the carrying value of right of use assets on account of Ind AS 116.
Depreciation and Amortisation Expense
Depreciation and amortization expenses comprises (i) depreciation of property, plant and equipment, and other intangible assets; and (ii) depreciation to right-of-use assets due to the impact of application of Ind AS 116 over the period.
Other Expenses
Other expenses comprise of (i) rent; (ii) communication expenses; (iii) travelling and conveyance expenses; (iv) annual fees; (v) processing charges; (vi) repairs and maintenance; (vii) insurance; (viii) rates and taxes; (ix) advertisement and publicity; (x) legal and professional fees; (xi) printing and stationery expenses; (xii) auditors remuneration; (xiii) electricity charges / power fuel; (xiv) directors sitting fees; (xv) directors commission; (xvi) provision for doubtful debts; (xvii) loss on sale of assets;
(xviii) loss on sale of property, plant and equipment; (xix) loss on sale of investments mandatorily measured at amortized cost;
(xix) CSR expenses and (xx) miscellaneous expenses.
Key components of other expenses are explained below:
• Processing charges primarily consists of printing, postage and service charges paid to facilitation centers for PAN, TAN, e-TDS, Aadhar and CRA services;
• Repair and maintainence expenses primarily comprises of expenses towards repairs and maintenance of building; computers, telecommunication systems and other general repair and maintenance;
• Provision for doubtful debts are mainly incurred based on the expected credit loss policy of the company;
• Annual fees primarily comprises of fees paid to regulators for CRA and authentication services;
• Communication expenses primarily consists of payment for leased line, internet connection, telephone and SMS services;
• Expenditure toward CSR activities;
• Power and fuel expenses comprise of payments towards electricity charges, diesel and petrol expenses for generator and cars facility for officials of the company; and
• Miscellaneous expenses mainly comprise of fees paid for storage of documents and other general office expenses.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
Subsidiaries:
Subsidiaries are all entities over which Group has control. Control is achieved when the Group 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. Specifically, the Group controls an investee if and only if the Group has:
• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)
• Exposure, or rights, to variable returns from its involvement with the investee, and
• The ability to use its power over the investee to affect its returns
Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
• The contractual arrangement with the other vote holders of the investee
• Rights arising from other contractual arrangements
• The Groups voting rights and potential voting rights
• The size of the groups holding of voting rights relative to the size and dispersion of the holdings of the other voting rights holders
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the period are included in the restated consolidated financial information from the date the Group gains control until the date the Group ceases to control the subsidiary.
Consolidation procedure
• Combine like items of assets, liabilities, equity, income, expenses and cash flows of the parent with those of its subsidiaries.
• Offset (eliminate) the carrying amount of the parents investment in each subsidiary and the parents portion of equity of each subsidiary. Business combinations policy explains how to account for any related goodwill.
• Eliminate in full intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between entities of the group (profits or losses resulting from intragroup transactions that are recognised in assets, such as fixed assets are eliminated in full). Intragroup losses may indicate an impairment that requires recognition in the restated consolidated financial information. Ind AS 12 Income Taxes applies to temporary differences that arise from the elimination of profits and losses resulting from intragroup transactions.
Restated Consolidated Financial Information is prepared using uniform accounting policies for like transactions and other events in similar circumstances. If a member of the group uses accounting policies other than those adopted in the restated consolidated financial information for like transactions and events in similar circumstances, appropriate adjustments are made to that group members financial statements in preparing the restated consolidated financial information to ensure conformity with the groups accounting policies.
The financial statements of all entities used for the purpose of consolidation are drawn up to same reporting date as that of the parent company, i.e., year ended on March 31.
Non-controlling interest:
Non-controlling interests in the net assets (excluding goodwill) of consolidated subsidiaries are identified separately from the Groups equity. The interest of non-controlling shareholders may be initially measured either at fair value or at the non- controlling interests proportionate share of the fair value of the acquirees identifiable net assets. The choice of measure ment basis is made on an acquisition to acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interest is the amount of those interests at initial recognition plus the non-controlling interests share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if it results in the non-controlling interest having a deficit balance.
List of entities consolidated:
| Particulars | Country of Incorporation | As at March 31, 2023 | As at March 31, 2022 | As at March 31, 2021 |
| NSDL e-Governance (Malaysia) SDN BHD | Republic of Malaysia | 51% | 51% | 51% |
| Protean e-Gov Australia Pty Ltd (incorporated on December 9, 2020) | Australia | 100% | 100% | 100% |
| Protean Account Aggregator Limited (formerly known as NSDL e-Governance Account Aggregator Limited) (incorporated on November 2, 2020) | India | 100% | 100% | 100% |
| Protean Infosec Services Limited (from September 30, 2021) | India | 100% | 100% | 100% |
Significant Accounting Judgments, Estimates and Assumptions
The preparation of Restated Consolidated Financial Information in conformity with Ind AS requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures, and the disclosure of contingent liabilities, at the end of the reporting period. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period/year, are described below. The Group based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur.
Use of judgements and estimates
The areas involving significant judgement and estimates are as follows:
Judgements:
Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the consolidated financial statements is included in the following notes:
• Note 18: Revenue recognition
• Note 24: Fair value measurement of financial assets
• Note 27: Leases
• Note 4 and 8: Classification of investments
Estimates:
Application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these restated consolidated financial information have been disclosed below:
• Note 23: Defined benefit
• Note 2: Property, plant and equipment
• Note 27: Leases
• Note 6: Income taxes
• Note 24: Fair value measurement of financial instruments
• Note 29: Share based payments
• Note 19: Other income
• Note 18: Revenue recognition
• Note 9: Trade receivables
The preparation of the restated consolidated financial information in conformity with the recognition and measurement principles of the Ind AS requires management of the Group to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the restated consolidated financial information and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these restated consolidated financial information have been disclosed below. Accounting estimates could change from period to period. Although these estimate are based on managements best knowledge of current events and actions, uncertainty about the assumption and estimates could result in the outcome requiring material adjustment to the carrying amount of asset and liabilities.
Estimation of uncertainties relating to the global health pandemic from COVID-19
In view of the unprecedented COVID-19 pandemic and economic forecasts, the Management has evaluated the impact on the restated consolidated financial information and made appropriate adjustment where necessary. In assessing the recoverability of its assets including receivables and unbilled receivables, the Group has considered internal and external information up to the date of approval of these restated consolidated financial information including economic forecasts. The Group has performed analysis on the assumptions used and based on current indicators of future economic conditions, the Group expects to recover the carrying amount of these assets.
However, the actual impact of COVID-19 on the Groups restated consolidated financial information may differ from that estimated and the Group will continue to closely monitor any material changes to future economic conditions.
Defined benefit
The cost of the defined benefits that includes gratuity and compensated absences and the present value of the defined benefit obligation are based on actuarial valuation using the projected unit credit method. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
Property, plant and equipment
Property, plant and equipment represent a significant proportion of the asset base of the group. The charge in respect of periodic depreciation is derived after determining an estimate of an assets expected useful life and the expected residual value at th e end of its life. The useful lives and residual values of groups assets are determined by management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology.
Leases
The Group evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgment. The Group uses significant judgement in assessing the lease term (including anticipated renewals) and the applicable discount rate. The Group determines the lease term as the non-cancellable period of a lease, together with both periods covered by an option to extend the lease if the Group is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the Group is reasonably certain not to exercise that option. In assessing whether the Group is reasonably certain to exercise an option to extend a lease, or not to exercise an option to terminate a lease, it considers all relevant facts and circumstances that create an economic incentive for the Group to exercise the option to extend the lease, or not to exercise the option to terminate the lease. The Group revises the lease term if there is a change in the non- cancellable period of a lease. The discount rate is generally based on the incremental borrowing rate specific to the lease being evaluated or for a portfolio of leases with similar characteristics.
Income taxes
The major tax jurisdiction for the group is India. Significant judgments are involved in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable profits during the periods in which those temporary differences and tax loss carry-forwards become deductible. The Group considers the expected reversal of deferred tax liabilities and projected future taxable income in making this assessment.
The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry-forward period are reduced.
Fair value measurement of financial instruments
When the fair value of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
Share based payments
The Group is required to evaluate the terms to determine whether share-based payment is equity settled or cash settled. Judgment is required to do this evaluation. Further, the Group is required to measure the fair value of equity settled transactions with employees at the grant date of the equity instruments. The aforementioned inputs entered in to the option valuation model that we use to determine the fair value of our share awards are subjective estimates, changes to these estimates will cause the fair value of our share-based awards, and related share-based compensations expense we record to vary.
Interest income
For all debt instruments measured either at amortised cost, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortised cost of a financial liability. When calculating the effective interest rate, the Group estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses. Interest income is included in finance income in the statement of profit and loss.
Trade receivables
The Group estimates the un-collectability of accounts receivable by analysing historical payment patterns, customer concentrations, customer credit-worthiness and current economic trends. If the financial condition of a customer deteriorates, additional allowances may be required.
Revenue Recognition
The Group earns revenue primarily from providing Information Technology (IT) enabled e-Governance services. The Group offers integrated portfolio of IT, business and engineering services and solutions.
Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration which the Group expects to receive in exchange for those products or services.
To recognise revenues, the Group applies the following five step approach;
• identify the contract with a customer,
• identify the performance obligations in the contract,
• determine the transaction price,
• allocate the transaction price to the performance obligations in the contract and
• recognize revenues when a performance obligation is satisfied.
Performance obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the client and is the unit of accounting in Ind AS 115.
Determination of transaction price
Revenue is measured based on transaction price which includes variable consideration only to the extent it is probable that a significant reversal of revenues recognized will not occur when the uncertainty associated with the variable consideration is resolved. Revenues also exclude taxes collected from customers.
Allocation of transaction price
A contracts transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, th e performance obligation is satisfied. For contracts with multiple performance obligations, the Group allocates the contracts transaction price to each performance obligation based on the relative standalone selling price. The primary method used to estimate standalone selling price is the adjusted market assessment approach, under which the Group evaluates the price in that market that a customer is willing to pay for those services.
While determining relative standalone selling price and identifying separate performance obligations require judgment, generally relative standalone selling prices and the separate performance obligations are readily identifiable as the Group sells those performance obligations unaccompanied by other performance obligations.
Satisfaction of performance obligation
A contract asset is right to consideration in exchange of services that the Group has rendered to a customer when that right is conditioned on something other than passage of time. Contract assets are recognised when there is excess of revenue earned over billings on contracts. Contract assets are classified as unbilled receivables (only act of invoicing is pending) when there is unconditional right to receive cash, and only passage of time is required, as per contractual terms.
A contract liability is the obligation to render services to a customer for which the Group has received consideration from the customer. If a customer pays consideration before the Group renders services to the customer, a contract liability is recognised when the payment is made. Contract liabilities are recognised as revenue when the Group renders services as per the contract.
• Revenue on time-and-material contracts are recognized as the related services are performed and revenue from the end of the last billing to the balance sheet date is recognized as unbilled revenues. Revenue from fixed-price, fixed-timeframe contracts, where there is no uncertainty as to measurement or collectability of consideration, is recognized as per the percentage-of-completion method (‘POC method). When there is uncertainty as to measurement or ultimate collectability, revenue recognition is postponed until such uncertainty is resolved.
• Revenue related to fixed price maintenance and support services contracts, where the Group is standing ready to provide services is recognized based on time elapsed mode and revenue is straight lined over the period of performance.
• Revenue from the sale of distinct internally developed software and manufactured systems and third party software is recognised at the point in time when the system / software is delivered to the customer. In cases where implementation and / or customisation services rendered significantly modifies or customises the software, these services and software are accounted for as a single performance obligation and revenue is recognised over time on a POC method.
• Revenue from the sale of distinct third party hardware is recognised at the point in time when control is transferred to the customer.
Revenue is measured based on the transaction price, which is the consideration, adjusted for service level credits and incentives, if any, as specified in the contract with the customer.
The billing schedules agreed with customers include periodic performance based payments and / or milestone based progress payments. Invoices are payable within contractually agreed credit period.
Contracts are subject to modification to account for changes in contract specification and requirements. The Group reviews modification to contract in conjunction with the original contract, basis which the transaction price could be allocated to a new performance obligation, or transaction price of an existing obligation could undergo a change. In the event transaction price is revised for existing obligation, a cumulative adjustment is accounted for.
Use of significant judgements in revenue recognition:
• The Groups contracts with customers could include promises to transfer multiple products and services to a customer. The Group assesses the products / services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligation involves judgement to determine the deliverables and the ability of the customer to benefit independently from such deliverables.
• Judgement is also required to determine the transaction price for the contract. The transaction price could be either a fixed amount of customer consideration or variable consideration with elements such as service level credits and incentives. The transaction price is also adjusted for the effects of the time value of money if the contract includes a significant financing component. Any consideration payable to the customer is adjusted to the transaction price, unless it is a payment for a distinct product or service from the customer. The estimated amount of variable consideration is adjusted in the transaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur and is reassessed at the end of each reporting period. The Group allocates the elements of variable considerations to all the performance obligations of the contract unless there is observable evidence that they pertain to one or more distinct performance obligations.
The Group uses judgement to determine an appropriate standalone selling price for a performance obligation. The Group allocates the transaction price to each performance obligation on the basis of the relative standalone selling price of each distinct product or service promised in the contract. Where standalone selling price is not observable, the Group uses the expected cost plus margin approach to allocate the transaction price to each distinct performance obligation.
Contract fulfilment costs are generally expensed as incurred except for certain software licence costs which meet the criteria for capitalisation. Such costs are amortised over the contractual period or useful life of licence whichever is less. The assessment of this criteria requires the application of judgement, in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recovered.
Practical expedients used:
In accordance with the practical expedient in Para 63 of Ind AS 115, the Group has not adjusted the promised amount of consideration for the effects of a significant financing component if the Group expects, at contract inception, that the period between when the Group transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
Property, Plant and Equipment
Property, plant and equipment are stated at cost of acquisition less accumulated depreciation and impairment loss, if any. The cost is inclusive of freight, installation cost, duties, taxes, borrowing cost and other incidental expenses for bringing the asset to its working conditions for its intended use but net of indirect taxes, wherever input credit is claimed.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under other non-current assets and the cost of assets not put to use before such date are disclosed under ‘Capital work-in-progress.
When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognizes such parts as separate component of assets with specific useful lives and provides depreciation over their useful life.
Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
Repairs and maintenance costs are recognized in net profit in the statement of profit and loss when incurred.
The cost and related accumulated depreciation are eliminated from the restated consolidated financial information upon sale or retirement of the asset and the resultant gains or losses are recognized in the statement of profit and loss.
Assets to be disposed off are reported at the lower of the carrying value or the fair value less cost to sell.
Leases
The Group as a lessee
The Groups lease asset classes primarily consist of leases for premise. 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:
• the contract involves the use of an identified asset;
• the Group has substantially all of the economic benefits from use of the asset through the period of the lease; and
• 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.
The Group recognises right-of-use asset representing its right to use the underlying asset for the lease term at the lease commencement date. The cost of the right-of-use asset measured at inception shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset or restoring the underlying asset or site on which it is located. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. The right-of-use assets is depreciated using the straight -line method from the commencement date over the lease term.
The Group measures the lease liability at the present value of the lease payments that are not paid at the commencement date of the lease. The lease payments are discounted using the incremental borrowing rate. 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.
Depreciation and Amortisation
Depreciation is charged so as to write off the cost or valuation of assets, other than land and properties under construction, over their estimated useful lives, using the straight-line method.
Depreciation and amortisation on additions / deletions is provided on pro-rata basis from the date of acquisition/ up to the date of deletion.
Depreciation and amortisation on assets is provided on the straight-line method using the rates based on the economic useful life of assets as estimated by the management but not being more than the limits specified in Schedule II of the Companies Act, 2013 as below:
| Assets | Estimated Useful Lives |
| Central System | 6 years |
| Servers | 6 years |
| Computers | 3 years |
| Communication (Network) | 6 years |
| Electrical Installations | 10 years |
| Office Equipments | 5 years |
| Furniture | 10 years |
| Buildings | 60 years |
Computer Software is amortized over a period of 4 years.
Depreciation is not recorded on capital work-in-progress until installation is complete and the asset is ready for its intended use. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.
On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the property revaluation reserve is transferred directly to retained earnings. No transfer is made from the revaluation reserve to retained earnings except when an asset is derecognised.
Intangible Assets
Intangible assets comprising of software are recorded at acquisition cost and are amortized over the estimated useful life on straight line basis. Cost of development and production incurred till the time software is ready for use is capitalised.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised. Research cost are expensed as incurred.
Development costs
Development expenditure on an individual project are recognised as an intangible asset when the Group can demonstrate:
• The technical feasibility of completing the intangible asset so that the asset will be available for use
• Its intention to complete and its ability and intention to use the asset
• How the asset will generate future economic benefits
• The ability to measure reliably the expenditure during development
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation expense is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset. During the period of development, the asset is tested for impairment annually.
Impairment of Tangible and Intangible Assets
At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Foreign Currency Transactions and Translation
Transactions and translations
Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the respective functional currency at the rates prevailing on the reporting period date.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at reporting period-end date exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
Non-monetary items that are measured at fair value in a foreign currency shall be translated using the exchange rates at the date when the fair value was measured. Non-monetary items that are measured in terms of historical cost in a foreign currency shall be translated using the exchange rate at the date of the transaction.
Employee Benefit Costs
Short-term employee benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, wages etc. and the expected cost of ex-gratia are recognised in the period in which the employee renders the related service. A liability is recognised for the amount expected to be paid when there is 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.
Post-Employment benefits
Defined Contribution plans
• Provident Fund: Employees are entitled to receive benefits in respect of provident fund, in which both employees and the Group make monthly contributions at a specified percentage of the covered employees salary. The contributions, as specified under the law were made to recognised Provident Fund.
• Superannuation: Certain employees of the Group are participants in a defined contribution plan. The Group has no further obligations to the Plan beyond its annual contributions which are contributed to a trust fund, the corpus of which is invested with the Life Insurance Corporation of India.
Defined Benefit Plans
• Gratuity: The Group provides for gratuity, a defined benefit retirement plan (‘the Gratuity Plan) covering eligible employees. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employees salary and the tenure of employment with the Company.
The Group has maintained a Group Gratuity Cum Life Assurance Scheme with the Life Insurance Corporation of India (LIC) towards which it annually contributes a sum determined by LIC.
The Groups net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets is deducted. The present value of the obligation under such defined benefit plan is determined based on actuarial valuation by an independent actuary using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plan are based on the market yields on Government securities as at the balance sheet date. The Group recognises the net obligation of a defined benefit plan in its balance sheet as an asset or liability.
Gains or losses through re-measurement of the net defined benefit liability / (asset) are recognised in other comprehensive income. The actual return of portfolio of plan assets, in excess of yields computed by applying the discount rate used to measure the defined benefit obligation are recognised in other comprehensive income. The effects of any plan amendments are recognised in statement of profit and loss.
• Compensated absences: The Group has a policy on compensated absences which are both accumulating and non- accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method on the additional amount expected to be paid/availed as a result of the unused entitlement that has accumulated at the balance sheet date. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur.
Income Tax
Income tax expense comprises current and deferred income tax. Income tax expense is recognized in net profit in the statement of profit and loss except to the extent that it relates to items recognized directly in equity or it is recognized in other comprehensive income.
Current tax
Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Current tax assets and current tax liabilities are offset only if there is a legally enforceable right to set off the recognized amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
Deferred tax
Deferred tax is recognised on the differences between the carrying amounts of assets and liabilities in the restated consolidated financial information and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited outside profit or loss (either in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss (either in other comprehensive income or directly in equity, respectively).
Provisions, Contingent Liabilities and Contingent Assets
A provision is recognised when the Group has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which reliable estimate can be made. Provisions (excluding retirement benefits) are discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are not recognised in the restated consolidated financial information. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. A contingent asset is neither recognised nor disclosed in the restated consolidated financial information.
Cash Flow Statement
Cash flows are reported using the indirect method for presenting operating cash flow, whereby profit or loss for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Group are segregated.
Cash and cash equivalents comprise cash in hand, balance with banks and term deposits with banks with original maturity up to three months.
Other bank balances comprises of term deposit with banks having maturity of more than three months but less than twelve months from the Balance sheet date.
Earnings Per Share
Basic earnings per share are calculated by dividing the net profit and loss for the period attributable to equity shareholders of the Group by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net profit and loss for the period attributable to equity shareholders of the Group and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
Dividend Income
Dividend income is recognised when the Groups right to receive the payment is established, which is generally when shareholders approve the dividend.
Financial Instruments
Initial recognition
The Group recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities that are not at fair value through profit or loss are added to the fair value on initial recognition.
Subsequent measurement Financial assets
Financial assets are classified into the following specified categories: financial assets "at amortised cost", "fair value through other comprehensive income", "fair value through Profit or Loss". The classification depends on the entitys business model for managing the financial assets and the contractual cash flow characteristics of the financial asset at the time of initial recognition.
Financial assets are recognised by the Group as per its business model.
All financial assets are recognised and de-recognised on a trade date basis where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially at fair value through profit or loss.
Income and expense is recognised on an effective interest basis for debt instrument, other equity instruments are classified as "fair value through profit or loss".
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the restated consolidated financial information are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
• Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
• Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices)
• Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as "loans and receivables". Loans and receivables (including trade and other receivables) and others are measured at amortised cost using the effective interest rate (EIR) method less impairment. Interest is recognised by applying the effective interest method, except for short-term receivables when the effect of discounting is immaterial.
Impairment of financial assets
The Group assesses at each date of balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. In determining the allowances for doubtful trade receivables, the Group has used a practical expedient by computing the expected credit loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account both quantitative and qualitative information and analysis, based on the Groups historical credit loss experience and informed credit assessment and is adjusted basis forward looking information. The expected credit loss allowance is based on the ageing of the receivables that are due and allowance rates used in the provision matrix. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
Loans and receivables and de-recognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers
the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset 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.
Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income if it is 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 asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Group has made an irrevocable election for its investments which are classified as equity instruments to present the subsequent changes in fair value in other comprehensive income based on its business model. Further, in cases where the Group has made an irrevocable election based on its business model, for its investments which are classified as equity instruments, the subsequent changes in fair value are recognized in other comprehensive income.
Financial assets at fair value through profit or loss
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss. Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest method, except for contingent consideration recognized in a business combination which is subsequently measured at fair value through profit and loss. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
Financial liabilities and equity instruments
Equity instruments
Equity instruments are recorded at the proceeds received, net of direct issue costs.
Financial liabilities
Financial liabilities are classified as either financial liabilities "at fair value through profit or loss" or other financial liabilities. Financial liabilities at fair value through profit or loss (FVTPL)
Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL.
De-recognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Groups obligations are discharged, cancelled or they expire.
Non-current Assets Held for Sale and Discontinued Operations
Non-current assets held for sale are measured at lower of the carrying value and the fair value less cost to sell.
Offsetting arrangements
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when Group has a legally enforceable right to set off the recognised amounts; and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. A right to set-off must be available today rather than being contingent on a
future event and must be exercisable by any of the counterparties, both in the normal course of business and in the event of default, insolvency or bankruptcy.
Share based payment
Equity settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date which is recognised over the vesting period, with the corresponding increase in equity. The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model.
Dividends
Final dividends on shares are recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the companys Board of Directors.
Corporate Social Responsibility (CSR) Expenditure
CSR expense is recognized as it is incurred by the Group or when Group has entered into any legal or constructive obligation for incurring such an expense.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2023 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2022
The following table sets forth certain information with respect to our results of operations for the three months ended June 30, 2022 and June 30, 2023:
| Particulars | For the three months ended June 30, 2022 | For the three months ended June 30, 2023 | ||
| (Rs million) | Percentage of total income | (Rs million) | Percentage of total income | |
| Income | ||||
| Revenue from operations | 1,567.48 | 94.05% | 2,204.03 | 94.53% |
| Other income | 99.13 | 5.95% | 127.62 | 5.47% |
| Total Income | 1,666.61 | 100.00% | 2,331.65 | 100.00% |
| Expenses | ||||
| Employee benefits expense | 242.09 | 14.53% | 392.72 | 16.84% |
| Finance costs | 2.65 | 0.16% | 2.17 | 0.09% |
| Depreciation and amortisation expense | 41.64 | 2.50% | 49.10 | 2.11% |
| Allowance for expected credit loss | 35.00 | 2.10% | 7.50 | 0.32% |
| Other expenses | 1,073.62 | 64.42% | 1,462.93 | 62.74% |
| Total expenses | 1,395.00 | 83.70% | 1,914.42 | 82.11% |
| Profit before tax | 271.61 | 16.30% | 417.23 | 17.89% |
| Less: Tax expense | ||||
| - Current tax | 60.34 | 3.62% | 104.30 | 4.47% |
| - Deferred tax | (1.44) | (0.09)% | (9.18) | (0.39)% |
| Total tax expense | 58.90 | 3.53% | 95.12 | 4.08% |
| Profit for the period (A) | 212.71 | 12.76% | 322.11 | 13.81% |
| Other comprehensive income | ||||
| Items that will not be reclassified subsequently to profit or loss | ||||
| Re-measurement of the defined benefit liability / asset | 19.02 | 1.14% | (44.28) | (1.90)% |
| Total other comprehensive income (net of tax) (B) | 19.02 | 1.14% | (44.28) | (1.90)% |
| Total comprehensive income (A+ B) | 231.73 | 13.90% | 277.83 | 11.92% |
THREE MONTHS ENDED JUNE 30, 2023 COMPARED TO THREE MONTHS ENDED JUNE 30, 2022 Income
Total income increased by 39.90% from Rs 1,666.61 million in the three months ended June 30, 2022 to Rs 2,331.65 million in the three months ended June 30, 2023 primarily due to an increase in revenue from transactions fees and accounts maintenance fees.
Revenue from Operations
Revenue from operations increased by 40.61% from Rs 1,567.48 million in the three months ended June 30, 2022 to Rs 2,204.03 million in the three months ended June 30, 2023 primarily due to an increase in revenue from transaction fees, and revenue from accounts maintenance fees. Other operational income were slightly lower in the three months ended June 30, 2023 compared to the three months ended June 30, 2022.
Sale of Services
Sale of services increased by 40.61% from Rs 1,567.48 million in the three months ended June 30, 2022 to Rs 2,204.03 million in the three months ended June 30, 2022 primarily owing to an increase in transaction fees by 47.49% from Rs 1,197.59 million in the three months ended June 30, 2022 to Rs 1,766.34 million in the three months ended June 30, 2023 on account of an increase in fees from issuance of PAN cards, an increase in accounts maintenance fees by 18.61% from Rs 367.00 million in the three months ended June 30, 2022 to Rs 435.29 million in the three months ended June 30, 2023 on account of an increase in numbers of active subscribers of NPS. Our other operational income decreased slightly from Rs 2.89 million in the three months ended June 30, 2022 to Rs 2.40 million in the three months ended June 30, 2023.
Other Income
Other income increased by 28.74% from Rs 99.13 million in the three months ended June 30, 2022 to Rs 127.62 million in the three months ended June 30, 2023, primarily due to an increase in interest earned on financial assets at amortised cost from Rs 63.05 million in the three months ended June 30, 2022 to Rs 92.74 million in the three months ended June 30, 2023, interest on bank deposits at amortised cost from Rs 14.84 million in the three months ended June 30, 2022 to Rs 28.82 million in the three months ended June 30, 2023, and support charges increased from Rs 1.92 million in the three months ended June 30, 2022 to Rs 2.12 million in the three months ended June 30, 2023.
The increase was offset by a decrease in dividend income from Rs 4.16 million in the three months ended June 30, 2022 to nil in the three months ended June 30, 2023, and miscellaneous income from Rs 12.29 million in the three months ended June 30, 2022 to Rs 0.49 million in the three months ended June 30, 2023.
Expenses
Total expenses increased by 37.23% from Rs 1,395.00 million in the three months ended June 30, 2022 to Rs 1,914.42 million in the three months ended June 30, 2023, primarily due an increase in employee benefit expense and an increase in other expenses.
Employee Benefits Expenses
Employee benefits expenses increased by 62.22% from Rs 242.09 million in the three months ended June 30, 2022 to Rs 392.72 million in the three months ended June 30, 2023, primarily due to an increase in salaries, wages and bonus by 55.17% from Rs 202.13 million in the three months ended June 30, 2022 to Rs 313.64 million in the three months ended June 30, 2022 on account of salary increments. In addition, contribution to provident and other fund increased by 44.76% from Rs 26.43 million in the three months ended June 30, 2022 to Rs 38.26 million in the three months ended June 30, 2023 and share based payment expense for ESOP 2017 increased from Rs 5.95 million in the three months ended June 30, 2022 to Rs 33.69 million in the three months ended June 30, 2023. This was offset by a marginal decrease in staff welfare expenses from Rs 7.58 million in the three months ended June 30, 2022 to Rs 7.13 million in the three months ended June 30, 2023.
Finance Costs
Finance costs decreased marginally from Rs 2.65 million in the three months ended June 30, 2022 to Rs 2.17 million in the three months ended June 30, 2023 mainly on account of fresh lease liability created on a property situated in Mumbai, Maharashtra.
Depreciation and Amortisation Expenses
Depreciation and amortisation expenses increased by 17.92% from Rs 41.64 million in the three months ended June 30, 2022 to Rs 49.10 million in the three months ended June 30, 2023, due to an increase in addition of fixed assets in the three months ended June 30, 2023.
Other Expenses
Other expenses increased by 36.26% from Rs 1,073.62 million in the three months ended June 30, 2022 to Rs 1,462.93 million in the three months ended June 30, 2023, primarily due to an increase in:
• Rent expenses from Rs 0.93 million in the three months ended June 30, 2022 to Rs 4.00 million in the three months ended June 30, 2023 on account of leasing a new office at Pune, Maharashtra.
• Communication expenses from Rs 29.17 million in the three months ended June 30, 2022 to Rs 30.54 million in the three months ended June 30, 2023 primarily due to increase in business operations in line with the increase in our revenue from operations.
• Annual fees (which is calculated based on our revenue from operations) that is required to be paid to the Pension Fund Regulatory & Development Authority by 17.41% from Rs 25.50 million in the three months ended June 30, 2022 to Rs 29.94 million in the three months ended June 30, 2023.
• Repairs and maintenance expenses of computers and telecommunication systems by 37.30% from Rs 190.18 million in the three months ended June 30, 2022 to Rs 261.11 million in the three months ended June 30, 2023, due to an increase in the use of IT resources resulting from an increase in economic activities.
• Rates and taxes to Rs 7.11 million in the three months ended June 30, 2023 compared to Rs 1.94 million in the three months ended June 30, 2022 on account of an increase in GST expenses booked in the current period.
• Advertisement and publicity expenses from Rs 8.80 million in the three months ended June 30, 2022 to Rs 32.41 million in the three months ended June 30, 2023 due to an increase in expenditure on business promotion activities.
• Electricity charges / power and fuel from Rs 5.98 million in the three months ended June 30, 2022 to Rs 9.62 million in the three months ended June 30, 2023.
• Miscellaneous expense from Rs 4.34 million in the three months ended June 30, 2022 to Rs 6.22 million in the three months ended June 30, 2023.
The increase was partially offset primarily by a decrease in bad debts written off to nil in the three months ended June 30, 2023 from Rs 1.19 million in the three months ended June 30, 2022 on account of no bad debts provided in the three months ended June 30, 2023.
Profit before Tax
For the reasons discussed above, profit before tax was Rs 417.23 million in the three months ended June 30, 2023 as compared to Rs 271.61 million in the three months ended June 30, 2022.
Tax Expense
Current tax expenses increased from Rs 60.34 million in the three months ended June 30, 2022 to Rs 104.30 million in the three months ended June 30, 2023 in line with an increase in the profit of the company. Deferred tax expenses increased from Rs 1.44 million in the three months ended June 30, 2022 to Rs 9.18 million in the three months ended June 30, 2023, primarily on account of an increase in provisions for doubtful debts.
As a result, total tax expense amounted to Rs 95.12 million in the three months ended June 30, 2023 as compared to Rs 58.90 million in the three months ended June 30, 2022.
Profit for the Period
We recorded a profit for the period of Rs 322.11 million in the three months ended June 30, 2023 as compared to Rs 212.71 million in the three months ended June 30, 2022.
Adjusted Earnings before Interest, Taxes, Depreciation and Amortisation (Adjusted EBITDA)
Adjusted EBITDA was Rs 340.88 million in the three months ended June 30, 2023 as compared to Rs 216.77 million in the three months ended June 30, 2022, while Adjusted EBITDA Margin was 15.47% in the three months ended June 30, 2023 as compared to 13.83% in the three months ended June 30, 2022.
RESULTS OF OPERATION FOR FISCALS 2021, 2022 and 2023
The following table sets forth certain information with respect to our results of operations on a consolidated basis for Fiscals 2021, 2022 and 2023:
| Particulars | Fiscal | |||||
| 2021 | 2022 | 2023 | ||||
| (Rs million) | Percentage of Total Income | (Rs million) | Percentage of Total Income | (Rs million) | Percentage of Total Income | |
| Income | ||||||
| Revenue from operations | 6,031.32 | 92.50% | 6,909.09 | 89.71% | 7,422.06 | 94.68% |
| Other income | 488.95 | 7.50% | 792.67 | 10.29% | 416.66 | 5.32% |
| Total Income | 6,520.27 | 100.00% | 7,701.76 | 100.00% | 7,838.72 | 100.00% |
| Expenses | ||||||
| Employee benefits expense | 752.67 | 11.54% | 786.76 | 10.22% | 1,229.48 | 15.68% |
| Finance costs | 9.45 | 0.14% | 4.83 | 0.06% | 9.27 | 0.12% |
| Depreciation and amortisation expense | 167.91 | 2.58% | 169.95 | 2.21% | 182.85 | 2.33% |
| Allowance for expected credit loss | 292.00 | 4.48% | 303.73 | 3.94% | 175.49 | 2.24% |
| Other expenses | 4,138.20 | 63.47% | 4,580.26 | 59.47% | 4,837.45 | 61.71% |
| Total expenses | 5,360.23 | 82.21% | 5,845.53 | 75.90% | 6,434.54 | 82.09% |
| Profit before tax | 1,160.04 | 17.79% | 1,856.23 | 24.10% | 1,404.18 | 17.91 |
| Less: Tax expense | ||||||
| - Current tax | 298.90 | 4.58% | 525.16 | 6.82% | 343.56 | 4.38% |
| - Deferred tax | (60.73) | (0.93)% | (108.30) | (1.41)% | (9.80) | (0.13)% |
| Total tax expense | 238.17 | 3.65% | 416.86 | 5.41% | 333.76 | 4.26% |
| Profit for the year (A) | 921.87 | 14.14% | 1,439.37 | 18.69% | 1,070.42 | 13.66% |
| Other comprehensive income | ||||||
| Items that will not be reclassified subsequently to profit or loss | ||||||
| Re-measurement of the defined benefit liability / asset | (28.60) | (0.44)% | 36.25 | 0.47% | (8.33) | (0.11)% |
| Total other comprehensive income (net of tax) (B) | (28.60) | (0.44)% | 36.25 | 0.47% | (8.33) | (0.11)% |
| Total comprehensive income (A+ B) | 893.27 | 13.70% | 1,475.62 | 19.16% | 1,062.09 | 13.55% |
FISCAL 2023 COMPARED TO FISCAL 2022
Key Developments
• We launched "Protean Cloud Services" an Al-powered private cloud offering for business enterprises on August 5, 2022.
• In order to expand our last mile geographical reach for our taxation services, we entered into partnerships with distribution networks such as Nearby Technologies Private Limited, Fino Payments Bank Limited, Vakrangee Limited and Payworld Digital Services Private Limited.
• Towards enabling digital on-boarding and data verification capabilities as part of our services, we have incorporated our Subsidiary, Protean Account Aggregator Limited (formerly known as NSDL e-Governance Account Aggregator Limited)on November 2, 2020 for account aggregation business and have received the certificate of registration dated January 9, 2023 from the RBI.
• Our Company initiated the future-fit program in which fresh engineering graduates were on boarded for a two month boot camp where they are trained in acquiring latest technology skills.
Income
Total income increased by 1.78% from Rs 7,701.76 million in Fiscal 2022 to Rs 7,838.72 million in Fiscal 2023 primarily due to an increase in revenue from transaction fees, revenue from accounts maintenance fees.
Revenue from Operations
Revenue from operations increased by 7.42% from Rs 6,909.09 million in Fiscal 2022 to Rs 7,422.06 million in Fiscal 2023 primarily due to an increase in revenue from transaction fees, and revenue from accounts maintenance fees. Other operational income remained mostly consistent in Fiscal 2023 compared to Fiscal 2022.
Sale of Services
Sale of services increased by 7.42% from Rs 6,909.09 million in Fiscal 2022 to Rs 7,422.06 million in Fiscal 2023 primarily owing to an increase in transaction fees by 6.07% from Rs 5,504.90 million in Fiscal 2022 to Rs 5,839.09 million in Fiscal 2023 on account of an increase in fees from issuance of PAN cards, an increase in accounts maintenance fees by 12.86% from Rs 1,390.90 million in Fiscal 2022 to Rs 1,569.82 million in Fiscal 2023 on account of an increase in numbers of active subscribers of NPS. Our other operational income remained consistent at Rs 13.15 million in Fiscal 2023 compared to Rs 13.29 million in Fiscal 2022.
Other Income
Other income decreased by 47.44% to Rs 416.66 million in Fiscal 2023 from Rs 792.67 million in Fiscal 2022, primarily due to a decrease in profit on sale of assets from Rs 438.96 million in Fiscal 2022 to nil in Fiscal 2023 on account of profit on sale of the Bengaluru data centre in Fiscal 2022. Further, interest earned on overdue trade receivables at amortised cost decreased from Rs 15.25 million in Fiscal 2022 to nil in Fiscal 2023, interest on security deposits at amortised cost decreased from Rs 7.61 million in Fiscal 2023 to Rs 1.77 million in Fiscal 2023, miscellaneous income decreased from Rs 26.74 million in Fiscal 2022 to Rs 15.35 million in Fiscal 2023 and sundry balances written back decreased from Rs 28.90 million in Fiscal 2022 to nil in Fiscal 2023.
The decrease was offset by an increase in interest earned on financial assets measured at amortised cost from Rs 196.54 million in Fiscal 2022 to Rs 320.48 million in Fiscal 2023, interest on bank deposits at amortised cost from Rs 38.19 million in Fiscal 2022 to Rs 54.03 million in Fiscal 2023, dividend income from Rs 13.11 million in Fiscal 2022 to Rs 16.29 million in Fiscal 2023. Support charges increased from Rs 5.91 million in Fiscal 2022 to Rs 8.74 million in Fiscal 2023.
Expenses
Total expenses increased by 10.08% from Rs 5,845.53 million in Fiscal 2022 to Rs 6,434.54 million in Fiscal 2023, primarily due an increase in employee benefit expense and an increase in other expenses.
Employee Benefits Expenses
Employee benefits expenses increased by 56.27% from Rs 786.76 million in Fiscal 2022 to Rs 1,229.48 million in Fiscal 2023, primarily due to an increase in salaries, wages and bonus from Rs 647.15 million in Fiscal 2022 to Rs 1,029.00 million in Fiscal 2023 on account of yearly increment. In addition, contribution to provident and other fund increased by 32.86% from Rs 87.56 million in Fiscal 2022 to Rs 116.33 million in Fiscal 2023, staff welfare expenses increased by 67.01% from Rs 36.40 million in Fiscal 2022 to Rs 60.79 million in Fiscal 2023 and share based payment expense for ESOP 2017 increased by 49.27% from Rs 15.65 million in Fiscal 2022 to Rs 23.36 million in Fiscal 2023.
Finance Costs
Finance costs increased from Rs 4.83 million in Fiscal 2022 to Rs 9.27 million in Fiscal 2023 mainly on account of fresh lease liability created on a property situated in Mumbai, Maharashtra.
Depreciation and Amortisation Expenses
Depreciation and amortisation expenses increased by 7.59% from Rs 169.95 million in Fiscal 2022 to Rs 182.85 million in Fiscal 2023, due to an increase in addition of fixed assets in Fiscal 2023.
Other Expenses
Other expenses increased by 5.62% from Rs 4,580.26 million in Fiscal 2022 to Rs 4,837.45 million in Fiscal 2023, primarily due to an increase in:
• Communication expenses from Rs 104.15 million in Fiscal 2022 to Rs 106.65 million in Fiscal 2023 primarily due to increase in business operations in line with the increase in our revenue from operations.
• Annual fees (which is calculated based on our revenue from operations) that is required to be paid to the Pension Fund Regulatory & Development Authority by 11.42% from Rs 99.84 million in Fiscal 2022 to Rs 111.24 million in Fiscal 2023 on account of reduced provision that was considered by us in Fiscal 2023 compared to Fiscal 2022.
• Repairs and maintenance expenses of computers and telecommunication systems by 35.39% from Rs 661.15 million in Fiscal 2022 to Rs 895.15 million in Fiscal 2023, due to an increase in the use of IT resources resulting from an increase in economic activities.
• Provision for doubtful GST credit to Rs 11.64 million in Fiscal 2023 compared to nil in Fiscal 2022 on account of provision made on GST credit not available.
• Advertisement and publicity expenses from Rs 45.85 million in Fiscal 2022 to Rs 56.55 million in Fiscal 2023 due to an increase in expenditure on business promotion activities.
• Electricity charges / power and fuel expenses from Rs 26.62 million in Fiscal 2022 to Rs 34.55 million in Fiscal 2023.
• Rates and taxes by 88.85% from Rs 16.59 million in Fiscal 2022 to Rs 31.33 million in Fiscal 2023 on account of an increase in GST expenses booked in the current period.
• Miscellaneous expense by 36.58% from Rs 19.60 million in Fiscal 2022 to Rs 26.77 million in Fiscal 2023.
The increase was partially offset primarily by a decrease in processing charges by 3.15% from Rs 3,363.04 million in Fiscal 2022 to Rs 3,256.95 million in Fiscal 2023 on account of due to reduction in processing charges in the social registry services on account of reduction in UIDAI charges that we charge from our customers; and a decrease in expenditure incurred on CSR activities by 16.36% from Rs 34.78 million in Fiscal 2022 to Rs 29.09 million in Fiscal 2023, on account of a decrease in our profit for the year.
Profit before Tax
For the reasons discussed above, profit before tax was Rs 1,404.18 million in Fiscal 2023 as compared to Rs 1,856.23 million in Fiscal 2022.
Tax Expense
Current tax expenses decreased from Rs 525.16 million in Fiscal 2022 to Rs 343.56 million in Fiscal 2023 in line with the decrease in the profit of the company. Deferred tax expenses decreased from Rs 108.30 million in Fiscal 2022 to Rs 9.80 million in Fiscal 2023, primarily on account of less provision made for doubtful debt.
As a result, total tax expense amounted to Rs 336.76 million in Fiscal 2023 as compared to Rs 416.86 million in Fiscal 2022. Profit for the Year
We recorded a profit for the year of Rs 1,070.42 million in Fiscal 2023 as compared to Rs 1,439.37 million in Fiscal 2022. Adjusted Earnings before Interest, Taxes, Depreciation and Amortisation (Adjusted EBITDA)
Adjusted EBITDA was Rs 1,179.64 million in Fiscal 2023 as compared to Rs 1,238.34 million in Fiscal 2022, while Adjusted EBITDA Margin was 15.89% in Fiscal 2023 as compared to 17.92% in Fiscal 2022.
FISCAL 2022 COMPARED TO FISCAL 2021
Key Developments
• We invested Rs 100 million in Open Network for Digital Commerce ("ONDC"), a Section-8 company, which is a digital project implemented by the Government of India to make the overall e-commerce market more efficient and inclusive that is based on open protocols and open source specifications. (Source: CRISIS Report) Our Company is one of the promoter of ONDC.
• We ventured into new business services such as cyber security (to that extent incorporated a wholly owned subsidiary Protean Infosec Services Limited on September 30, 2021) and cloud services.
Income
Total income increased by 18.12% from Rs 6,520.27 million in Fiscal 2021 to Rs 7,701.76 million in Fiscal 2022 primarily due to an increase in revenue from transaction fees, revenue from accounts maintenance fees and an increase in other income.
Revenue from Operations
Revenue from operations increased by 14.55% from Rs 6,031.32 million in Fiscal 2021 to Rs 6,909.09 million in Fiscal 2022 primarily due to an increase in revenue from transaction fees, revenue from accounts maintenance fees and an increase in other income.
Sale of Services
Sale of services increased by 14.55% from Rs 6,031.32 million in Fiscal 2021 to Rs 6,909.09 million in Fiscal 2022 primarily owing to an increase in transaction fees by 21.61% from Rs 4,526.78 million in Fiscal 2021 to Rs 5,504.90 million in Fiscal 2022 on account of an increase in fees from issuance of PAN cards, a decrease in accounts maintenance fees by 6.86% from Rs 1,493.38 million in Fiscal 2021 to Rs 1,390.90 million in Fiscal 2022 on account of an increase in numbers of active subscribers of NPS, and an increase in other operational income by 19.09% from Rs 11.16 million in Fiscal 2021 to Rs 13.29 million in Fiscal 2022 on account of increase in non-compliance fees/charges recovered from TIN facilitation centres.
Other Income
Other income increased by 62.12% from Rs 488.95 million in Fiscal 2021 to Rs 792.67 million in Fiscal 2022, primarily due to an increase in interest from bank deposits by 54.18% from Rs 24.77 million in Fiscal 2021 to Rs 38.19 million in Fiscal 2022 and interest earned on security deposit measured at amortised cost by 10.77% from Rs 6.87 million in Fiscal 2021 to Rs 7.61 million in Fiscal 2022. In addition, sundry balances written back increased from nil in Fiscal 2021 to Rs 28.90 million in Fiscal 2022. Profit on sale of assets (nets) also increased from nil in Fiscal 2021 to Rs 438.96 million in Fiscal 2022 and profit on discard of leased assets increased from nil in Fiscal 2021 to Rs 4.84 million in Fiscal 2022. Further, divided income increased by 42.19% from Rs 9.22 million in Fiscal 2021 to Rs 13.11 million in Fiscal 2022.
The increase was offset by a decrease in interest earned on financial assets measured at amortised cost by 25.17% from Rs 262.66 million in Fiscal 2021 to Rs 196.54 million in Fiscal 2022, interest on overdue trade receivables measured at amortised cost by 86.23% from Rs 110.75 million in Fiscal 2021 to Rs 15.25 million in Fiscal 2022, profit on sale of investments carried at amortised cost from Rs 52.28 million in Fiscal 2021 to Rs 0.02 million in Fiscal 2022. Support charges decreased by 20.67% from Rs 7.45 million in Fiscal 2021 to Rs 5.91 million in Fiscal 2022.
Expenses
Total expenses increased by 9.05% from Rs 5,360.23 million in Fiscal 2021 to Rs 5,845.53 million in Fiscal 2022, primarily due an increase in employee benefit expense and an increase in other expenses.
Employee Benefits Expenses
Employee benefits expenses increased by 4.53% from Rs 752.67 million in Fiscal 2021 to Rs 786.76 million in Fiscal 2022, primarily due to a marginal increase in salaries, wages and bonus by from Rs 644.07 million in Fiscal 2021 to Rs 647.15 million in Fiscal 2022 on account of yearly increment. In addition, contribution to provident and other fund increased marginally by 8.97% from Rs 80.35 million in Fiscal 2021 to Rs 87.56 million in Fiscal 2022, staff welfare expenses increased by 116.15% from Rs 16.84 million in Fiscal 2021 to Rs 36.40 million in Fiscal 2022 and share based payment expense for ESOP 2017 increase by 37.16% from Rs 11.41 million in Fiscal 2021 to Rs 15.65 million in Fiscal 2022.
Finance Costs
Finance costs decreased by 48.89% from Rs 9.45 million in Fiscal 2021 to Rs 4.83 million in Fiscal 2022 mainly reduction in lease liability resulting from surrender of two leased premises located in Mumbai, Maharashtra during Fiscal 2022.
Depreciation and Amortisation Expenses
Depreciation and amortisation expenses increased marginally by 1.21% from Rs 167.91 million in Fiscal 2021 to Rs 169.95 million in Fiscal 2022, due to an increase in depreciation impact on addition in property, plant and equipment and other intangible assets.
Other Expenses
Other expenses increased by 10.68% from Rs 4,138.20 million in Fiscal 2021 to Rs 4,580.26 million in Fiscal 2022, primarily due to an increase in:
• Processing charges by 7.21% from Rs 3,136.80 million in Fiscal 2021 to Rs 3,363.04 million in Fiscal 2022, primarily due to an increase in transaction based revenue on account reduced impact of COVID-19 and increase in customers.
• Communication expenses by 11.77% from Rs 93.18 million in Fiscal 2021 to Rs 104.15 million in Fiscal 2022 primarily due to increase in business operations in line with the increase in our revenue from operations.
• Repairs and maintenance expenses of computers and telecommunication systems by 24.77% from Rs 529.90 million in Fiscal 2021 to Rs 661.15 million in Fiscal 2022, due to an increase in the use of IT resources resulting from an increase in economic activities.
• Advertisement and publicity expenses from Rs 3.26 million in Fiscal 2021 to Rs 45.85 million in Fiscal 2022 due to an increase in expenditure on business promotion activities.
• Provision for doubtful debts by 4.02% from Rs 292.00 million in Fiscal 2021 to Rs 303.73 million in Fiscal 2022, primarily due to an increase in provisioning in Fiscal 2022 as per the framework of our expected credit loss policy compared to Fiscal 2021 on account of payment due from an existing customer of our Company. We continue to provide services to the customer on the pre-paid model.
The increase was partially offset by a decrease in annual fees (which is calculated based on our revenue from operations) that is required to be paid to the Pension Fund Regulatory & Development Authority by 6.07% from Rs 106.29 million in Fiscal 2021 to Rs 99.84 million in Fiscal 2022, on account of excess provisions considered that was considered by us in Fiscal 2021 compared to Fiscal 2022; a decrease rates and taxes by 9.39% from Rs 18.31 million in Fiscal 2021 to Rs 16.59 million in Fiscal 2022; a decrease in electricity charges / power and fuel by 18.92% from Rs 32.83 million in Fiscal 2021 to Rs 26.62 million in Fiscal 2022, on account of surrender of two leased properties situated in Mumbai, Maharashtra; and a decrease in expenditure incurred on CSR activities by 39.66% from Rs 57.64 million in Fiscal 2021 to Rs 34.78 million in Fiscal 2022, on account of additional CSR expenditure in Fiscal 2021 which was carried over from Fiscal 2020 as we were not able to completely spend on our CSR activities due to the impact of the COVID-19 pandemic.
Profit before Tax
For the reasons discussed above, profit before tax was Rs 1,856.23 million in Fiscal 2022 as compared to Rs 1,160.04 million in Fiscal 2021.
Tax Expense
Current tax expenses increased from Rs 298.90 million in Fiscal 2021 to Rs 525.16 million in Fiscal 2022 in line with the increase in the profit of the company. Deferred tax expenses increased from Rs 60.73 million in Fiscal 2021 to Rs 108.30 million in Fiscal 2021, primarily on account of disallowance of expenses related to provision for doubtful debts.
As a result, total tax expense amounted to Rs 416.86 million in Fiscal 2022 as compared to Rs 238.17 million in Fiscal 2021.
Profit for the Year
We recorded a profit for the year of Rs 1,439.37 million in Fiscal 2022 as compared to Rs 921.87 million in Fiscal 2021.
Adjusted Earnings before Interest, Taxes, Depreciation and Amortisation (Adjusted EBITDA)
Adjusted EBITDA was Rs 1,238.34 million in Fiscal 2022 as compared to Rs 848.45 million in Fiscal 2021, while Adjusted EBITDA Margin was 17.92% in Fiscal 2022 as compared to 14.07% in Fiscal 2021.
LIQUIDITY AND CAPITAL RESOURCES
We have historically financed the expansion of our business and operations primarily through funds generated from our operations.
CASH FLOWS
The following table sets forth certain information relating to our cash flows in the periods indicated:
| Fiscal | For the three months ended June 30, 2022 | For the three months ended June 30, 2023 | |||
| Particulars | 2021 | 2022 | 2023 | ||
| (Rs million) | |||||
| Net cash generated from/ (used in) operating activities | 1,001.19 | 942.69 | 1,370.21 | 109.40 | (79.04) |
| Fiscal | For the three months ended June 30, 2022 | For the three months ended June 30, 2023 | |||
| Particulars | 2021 | 2022 | 2023 | ||
| (Rs million) | |||||
| Net cash generated from/ (used in) investing activities | 1,156.56 | 726.20 | (2,823.10) | (1,390.44) | 116.81 |
| Net cash (used in) financing activities | (1,833.57) | (336.30) | (442.91) | (11.86) | (13.07) |
| Net increase/ (decrease) in cash and cash equivalents | 324.18 | 1,332.59 | (1,895.79) | (1,292.90) | 24.70 |
| Cash and cash equivalents at the end of the year / period | 734.61 | 2,067.20 | 171.41 | 774.30 | 196.11 |
Operating Activities
Three months ended June 30, 2023
In the three months ended June 30, 2023, net cash used in operating activities was Rs 79.04 million. Profit before tax was Rs 417.23 million and adjustments primarily consisted of depreciation and amortisation of Rs 49.10 million, provision for doubtful debts of Rs 7.50 million and amortisation of premium / discount on government / debt securities of Rs 4.98 million, share based payment expense of Rs 33.69 million and interest on lease expense of Rs 2.17 million. This was partially offset by adjustments in interest income on financial assets carried at amortised cost of Rs 92.74 million, and interest income on bank deposit of Rs 28.82 million.
Operating cash flows before working capital changes were Rs 392.60 million in the three months ended June 30, 2023. The main working capital adjustments included an increase in trade receivables by Rs 114.54 million, and other assets and financial assets increased by Rs 152.06 million as at end of the period. This was offset by an increase in trade payables by Rs 16.94 million, and decrease in other financial liabilities, other liabilities and provisions by Rs 145.910 million. Cash generated from operating activities in the three months ended June 30, 2023 amounted to Rs 2.97 million. Income tax paid (net) amounted to Rs 76.07 million.
Three months ended June 30, 2022
In the three months ended June 30, 2022, net cash generated from operating activities was Rs 279.95 million. Profit before tax was Rs 271.61 million and adjustments primarily consisted of depreciation and amortisation of Rs 41.64 million, provision for doubtful debts of Rs 35.00 million and amortisation of premium / discount on government / debt securities of Rs 4.40 million, share based payment expense of Rs 5.95 million and interest on lease expense of Rs 2.65 million. This was partially offset by adjustments in interest income on financial assets carried at amortised cost of Rs 63.05 million, interest income on bank deposit of Rs 14.84 million, and dividend income of Rs 4.16 million.
Operating cash flows before working capital changes were Rs 279.95 million in the three months ended June 30, 2022. The main working capital adjustments included an increase in trade receivables by Rs 0.60 million, and other assets and financial assets increased by Rs 105.47 million as at end of the period. This was offset by an increase in trade payables by Rs 136.40 million, and decrease in other financial liabilities, other liabilities and provisions by Rs 93.60 million. Cash generated from operating activities in the three months ended June 30, 2022 amounted to Rs 216.68 million. Income tax paid (net) amounted to Rs 107.28 million.
Fiscal 2023
In Fiscal 2022, net cash generated from operating activities was Rs 1,370.21 million. Profit before tax was Rs 1,404.18 million and adjustments primarily consisted of depreciation and amortisation of Rs 182.85 million, provision for doubtful debts of Rs 175.49 million and amortisation of premium / discount on government / debt securities of Rs 19.14 million, share based payment expense of Rs 23.36 million and interest on lease expense of Rs 9.27 million. This was partially offset by adjustments in interest income on financial assets carried at amortised cost of Rs 320.48 million, interest income on bank deposit of Rs 54.03 million, dividend income of Rs 16.29 million.
Operating cash flows before working capital changes were Rs 1,434.55 million in Fiscal 2023. The main working capital adjustments included an increase in trade receivables by Rs 261.32 million, increase in trade payables of Rs 361.10 million and a decrease in other assets and financial assets by Rs 85.01 million as at year end, increase in other financial liabilities, other liabilities and provisions of Rs 176.67 million on account of an increase in GST and TDS payable. Cash generated from operating activities in Fiscal 2023 amounted to Rs 1,796.01million. Income tax paid (net) amounted to Rs 425.80 million.
Fiscal 2022
In Fiscal 2022, net cash generated from operating activities was Rs 942.69 million. Profit before tax was Rs 1,856.23 million and adjustments primarily consisted of depreciation and amortisation of Rs 169.95 million, provision for doubtful debts of Rs 303.73 million and amortisation of premium / discount on government / debt securities of Rs 19.56 million, share based payment expense
of Rs 15.65 million and interest on lease expense of Rs 4.83 million. This was partially offset by adjustments in interest income on financial assets carried at amortised cost of Rs 196.54 million and profit on sale / discard of assets (net) of Rs 438.96 million, interest income on bank deposit of Rs 38.19 million, dividend income of Rs 13.11 million and profit on discard of leased assets (net) of Rs 4.84 million.
Operating cash flows before working capital changes were Rs 1,678.31 million in Fiscal 2022. The main working capital adjustments included an increase in trade receivables by Rs 328.09 million, decrease in trade payables of Rs 31.19 million and other assets and financial assets decreased by Rs 55.46 million as at year end, increase in other financial liabilities, other liabilities and provisions of Rs 46.65 million on account of an increase in GST and TDS payable. Cash generated from operating activities in Fiscal 2022 amounted to Rs 1,421.14 million. Income tax paid (net) amounted to Rs 478.45 million.
Fiscal 2021
In Fiscal 2021, net cash generated from operating activities was Rs 1,001.19 million. Profit before tax was Rs 1,160.04 million and adjustments primarily consisted of depreciation and amortisation of Rs 167.91 million, provision for doubtful debts of Rs 292.00 million and amortisation of premium / discount on government / debt securities of Rs 11.30 million, share based payment expense of Rs 11.41 million and interest on lease expense of Rs 9.45 million. This was partially offset by adjustments in interest income on financial assets carried at amortised cost of Rs 262.66 million and profit on sale / discard of assets (net) of Rs 52.28 million, interest income on bank deposit of Rs 24.77 million, dividend income of Rs 9.22 million and profit on discard of leased assets (net) of Rs 1.40 million.
Operating cash flows before working capital changes were Rs 1,301.78 million in Fiscal 2021. The main working capital adjustments included an increase in trade receivables by Rs 162.31 million and other assets and financial assets decreased by Rs 36.24 million as at year end, increase in other financial liabilities, other liabilities and provisions of Rs 43.03 million on account of increase in provision for leave encashment and gratuity on account of increase in provision of incentives payable to employees due to increase in number of employees, revision of pay structure to meet industry standards and increase in performance linked incentives. This was significantly offset by an increase in trade payables by Rs 101.57 million. Cash generated from operating activities in Fiscal 2021 amounted to Rs 1,320.31 million. Income tax paid (net) amounted to Rs 319.12 million.
Investing Activities
Three months ended June 30, 2023
Net cash generated from investing activities was Rs 116.81 million in the three months ended June 30, 2023, primarily on account of liquidation of fixed deposit of Rs 101.87 million and interest received of Rs 91.67 million. This was offset by purchase of property plant and equipment including capital advances of Rs 22.11 million and purchase of intangible assets including assets under development of Rs 54.62 million.
Purchase of property, plant and equipment of Rs 162.82 million, investment / maturities in fixed deposits (net) of Rs 101.87 million, and purchase of intangible assets including intangible assets under development of Rs 54.62 million. This was offset primarily by interest received of Rs 91.67 million.
Three months ended June 30, 2022
Net cash used in investing activities was Rs 1,390.44 million in the three months ended June 30, 2022, primarily on account of purchase of property plant and equipment including capital advances of Rs 20.30 million, purchase of intangible assets including assets under development of Rs 44.10 million, purchase of non-current investments (net of current accrued upto date of purchase) of Rs 1,448.50 million and purchase of current investment of Rs 3.80 million. This was partially offset by interest received of Rs 27.10 million, dividend received of Rs 4.16 million, liquidation of fixed deposit of Rs 89.00 million and proceeds from redemption of current investments of Rs 6.00 million.
Fiscal 2023
Net cash generated from investing activities was Rs 2,823.10 million in Fiscal 2023, primarily on account of purchase of property plant and equipment including capital advances of Rs 122.70 million, purchase of intangible assets including assets under development of Rs 115.82 million, purchase of non-current investments (net of current accrued upto date of purchase) of Rs 2,217.84 million and investment of fixed deposit of Rs 1,259.87 million. This was partially offset by interest received of Rs 3 27.02 million, dividend received of Rs 16.29 million and proceeds from redemption of current investments of Rs 549.82 million.
Fiscal 2022
Net cash generated from investing activities was Rs 726.20 million in Fiscal 2022, primarily on account of proceeds from sale of property, plant and equipment of Rs 1,319.98 million, interest received of Rs 234.73 million, liquidation of fixed deposit of Rs 149.02 million, redemption of non-current investments of Rs 106.00 million, and dividends received of Rs 13.11 million. This was partially offset by purchase of non-current investments (net of interest accrued upto date of purchase) of Rs 498.71 million, purchase of current investments of Rs 411.90 million, purchase of property, plant and equipment of Rs 121.08 million, movement in capital advances of Rs 51.96 million and purchase of intangible assets including intangible assets under development of Rs 16.86 million.
Fiscal 2021
Net cash generated from investing activities was Rs 1,156.56 million in Fiscal 2021, primarily on account of redemption of non- current investments of Rs 1,040.80 million, redemption of current investments of Rs 610.00 million, interest received of Rs 315.94 million and dividends received of Rs 9.22 million. This was partially offset by investment / maturities in fixed deposits (net) of Rs 326.16 million, purchase of current investments of Rs 400.00 million and purchase of property, plant and equipment, intangible assets and advances given for purchase of capital items of Rs 105.70 million, movement in capital advances of Rs 28.73 million and purchase of intangible assets including intangible assets under development of Rs 16.27 million.
Financing Activities
Three months ended June 30, 2023
Net cash used in financing activities was Rs 13.07 million in the three months ended June 30, 2023 on account of payment towards lease liability of Rs 10.90 million and interest on lease liability of Rs 2.17 million.
Three months ended June 30, 2022
Net cash used in financing activities was Rs 11.86 million in the three months ended June 30, 2022 on account of payment towards lease liability of Rs 9.21 million and interest on lease liability of Rs 2.65 million.
Fiscal 2023
Net cash used in financing activities was Rs 442.91 million in Fiscal 2023 on account of dividend paid of Rs 403.84 million and payment towards lease liability of Rs 37.61 million and interest on lease liability of Rs 9.27 million. This was offset primarily by proceeds from issue of shares by way of employees stock options of Rs 7.81 million.
Fiscal 2022
Net cash used in financing activities was Rs 336.30 million in Fiscal 2022 on account of dividend paid of Rs 362.72 million and payment towards lease liability of Rs 44.57 million and interest on lease liability of Rs 4.83 million. This was offset primarily by proceeds from issue of shares by way of employees stock options of Rs 75.82 million.
Fiscal 2021
Net cash used in financing activities was Rs 1,833.57 million in Fiscal 2021 on account of dividend paid of Rs 1,804.96 million and payment towards lease liability of Rs 59.91 million and interest on lease liability of Rs 9.45 million. This was offset primarily by proceeds from issue of shares by way of employees stock options of Rs 40.75 million.
INDEBTEDNESS
As of June 30, 2023, our total borrowings (consisting of current and non-current borrowings) was nil.
CONTINGENT LIABILITIES AND OFF-BALANCE SHEET ARRANGEMENTS
As of June 30, 2023, our contingent liabilities that have not been accounted for in our financial statements, were as follows:
| Particulars | Amount |
| (Rs million) | |
| Disputed demand raised by sales tax officer for MVAT and CST(1) | 226.32 |
| Claims against the Group not acknowledged as debts (net)(2) | 9.90 |
| Demand raised by Income tax officer for Assessment Year 2016-2017(3) | 13.63 |
| Total | 249.85 |
1. Demand raised by sales tax officer for MVAT and CSTpayable on services provided by Group. The Group has filed an appeal before the Sales Tax Tribunal and paid a deposit of T 14.20 million under protest. The amounts assessed as contingent liability do not include interest that could be claimed by the authorities. As per order of the tribunal dated January 28, 2022, it has quashed and set aside the order passed by the First Appellate Authority.
2. MVAT payable to seller on purchase of Times Tower premises.
3. Demand raised by Income tax officer is on account of disallowance of deduction claimed by our Company under Section 35AC and chapter VI-A of Income tax Act, 1961 in income tax return filed for Assessment Year 2016-17 pursuant to an order dated February 10, 2022. Our Company has filed rectification application as well as appeal to CIT(A) against said demand.
For further information on our contingent liabilities, see "Restated Consolidated Financial Information" beginning on page 195.
Except as disclosed in the Restated Consolidated Financial Information or elsewhere in this Red Herring Prospectus, there are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that we believe are material to investors.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The following table sets forth certain information relating to future payments due under known contractual commitments as of June 30, 2023, aggregated by type of contractual obligation:
| Particulars | As of June 30, 2023 | |||
| Payment due by period | ||||
| Carrying Amount | Less than 1 year | 1-5 years | More than 5 years | |
| (Rs million) | ||||
| Lease liabilities | 120.82 | 64.51 | 69.74 | - |
| Trade Payables | 1,335.26 | 1,335.26 | - | - |
| Other Financial Liabilities | 119.30 | 119.30 | - | - |
| Total | 1,575.38 | 1,519.07 | 69.74 | - |
For further information on our capital and other commitments, see "Restated Consolidated Financial Information" beginning on page 195.
CAPITAL EXPENDITURES
In Fiscals 2021, 2022 and 2023 and in the three months ended June 30, 2022 and June 30, 2023, our capital expenditure towards additions to fixed assets (property, plant and equipments and intangible assets) were Rs 81.90 million, Rs 168.65 million, Rs 239.87 million, Rs 65.25 million and Rs 76.76 million, respectively. The following table sets forth our fixed assets for the periods indicated:
| Particulars | Fiscal 2021 | Fiscal 2022 | Fiscal 2023 | Three months ended June 30, 2022 | Three months ended June 30, 2023 |
| (Rs million) | |||||
| Property, plant and equipment | 105.70 | 121.08 | 124.05 | 21.13 | 22.14 |
| Intangible Assets | 16.27 | 16.86 | 46.47 | 1.27 | 58.14 |
| Capital work-in-progress (net additions/transfers) | (34.59) | (1.67) | (11.74) | (5.80) | - |
| Intangible assets under development | (5.48) | 32.38 | 81.09 | 48.65 | (3.52) |
| Total | 81.90 | 168.65 | 239.87 | 65.25 | 76.76 |
For further information, see "Restated Consolidated Financial Information" beginning on page 195.
RELATED PARTY TRANSACTIONS
We enter into various transactions with related parties in the ordinary course of business. These transactions principally include remuneration to executive Directors and Key Managerial Personnel. For further information relating to our related party transactions, see "Restated Consolidated Financial Information - Note 26: Related Party Transactions" beginning on page 243.
AUDITORS OBSERVATIONS
Qualifications
There have been no reservations/ qualifications/ adverse remarks/ matters of emphasis highlighted by our statutory auditors in their auditors reports on the audited consolidated financial statements as of and for the years ended March 31, 2021, March 31, 2022, March 31, 2023 and the three months ended June 30, 2022 and June 30, 2023.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our management monitors and manages key financial risk relating to our operations by analysing exposures by degree and magnitude of risk. The risks include credit risk and liquidity risk. Our Board of Directors has overall responsibility for the establishment and oversight of our risk management framework. Our risk management policies are established to identify and analyse the risks faced by us, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and our activities.
Credit Risk
Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to Rs 2,195.66 million, Rs 1,968.54 million, Rs 2,088.62 million, Rs 2,003.98 million and Rs 2,075.60 million as of June 30, 2023, June 30, 2022, March 31, 2023, March 31, 2022, and March 31, 2021, respectively. Trade receivables is typically unsecured and are derived from revenue earned from customers. Credit risk has always been managed by us through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which we grant credit terms in the normal course of business.
Expected Credit Loss
We allocate each exposure to a credit risk grade based on a variety of data that is determined to be predictive of the risk of loss, (for example, timeliness of payments and available information) and applying experienced credit judgement. Exposures to customers outstanding at the end of each reporting period are reviewed by us to determine incurred and expected credit losses, giving due regard for probable exposures on disputed dues or dues that are subject to litigation. We have not experienced significant impairment of trade receivables resulting in credit losses.
Liquidity Risk
Liquidity risk is the risk that we will encounter difficulty in meeting the obligations associated with our financial liabilities that are settled by delivering cash or another financial asset. Our principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. We have no outstanding bank borrowings.
UNUSUAL OR INFREQUENT EVENTS OR TRANSACTIONS
Except as described in this Red Herring Prospectus, to our knowledge, there have been no unusual or infrequent events or transactions that have in the past or may in the future affect our business operations or future financial performance.
SIGNIFICANT ECONOMIC CHANGES THAT MATERIALLY AFFECT OR ARE LIKELY TO AFFECT INCOME FROM CONTINUING OPERATIONS
Our business has been subject, and we expect it to continue to be subject, to significant economic changes that materially affect or are likely to affect income from continuing operations identified above in " - Significant Factors Affecting our Results of Operations and the uncertainties described in "Risk Factors" beginning on pages 270 and 24, respectively.
KNOWN TRENDS OR UNCERTAINTIES
Our business has been subject, and we expect it to continue to be subject, to significant economic changes arising from the trends identified above in "Managements Discussion and Analysis of Financial Condition and Results of Operations - Significant Factors Affecting our Results of Operations" and the uncertainties described in "Risk Factors" on beginning pages 270 and 24, respectively. To our knowledge, except as discussed in this Red Herring Prospectus, there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on revenues or income of our Company from continuing operations.
FUTURE RELATIONSHIP BETWEEN COST AND INCOME
Other than as described in "Risk Factors"Our Business" and "Managements Discussion and Analysis of Financial Condition and Results of Operations" beginning on pages 24, 135 and 267 respectively, to our knowledge there are no known factors that may adversely affect our business prospects, results of operations and financial condition.
NEW PRODUCTS OR BUSINESS SEGMENTS
Except as set out in this Red Herring Prospectus, we have not announced and do not expect to announce in the near future any
new business segments.
COMPETITIVE CONDITIONS
We operate in a competitive environment. See "Risk Factors", "Industry Overview" and "Our Business" beginning on pages 24, 101 and 135 respectively, for further details on competitive conditions that we face across our various business segments.
EXTENT TO WHICH MATERIAL INCREASES IN NET SALES OR REVENUE ARE DUE TO INCREASED SALES VOLUME, INTRODUCTION OF NEW PRODUCTS OR SERVICES OR INCREASED SALES PRICES
Changes in revenue in the three months ended June 30, 2022 and June 30, 2023 and the last three Fiscals are as described in "—
Three months ended June 30, 2023 compared to three months ended June 30, 2022", "— Fiscal 2023 compared to Fiscal 2022" and " — Fiscal 2022 compared with Fiscal 2021" above on pages 287, 289 and 291, respectively.
SEGMENT REPORTING
Our business activity primarily falls within a single business and geographical segment, i.e. information technology enabled e- governance services, and in India, accordingly, other than as disclosed in "Restated Consolidated Financial Information — 25. Segment Reporting" beginning on page 243, we do not follow any other segment reporting.
SIGNIFICANT DEPENDENCE ON SINGLE OR FEW CUSTOMERS
Given the nature of our business operations, we do not believe our business is dependent on any single or a few customers. SEASONALITY/ CYCLICALITY OF BUSINESS
Our business is not subject to seasonality or cyclicality. For further information, see "Industry Overview" and "Our Business" beginning on pages 101 and 135 respectively.
SIGNIFICANT DEVELOPMENTS AFTER JUNE 30, 2023 THAT MAY AFFECT OUR FUTURE RESULTS OF OPERATIONS
Except as disclosed in this Red Herring Prospectus, there have been no significant developments after June 30, 2023 that may affect our future results of operations.
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