M.P.Vijay Kumar, Chief Financial Officer,
(91) 44-2254-0770; vijaykumar.mp@sifycorp.com
TIDEL Park, 2nd Floor, 4, Rajiv Gandhi Salai,
Taramani, Chennai 600113 India
Indicate the number of outstanding shares
of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
If this report is an annual or transition
report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Note - Checking the box above will not
relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their
obligations under those Sections.
Indicate by check mark whether the Registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and
large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing:
If this is an annual report, indicate by
check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act).
Unless the context
otherwise requires, references in this annual report to “we,” “us,” the “Company,” “Sify”
or “Satyam Infoway” are to Sify Technologies Limited, a limited liability Company organized under the laws of the Republic
of India. References to “U.S.” or the “United States” are to the United States of America, its territories
and its possessions. References to “India” are to the Republic of India. In January 2003, we changed the name of our
Company from Satyam Infoway Limited to Sify Limited. In October 2007, we again changed our name from Sify Limited to Sify Technologies
Limited.
“
Sify”, “SifyMax.in,”, “Sify e-port
s
” and “Sify online”
are trademarks used by us for which we have already obtained registration certificates in India. All other trademarks or trade
names used in this Annual Report on Form 20-F for the year ended March 31, 2018 (the “Annual Report”) are the property
of their respective owners. In this Annual Report, references to “$,” “Dollars” or “U.S. dollars”
are to the legal currency of the United States, and references to “₹”, “Rs.,” “rupees”
or “Indian rupees” are to the legal currency of India. References to a particular “fiscal” year are to
our fiscal year ended March 31 of such year. References to the “Group” mean Sify Technologies Limited and its subsidiaries.
References to “equity shares” refer to our Indian Equity Shares, which are not traded on an exchange in India or the
United States. References to “ADSs” refer to our American Depositary Shares, which are traded on the NASDAQ Capital
Market under the symbol “SIFY.”
For your convenience,
this Annual Report contains translations of some Indian rupee amounts into U.S. dollars which should not be construed as a representation
that those Indian rupee or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Indian rupees, as the
case may be, at any particular rate, the rate stated below, or at all. Except as otherwise stated in this Annual Report, all translations
from Indian rupees to U.S. dollars contained in this Annual Report have been based on the reference rate in the City of Mumbai
on March 31, 2018 for cable transfers in Indian rupees as published by the Reserve Bank of India (RBI), which was ₹ 65.04
per US $1.00.
Our financial statements
are presented in Indian rupees and prepared in accordance with English version of International Financial Reporting Standards as
issued by the International Accounting Standards Board, or IFRS. In this Annual Report, any discrepancies in any table between
totals and the sums of the amounts listed are due to rounding.
This Annual Report contains “forward-looking
statements”, as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, that are based on our current expectations, assumptions, estimates and projections about our Company,
our industry, economic conditions in the markets in which we operate, and certain other matters. Generally, these forward-looking
statements can be identified by the use of forward-looking terminology such as 'anticipate', 'believe', 'estimate', 'expect', ‘may’,
'intend', 'will', 'project', 'seek', 'should' and similar expressions. Those statements include, among other things, the discussions
of our business strategy and expectations concerning our market position, future operations, margins, profitability, liquidity
and capital resources. These statements are subject to known and unknown risks, uncertainties and other factors, which may cause
actual results or outcomes to differ materially from those implied by the forward-looking statements. Important factors that may
cause actual results or outcomes to differ from those implied by the forward-looking statements include, but are not limited to,
those discussed in the “Risk Factors” section in this Annual Report. In light of these and other uncertainties, you
should not conclude that the results or outcomes referred to in any of the forward-looking statements will be achieved.
We operate in rapidly changing businesses,
and new risk factors emerge from time to time. We cannot predict every risk factor, nor can we assess the impact, if any, of all
such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ
materially from those projected in any forward-looking statements. All forward-looking statements included in this Annual Report
are based on information available to us, and reflect management’s beliefs, on the date hereof, and we do not undertake to
update these forward-looking statements to reflect future events or circumstances. In addition, readers should carefully review
the other information in this Annual Report and in our reports and other documents filed with the United States Securities and
Exchange Commission (“SEC”) from time to time.
PART I
Item 1. Identity of Directors, Senior
Management and Advisers.
Not applicable.
Item 2. Offer Statistics and Expected
Timetable
Not applicable.
Item 3. Key Information
Selected Financial Data
Summary of Consolidated Financial Data
You should read the
summary consolidated financial data below in conjunction with the Company's consolidated financial statements and the related notes,
as well as the section entitled “Operating and Financial Review and Prospects,” all of which are included elsewhere
in this Annual Report. The summary consolidated statements of income data for the five years ended March 31, 2018, 2017, 2016,
2015 and 2014 and the summary consolidated Statement of Financial Position as of March 31, 2018, 2017, 2016, 2015 and 2014 have
been derived from our audited consolidated financial statements and related notes to the consolidated financial statements which
were prepared and presented in accordance with International Financial Reporting Standards (IFRS) as issued by International Accounting
Standards Board (IASB). Historical results are not necessarily indicative of future results.
Sify Technologies Limited
Consolidated Statement of Income
(In thousands of Rupees, except share and per share data and as otherwise stated)
|
|
Year ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2018
Convenience
translation
into US$ in
thousands,
except share
and per
share
data
|
|
|
|
|
₹
|
|
|
|
₹
|
|
|
|
₹
|
|
|
|
₹
|
|
|
|
₹
|
|
|
|
(See Note 1)
|
|
Revenue
|
|
|
20,685,613
|
|
|
|
18,432,020
|
|
|
|
15,034,896
|
|
|
|
12,864,614
|
|
|
|
10,460,229
|
|
|
|
318,044
|
|
Cost of goods sold and services rendered
|
|
|
(13,434,950
|
)
|
|
|
(11,870,221
|
)
|
|
|
(9,103,864
|
)
|
|
|
(7,727,312
|
)
|
|
|
(6,136,860
|
)
|
|
|
(206,565
|
)
|
Other income
|
|
|
189,738
|
|
|
|
145,872
|
|
|
|
104,885
|
|
|
|
92,859
|
|
|
|
93,461
|
|
|
|
2,918
|
|
Selling, general and administrative expenses
|
|
|
(4,394,814
|
)
|
|
|
(3,991,273
|
)
|
|
|
(3,479,287
|
)
|
|
|
(3,132,040
|
)
|
|
|
(2,739,813
|
)
|
|
|
(67,571
|
)
|
Depreciation and amortization
|
|
|
(1,754,537
|
)
|
|
|
(1,758,776
|
)
|
|
|
(1,598,037
|
)
|
|
|
(1,271,806
|
)
|
|
|
(1,101,243
|
)
|
|
|
(26,976
|
)
|
Profit / (loss) from operating activities
|
|
|
1,291,050
|
|
|
|
957,622
|
|
|
|
958,593
|
|
|
|
826,315
|
|
|
|
575,774
|
|
|
|
19,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income
|
|
|
129,325
|
|
|
|
122,584
|
|
|
|
45,437
|
|
|
|
61,358
|
|
|
|
120,248
|
|
|
|
1,988
|
|
Finance expenses
|
|
|
(496,780
|
)
|
|
|
(437,109
|
)
|
|
|
(565,712
|
)
|
|
|
(512,293
|
)
|
|
|
(377,622
|
)
|
|
|
(7,638
|
)
|
Net finance income / (expense)
|
|
|
(367,455
|
)
|
|
|
(314,525
|
)
|
|
|
(520,275
|
)
|
|
|
(450,935
|
)
|
|
|
(257,374
|
)
|
|
|
(5,650
|
)
|
Profit / (loss) before tax
|
|
|
923,595
|
|
|
|
643,097
|
|
|
|
438,318
|
|
|
|
375,380
|
|
|
|
318,400
|
|
|
|
14,200
|
|
Income tax (expense) / benefit
|
|
|
(194
|
)
|
|
|
(698
|
)
|
|
|
135
|
|
|
|
(122
|
)
|
|
|
-
|
|
|
|
(3
|
)
|
Profit / (loss) for the year
|
|
|
923,401
|
|
|
|
642,399
|
|
|
|
438,453
|
|
|
|
375,258
|
|
|
|
318,400
|
|
|
|
14,197
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the Company
|
|
|
923,401
|
|
|
|
642,399
|
|
|
|
438,453
|
|
|
|
375,258
|
|
|
|
318,400
|
|
|
|
14,197
|
|
Non-controlling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
923,401
|
|
|
|
642,399
|
|
|
|
438,453
|
|
|
|
375,258
|
|
|
|
318,400
|
|
|
|
14,197
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
6.14
|
|
|
|
4.45
|
|
|
|
3.11
|
|
|
|
2.66
|
|
|
|
2.33
|
|
|
|
0.09
|
|
Diluted earnings per share
|
|
|
6.11
|
|
|
|
4.45
|
|
|
|
3.10
|
|
|
|
2.65
|
|
|
|
2.33
|
|
|
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend paid per share *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully paid up (₹ 10 per share)
|
|
|
1.20
|
|
|
|
1.00
|
|
|
|
1.00
|
|
|
|
1.00
|
|
|
|
-
|
|
|
|
0.02
|
|
Partly paid up (₹ 7.75 per share)
|
|
|
0.93
|
|
|
|
0.70
|
|
|
|
0.70
|
|
|
|
0.70
|
|
|
|
-
|
|
|
|
0.01
|
|
* Excluding dividend distribution tax
Particulars
(Rupees in thousands, except share and per share data)
Balance Sheet data
|
|
March 31,
|
|
|
Convenience
translation into
US$ in
thousands,
except share and
per share data
(see note 1 )
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2018
|
|
|
|
₹
|
|
|
₹
|
|
|
₹
|
|
|
₹
|
|
|
₹
|
|
|
$
|
|
Cash and cash equivalents including restricted cash
|
|
|
2,288,121
|
|
|
|
1,884,265
|
|
|
|
1,735,880
|
|
|
|
1,477,547
|
|
|
|
1,270,127
|
|
|
|
35,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net current assets
|
|
|
1,851,124
|
|
|
|
700,522
|
|
|
|
1,046,673
|
|
|
|
1,032,893
|
|
|
|
1,110,210
|
|
|
|
28,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
24,462,104
|
|
|
|
21,534,054
|
|
|
|
18,601,926
|
|
|
|
16,234,235
|
|
|
|
14,114,363
|
|
|
|
376,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity attributable to equity shareholders of the Company
|
|
|
9,004,953
|
|
|
|
8,264,419
|
|
|
|
7,500,831
|
|
|
|
7,165,301
|
|
|
|
6,955,653
|
|
|
|
138,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by / (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
2,120,604
|
|
|
|
1,748,483
|
|
|
|
2,442,662
|
|
|
|
1,556,981
|
|
|
|
968,441
|
|
|
|
32,604
|
|
Investing activities
|
|
|
(1,794,304
|
)
|
|
|
(1,609,979
|
)
|
|
|
(1,566,051
|
)
|
|
|
(866,925
|
)
|
|
|
(806,684
|
)
|
|
|
(27,587
|
)
|
Financing activities
|
|
|
(1,048,056
|
)
|
|
|
(257,913
|
)
|
|
|
(580,313
|
)
|
|
|
(597,725
|
)
|
|
|
114,999
|
|
|
|
(16,114
|
)
|
Notes
|
1.
|
Reference to shares and per share amounts refers to our equity shares. Our outstanding equity shares
include equity shares held by a depository underlying our ADSs. Effective September 24, 2002, one ADS represented one equity share.
|
Exchange Rates
Our functional currency
is the Indian rupee. The exchange rate between the rupee and the U.S. dollar has changed substantially in recent years and may
fluctuate substantially in the future. Our exchange rate risk primarily arises from our foreign currency revenues, receivables
and payables.
The following table sets forth the high
and low exchange rates for the previous six months and is based on the reference rate in the City of Mumbai on business days during
the period for cable transfers in Indian rupees as published by the Reserve Bank of India (RBI).
|
|
High
|
|
|
Low
|
|
Month
|
|
₹
.
|
|
|
₹
|
|
May 2018
|
|
|
68.39
|
|
|
|
66.61
|
|
April 2018
|
|
|
66.83
|
|
|
|
64.93
|
|
March 2018
|
|
|
65.23
|
|
|
|
64.80
|
|
February 2018
|
|
|
65.10
|
|
|
|
63.61
|
|
January 2018
|
|
|
63.98
|
|
|
|
63.35
|
|
December 2017
|
|
|
64.54
|
|
|
|
63.93
|
|
The following table sets forth, for the
fiscal years indicated, information concerning the number of Indian rupees for which one U.S. dollar could be exchanged based on
the reference rate in the City of Mumbai on business days during the period for cable transfers in Indian rupees as published by
the Reserve Bank of India (RBI). The column titled ‘Average' in the table below is the average of the last business day of
each month during the year.
Fiscal Year Ended
|
|
Period
end
|
|
|
Average
|
|
|
High
|
|
|
Low
|
|
March 31
|
|
₹
|
|
|
₹
|
|
|
₹.
|
|
|
₹.
|
|
2018
|
|
|
65.04
|
|
|
|
64.45
|
|
|
|
65.76
|
|
|
|
63.35
|
|
2017
|
|
|
64.84
|
|
|
|
67.09
|
|
|
|
68.72
|
|
|
|
64.84
|
|
2016
|
|
|
66.33
|
|
|
|
65.46
|
|
|
|
68.78
|
|
|
|
62.16
|
|
2015
|
|
|
62.59
|
|
|
|
61.14
|
|
|
|
63.75
|
|
|
|
58.43
|
|
2014
|
|
|
60.10
|
|
|
|
60.49
|
|
|
|
68.36
|
|
|
|
53.74
|
|
On March 31, 2018, the reference rate in
the City of Mumbai for cable transfers in Indian rupees as published by RBI was ₹65.04.
On
June 20, 2018, the reference rate in the City of Mumbai for cable transfers in Indian rupees as published by RBI was ₹68.08.
Capitalization and indebtedness
Not applicable.
Reasons for the offer and use of proceeds
Not applicable.
Risk Factors
Investing in our American Depositary Shares,
or ADSs, involves a high degree of risk. This Annual Report contains forward-looking statements that involve risks and uncertainties.
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of
factors, including those described in the following risk factors and elsewhere in this Annual Report. If any of the risks actually
occur, our business, financial condition, operating results and prospects could be materially and adversely affected. In that event,
the market price of our ADS could decline, and you could lose part or all of your investment. Our business, operating results,
financial performance, or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently
do not believe are material.
Risks Related to our Company and Industry
We may incur losses in the future
and we may not achieve or maintain profitability.
We have in the past
incurred losses. We may in the future incur net losses and suffer negative operating cash flows. We expect to increase our expenditures
as we continue to expand our services, promote our brand, and invest in the expansion of our infrastructure. In future, we may
incur expenses in connection with investments in Network Data Centers and related infrastructure. Accordingly, we will need to
significantly increase our revenues in order to improve our profitability. We cannot assure you that we will improve our profitability
or that we will not incur operating losses in the future. If we are unable to become consistently profitable and continue to incur
losses, we may be unable to build a sustainable business and our results of operations may be adversely affected. In this
event, the price of our ADSs and the value of your investment may decline.
The economic
environment, increased pricing pressure and decreased utilization rates could negatively impact our revenues and operating results.
Spending
on technology products and services is subject to fluctuations depending on many factors, including the economic environment in
the markets in which our clients operate. Factors such as the pace of recovery, management of large government deficits, sovereign
ratings of government bonds, which we believe remains challenging in many countries and may continue to be challenging in the near
future, or any slowdown in global IT spending may adversely affect our revenue growth, due to the markets in which our clients
operate. Global economic performance also has a bearing on our Infrastructure and e-Learning businesses. Currency fluctuations
will also lead to variations in revenue. The Infrastructure Managed Services, National Long Distance (‘NLD’) / International
Long Distance (‘ILD’) business and eLearning may be affected in terms of prices and growth.
With
regard to the Indian economy, we continue to experience pricing pressure due to competition in the markets in which we operate. Lead
times for orders or contracts have become much longer, as we have longer credit periods. These factors have affected and will affect
the growth in demand for our corporate business.
We
have invested in building our network and Data Center infrastructure and will continue invest in the future. Our utilization rates
of the existing and prospective infrastructure will determine our profitability. We may not utilize our infrastructure at the optimum
level which would impact our revenue.
Reduction
in IT spending, inability to maintain or increase prices, extended credit terms, and inability to maintain or improve utilization
rates of our infrastructure may adversely impact our revenues, gross profits, operating margins and results of operations.
Currency fluctuations may affect
the results of our operations or the value of our ADSs.
The exchange rate between
the Indian rupee and the U.S. dollar has changed significantly in recent years and may continue to fluctuate substantially in the
future.
We use derivative financial
instruments, such as foreign exchange forward and option contracts, to mitigate the risk of changes in foreign exchange rates on
accounts receivable and payable and forecast cash flows denominated in US dollar. We may not purchase derivative instruments for
a sufficient amount to adequately insulate ourselves from foreign currency exchange risks. We have entered into interest rate swap
transactions. Exchange rate fluctuations may adversely impact our cash flows on these transactions.
For the year ended
March 31, 2018, we have recognized a net gain of ₹ 6.97 million ($0.11 million) arising on account of foreign exchange fluctuations.
If foreign exchange currency markets continue to be volatile, such fluctuations in foreign currency exchange rates could materially
and adversely affect our results of operations in future periods. Also, the volatility in the foreign currency markets may make
it difficult to hedge our foreign currency exposures effectively and make them expensive.
Further, the policies
of the Reserve Bank of India (RBI) may change from time to time which may limit our ability to hedge our foreign currency exposures
adequately. Full or increased capital account convertibility, if introduced, could result in increased volatility in the fluctuations
of exchange rates between the Indian rupee and US dollar. Our US customers may leave us exposed to fluctuation in revenues based
on currency fluctuations.
A significant portion
of our revenue arises from exports in foreign currency and hence, any appreciation/ depreciation in Indian Rupee in relation to
any foreign currency may affect our revenue and profits.
In July 2012, the
RBI has mandated conversion of foreign currency balances held in Export Earners Foreign Currency (EEFC) Accounts, before the end
of subsequent month of the transaction. This may force us to convert foreign currency balances to INR at an unfavorable exchange
rate, which will result in loss.
Intense
competition in our businesses could prevent us from improving our profitability and we may be required to further modify the rates
we charge for our services in response to new pricing models introduced by new and existing competition which would significantly
affect our revenues.
Our
corporate network services compete with well-established companies, including Bharti Airtel, Tata Communications Limited, the Government-owned
telecom companies, Bharat Sanchar Nigam Limited and Mahanagar Telephone Nigam Limited and new players like Reliance Jio.
A
significant number of competitors have entered India’s Internet service provider industry. The large players,
especially the state run telecommunication companies, may enjoy significant competitive advantages over us, including greater
financial resources, which could allow them to charge prices that are lower than ours in order to attract customers. These
factors have resulted in periods of significant reduction in actual average selling prices of our services. With the entry of
a new player, the retail internet market has seen significant reduction in prices during the current year by all operators
due to pricing strategy by the new entrant. This has significantly affected the customer base and the average revenue per
user of the existing operators. We may see similar trend in enterprise market as well, which may have an adverse effect on
our revenues and operating margins. We expect the market for Internet access and other connectivity services to remain
extremely price competitive. Increased competition may result in operating losses, loss of market share and diminished value
in our services, as well as different pricing, service or marketing decisions. In addition, competition may generally cause
us to incur unanticipated costs associated with research and product development. Additionally, we believe that our
ability to compete also depends in part on factors outside our control, such as the availability of skilled employees in
India, the price at which our competitors offer comparable services, and the extent of our competitors’ responsiveness
to their clients’ needs. We cannot assure you that we will be able to successfully compete against current and
future competitors, or that we will not lose key employees or customers to such competitors, which may adversely affect our
business and results of operations.
Pressure on margins
may affect the results of our operations.
Our margins have been
stagnant recently due to competitive pricing pressure. While we seek to manage costs efficiently, there may not be improvements
in margins due to the sustained pricing pressure. Unavailability of tax loss carryforwards might impact our margins in the current
year and the future. Our continuing investment in infrastructure may result in lower margins in the initial years of investment
and may or may not improve further, which will adversely impact our margins.
We may fail to meet such obligations
of export under the Export Promotion Capital Goods Scheme (EPCG) and be subjected to penalties.
We have been availing duty benefit for
our import of capital goods under the EPCG scheme available for export of services. Under the scheme, we are eligible to import
capital goods without import duty with an obligation to generate export earnings to the extent of 6 times the value of such duty
benefit availed within a period of 6 years over and above the annual average export obligation. Though there are export earnings
at present, we may fail to fulfill such obligation in the future. In the case of a shortfall in fulfilment of such export obligation,
we may be subjected to repay the duty benefit availed along with interest.
Our business
will suffer if we fail to anticipate and develop new services and enhance existing services in order to keep pace with rapid changes
in technology
The technology
market is characterized by rapid technological change, evolving industry standards, changing client preferences and new product
and service introductions. Our future success will depend on our ability to anticipate these advances and develop new product and
service offerings to meet client needs. We may fail to anticipate or respond to these advances on a timely basis, or, if we do
respond, the services or technologies that we develop may not be successful in the marketplace. We have recently introduced, and
propose to introduce several solutions involving complex delivery models combined with innovative outcome-based pricing models.
The complexity of these solutions, our inexperience in developing or implementing them and significant competition in the markets
for these solutions may affect our ability to market these solutions successfully. In addition, better or more competitively priced
products, services or technologies that are developed by our competitors may render our service non-competitive.
Despite
our best efforts to optimize costs, our future operating results could fluctuate in part because our expenses are relatively fixed
in the short term while future revenues are uncertain, and any adverse fluctuations could negatively impact the price of our ADSs.
Our
revenues, expenses and operating results have varied in the past and may fluctuate significantly in the future due to a number
of factors, many of which are outside our control. A significant portion of our investment and cost base is relatively fixed in
the short term. Our revenues in the foreseeable future will depend on many factors, including the following:
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the range of services provided by us and the usage thereof by our customers;
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the quantum and nature of any agreements we enter into with strategic partners for our services;
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the services, products or pricing policies introduced by our competitors;
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capital expenditure and other costs relating to our operations;
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the timing and quality of our marketing efforts;
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our ability to successfully integrate operations and technologies from any acquisitions, joint ventures or other business combinations or investments;
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the introduction of alternative technologies; and
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technical difficulties or system failures affecting the telecommunication infrastructure in India, the Internet generally or the operation of our websites.
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We
plan to continue to expand and invest in our network infrastructure. Many of our expenses are relatively fixed in the short-term. We
cannot assure you that our revenues will increase in proportion to the increase in our expenses. We may be unable to adjust spending
quickly enough to offset any unexpected revenues shortfall. This could lead to a shortfall in revenues in relation to our expenses
and adversely affect our revenue and operating results.
You should not rely
on yearly comparisons of our results of operations as indicators of future performance and operating results may be below the
expectations of public market analysts and investors. In this event, the price of our ADSs may decline.
Our business may not be compatible
with delivery methods of Internet access services developed in the future.
We face the risk
that fundamental changes may occur in the delivery of Internet access services in India. The internet market has seen significant
changes in the recent past from connecting fixed offices/locations to connecting mobile devices to connecting disparate automated
devices and to continue to be relevant in this dynamic and disruptive environment, we will have to develop new technology or modify
our existing technology to accommodate these developments. Our pursuit of these technological advances, whether directly through
internal development or by third-party license, may require substantial time and expense. We may be unable to adapt our Internet
service business to alternate delivery means and new technologies may not be available to us at all. We provide wireless connectivity
on the 5.7 GHz spectrum allotted to us by the Wireless Planning Commission. The spectrum allocation may be inconsistent with industry
standards. The current capacity may be insufficient to offer a breadth of services. The Government may issue instructions to release
the spectrum that we hold. High cost of spectrum acquisition may be inconsistent with our revenue and cost models. We may not keep
up with the pace of change that takes place in wireless technologies.
Disruption to our Networks and Data
Center infrastructure may cause us to lose customers and/or incur additional expenses.
Some of the risks to
our infrastructure include physical damage, security breaches, capacity limitations, power surges or outages, software
incompatibility and/or other disruptions beyond our control, such as natural disasters and acts of terrorism. From time to time
in the course of our operations, we experience disruptions in our service due to factors such as cable damage, theft of our equipment,
inclement weather and service failures of our third-party service providers. Disruptions may cause interruptions in service or
reduced capacity for customers, either of which could cause us to lose customers, or increase our operating expense, both of which
could adversely affect our business, revenues and cash flows.
The success
of our business depends on penetration of the Internet in India, which may be slowed or halted by technical obstacles in India.
Penetration
of the internet and availability of increased bandwidth in India, which is the measure of Internet penetration, is relatively low
and slow compared to many developing and developed countries in the world. Though in recent years, the coverage of tier III/tier
IV cities has increased, there may be many technical obstacles to accessing certain regions which may increase the cost of delivering
internet and thereby cause a slowdown or halt the progress of internet, which will adversely affect our operations.
We may be
compelled to surrender or pay additional for the spectrum that was allotted to us earlier.
The
Government of India has asked us to surrender certain range of spectrum allotted to us and the same was auctioned as BWA spectrum. The
Government also has asked the company to make payment for certain spectrum from the date of allotment or to surrender the same.
The other range of spectrum that we have been allotted, 5.7 GHz, is also close to capacity utilization and will need to be augmented
in the near future. Enterprise connectivity will need licensed bands of spectrum for assured quality and security, so the
non-availability of spectrum would materially adversely affect our business and results of operations. In the event of the
surrender of the spectrum certain frequencies, it may hamper our future plans for expansion of services, and there are no assurances
that we will be able to obtain additional replacement spectrum.
We might
not be able to grow Network Connectivity services due to a declining contribution.
In
the Network Connectivity business, realization could be lower year on year based on the market conditions. Every year when
annual contracts come up for renewal, customers sign up for more bandwidth or more links at a lower unit price. This is offset
somewhat by lower bandwidth costs, which we renegotiate with our service providers. This impacts us in two ways: first, despite
an increase in sales volume, we may not see a commensurate rise in revenues; and secondly, margins in our business are continually
shrinking. Therefore, our revenue from our connectivity business may stagnate with declining bandwidth prices.
We may not
be able to retain and acquire customers for our Data Centers.
In
the field of Data Center services, competition from Data Center operators may attract customers away from us or make it more difficult
for us to attract new customers. If competitors are more successful than us in the market, it could be difficult for us to retain
and/or acquire customers. Furthermore, once customers cease using our services and choose another service provider, it may require
substantial efforts in terms of cost and time to re-acquire such customers, and despite spending on such customer acquisition or
retention, we may be unsuccessful in retaining such customers.
In
order to improve our competitiveness, we continue to expand our Data Center infrastructure. If we are unable to attract adequate
customers, we will not be able to achieve the revenues initially anticipated, which could have an adverse effect on our future
results of operations and financial condition.
Our Data
Centers may not be competitive enough in terms of green features.
We
may fail to convert our existing Data Centers and/or build new Data Centers under the LEED (Leadership in Energy and Environmental
Design) Commercial Interior (CI) programme of United States Green Building Council (USGBC). LEED certification is an internationally
recognized programme and is considered one of the highest standards for energy efficient constructions. The Data Center uses several
green features such as site ecology, water conservation, smart energy meters and equipment, reduction of CO2 emissions, high recycle
content, effective waste management and eco-friendly interiors. Increased demand for green Data Center may hamper the marketing
of our existing Data Centers that are not LEED certified.
Reduction in power supply and non-availability
of fuel may affect our Data Centers.
There has been acute power shortage in
recent years in India and hence, there could be a reduction in the availability of electricity. Where there is non-availability
of power supply in Data Centers, we resort to alternate sources of power (fuel) and the running of the Data Centers mainly depend
on the availability of fuel, which will increase the cost of operations. Additionally, non-availability of power/fuel will disrupt
our operations and it would be difficult for our customers to access data during such times.
We may lose
relevance and revenues if we do not position our business models in line with current and future technology trends.
Technology
trends, such as cloud computing, IoT, SD-WAN and software-as-a-service, allow new business models that could replace current lines
of business. The markets for our services are characterized by rapidly changing technology, evolving industry standards, emerging
competition and frequent introduction of new services. We may not successfully identify new opportunities, develop and bring
new services to market in a timely manner. Unless we are able to adopt and deploy these advancements, we may lose our competitive
position in the marketplace, which would adversely affect our revenues and may lead to increased customer attrition, as our customers
switch to other providers.
We face risks associated with having
a long selling and implementation cycle for our services that requires us to make significant capital expenditures and resource
commitments prior to recognizing revenue for those services.
Data Center service
typically requires significant investment of capital, human resources and time by both our customers and us. Constructing and commissioning
of a Data Center requires significant capital expenditures. A customer’s decision to utilize our colocation services, our
managed services or our other services typically involves time-consuming contract negotiations regarding the service level commitments
and other terms, and substantial due diligence on the part of the customer regarding the adequacy of our infrastructure and attractiveness
of our resources and services. Our efforts in pursuing a particular sale or customer may not be successful. If our efforts in pursuing
sales and customers are unsuccessful, our financial condition could be negatively affected.
The Data Center business is capital-intensive,
and we expect our capacity to generate capital in the short term may be insufficient to meet our anticipated capital requirements.
The costs of constructing, developing and
operating Data Centers are substantial. Further, we may encounter development delays, excess development costs, or delays in developing
space for our customers to utilize. We also may not be able to identify suitable land or facilities for new Data Centers or at
a cost on terms acceptable to us. We are required to fund the costs of constructing, developing and operating our Data Centers
with cash retained from operations, as well as from financings from bank and other borrowings. Moreover, the costs of constructing,
developing and operating Data Centers have increased in recent years, and may further increase in the future, which may make it
more difficult for us to expand our business and to operate our Data Centers profitably. If we cannot generate sufficient capital
to meet our anticipated capital requirements, our financial condition, business expansion and future prospects could be materially
affected.
Our customer base may decline if
our customers or potential customers develop Data Centers or expand their own existing Data Centers.
Some of our customers
may develop their own Data Center facilities. Other customers with their own existing Data Centers may choose to expand their Data
Center operations in the future. In the event that any of our key customers were to develop or expand their Data Centers, we may
lose business or face pressure as to the pricing of our services. In addition, if we fail to offer services that are cost-competitive
and operationally advantageous as compared with services provided in-house by our customers, we may lose customers or fail to attract
new customers. If we lose a customer, there is no assurance that we would be able to replace that customer at the same or a higher
rate, or at all, and our business and results of operations would suffer.
Our Data Center infrastructure may
become obsolete or unmarketable and we may not be able to upgrade our power, cooling, security or connectivity systems cost-effectively
or at all.
The markets for the
Data Centers we own and operate are characterized by rapidly changing technology, evolving industry standards, frequent new service
introductions, shifting distribution channels and changing customer demands. As a result, the infrastructure at our Data Centers
may become obsolete or unmarketable due to demand for new processes and/or technologies, including, without limitation: (i) new
processes to deliver power to, or eliminate heat from, computer systems; (ii) customer demand for additional redundancy capacity;
(iii) new technology that permits higher levels of critical load and heat removal than our Data Centers are currently designed
to provide; and (iv) an inability of the power supply to support new, updated or upgraded technology. In addition, the systems
that connect our Data Centers to the Internet and other external networks may become outdated, including with respect to latency,
reliability and diversity of connectivity. When customers demand new processes or technologies, we may not be able to upgrade our
Data Centers on a cost-effective basis, or at all, due to, among other things, increased expenses to us that cannot be passed on
to customers or insufficient revenue to fund the necessary capital expenditures. The obsolescence of our power and cooling systems
and/or our inability to upgrade our Data Centers, including associated connectivity, could reduce revenue at our Data Centers and
could have a material adverse effect on us.
Procuring power at lower costs for
Data Centers by the competitors may put us at a disadvantage in terms of pricing for our Data Center operations.
The single largest
operating cost in Data Centers is power. Currently all Data Centers are located in proximity to, or at the edge of major urban
centers such as Mumbai, Chennai, Bengaluru and Noida. Inexpensive land and labour allow companies to locate new Data Centers in
remote locations. We may neither be in a position to develop Data Centers at remote locations where power is cheap nor procure
power at cheaper rates for our Data Centers. If our competitors procure power at lower cost, they may have an advantage over us
with respect to pricing. Our inability to offer competitive pricing may result in loss of customers and will impact our business
and result of operations. The alternate sources of power are also exposed to inflation, regulation and hence, any undue price increase
would affect our energy cost significantly.
If we are not successful in expanding
our service offerings, we may not achieve our financial goals and our results of operations may be adversely affected.
We have plans to expand
the nature and scope of our service offerings, particularly into the area of cloud and managed services, including direct private
connection to major cloud platforms and the provision of cloud infrastructure. The success of our expanded service offerings depends,
in part, upon demand for such services by new and existing customers and our ability to meet their demand in a cost-effective manner.
We may face a number of challenges expanding our service offerings, including:
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acquiring or developing the necessary expertise in IT;
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maintaining high-quality control and process execution standards;
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maintaining productivity levels and implementing necessary process improvements;
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successfully attracting existing and new customers for new services we develop.
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A failure by us to
effectively manage the growth of our service portfolio could damage our reputation, cause us to lose business and adversely affect
our results of operations. In addition, cloud and managed services may require significant upfront investment and continued expansion
into these services may impact our profit margins. In the event that we are unable to successfully grow our service portfolio,
we could lose our competitive edge in providing our existing cloud and managed services.
We may be vulnerable to security
breaches which could disrupt our operations and have a material adverse effect on our financial condition and results of operations.
As we provide assurances
to our customers that we provide the highest level of security, any breach on such security could be harmful to our brand and reputation.
We may be required to expend significant capital and resources to protect against such threats or to alleviate problems caused
by breaches in security. In addition, as we continue expanding our service offerings in managed cloud services, including direct
private connection to major cloud platforms and the provision of cloud infrastructure, we will face greater risks from potential
attacks because the provision of cloud-related services will increase the flow of Internet user data through the Data Center facilities
we operate and create broader public access to our system. As techniques used to breach security change frequently and are often
not recognized until launched against a target, we may not be able to implement new security measures in a timely manner or, if
and when implemented, we may not be certain whether these measures could be circumvented. Any breaches that may occur could expose
us to increased risk of lawsuits, regulatory penalties, loss of existing or potential customers, harm to our reputation and increases
in our security costs, which could have a material adverse effect on our financial condition and results of operations.
In addition, any assertions
of alleged security breaches or systems failure made against us, whether true or not, could harm our reputation, cause us to incur
substantial legal fees and have a material adverse effect on our business, reputation, financial condition and results of operations.
We may encounter litigation and penalties
due to breach of system and security controls by associates or sub-contractors in the online assessment services
We provide online assessment
services to the Government, Public & Private sector undertakings. We provide these services through our online assessment tool.
This tool engages employees and sub-contractors for student registration, exam center allocation, hall ticket issuance, question
paper content creation, logistics planning, exam-day management, and results management. We cannot assure you that there
may not be any breach of the system and security controls including any malpractices by candidates or sub-contractors or any person
engaged with the conduct of the examination, which may expose us to criminal or civil enforcement actions in addition to penalties
and suspension or disqualifications.
Despite our endeavor to maintain the sanctity
of the examinations, an incident occurred in the month of February 2018 where Sify observed a technical glitch in the question
paper. We decided to cancel the question paper and reexamination was successfully conducted immediately. A few answer keys appeared
in the social media posted by an unknown person. Pursuant to the protests carried out by certain sections of students in Delhi,
the government tasked the country’s investigating agency with probing the matter. On May 23, 2018, Central Bureau of Investigation
(CBI) conducted inquiry at 12 locations including 4 premises of Sify Technologies Limited. Sify extended its full support by submitting
the reports, statements, process documents to CBI during the preliminary enquiry.
The authorities during the inquiry collected
data pertaining to the examination conducted between February 17 to 22, 2018, in a FIR (First Information Report) filed subsequently,
the authorities have suspected 7 candidates (appeared for exam) cheating at different exam centers. The authorities have also named
9 personnel of a private third-party agency engaged by Sify for the exam. Further, the authorities have also named one employee
of Sify in his capacity as custodian of the question paper in his individual capacity.
Although Sify Technologies is not party
to the proceedings, we have been extending full support and cooperation to the authorities in the investigation. We intend to take
suitable steps after reviewing the final report once the investigation is completed.
We cannot assure you that similar instances
will not occur in future and any such instances may impact our reputation and cause adverse effect on our business or results of
operations.
We engage third-party contractors
to carry out various services.
We endeavor to engage
third-party contractors with proven track records, reliability and adequate financial resources. However, any such third-party
contractor may still fail to provide satisfactory services at the level of quality required by us. Such failure could harm our
reputation and have a material adverse effect on our business, reputation, financial condition and results of operations.
We may fail
to augment our skills and capability to best manage our services over Internet Protocol and data networks.
We
have been able to build a reputation and maintain our lead because of our expertise and capability with the delivery and management
of services over Internet Protocol and data networks. With the build-up of the capability and experience of our competitors, we
are at the risk of losing market share, if we do not augment our skills and capabilities to keep our qualitative lead over them.
Infrastructure such as networks is considered by customers as a commodity, and the only differential that we offer is our ability
to manage and monitor services in a superior manner.
It may not
be possible for us to retain our brand equity if we do not resort to huge investments for brand development.
Our
competitors offering similar services are all large telecom companies who make substantial investments in building their brand
image across their services. Conversely, we are focused on IT infrastructure services over data telecom networks and we believe
that we enjoy the reputation of a specialist in these services. However, if we do not build up awareness as well as our brand and
reputation over time, the sheer weight of investments in brand development by the larger telecommunication providers will dilute
our brand recognitions and competitive advantages.
Any loss of business from our top
clients could reduce our revenue and significantly impact our business.
In fiscal 2018, our
largest client accounted for 10.94% of our total revenues and our five largest clients together accounted for 22.26% of our total
revenues. The services we offer for specific clients are likely to vary from year to year. Thus, a major client in one year may
not provide the same level of revenues in a subsequent year. A number of factors other than our performance could cause the loss
of or reduction in business or revenue from a client, and these factors are not predictable. For example, a client may demand price
reductions, change its outsourcing strategy or move work in-house. If we lose one of our major clients or if one of our
major clients significantly reduces its volume of business with us, our revenues and profitability could be reduced.
If we are unable to meet our service
level commitments, our reputation and results of operation could suffer.
Most of our customer
contracts provide that we maintain certain service level commitments to our customers. If we fail to meet our service level commitments,
we may be contractually obligated to pay the affected customer a financial penalty, which varies by contract, and the customer
may in some cases be able to terminate its contract. In addition, if such a failure were to occur, there can be no assurance that
our customers will not seek other legal remedies that may be available to them, including:
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requiring us to provide free services;
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seeking damages for losses incurred; and
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cancelling or electing not to renew their
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Any of these events
could materially increase our expenses or reduce our net revenue, which would have a material adverse effect on our reputation
and results of operations. Our failure to meet our commitments could also result in substantial customer dissatisfaction or loss.
As a result of such customer loss and other potential liabilities, our net revenue and results of operations could be materially
and adversely affected.
We may not
meet the selection criteria set for high value contracts by the Government.
As
we participate in bidding for large Government of India contracts, as well as business from large corporations, we increasingly
come under scrutiny for financial indicators. Unless we leverage our capacity and become consistently profitable, we could be excluded
from major government projects because we fail to meet their selection criteria, which would adversely affect our business and
results of operations.
The success
of our business depends on our capability to develop compatible applications and tools.
As
we offer our Applications Integration services to an increasing base of large corporations, we run the risk of not being able to
meet their needs for scaling and sophistication in the future if we do not build the capacity to develop and integrate applications
software to meet with future needs. We may not have adequate resources to develop our capability as a result of emerging sophistication
required for such services. The failure to develop such resources may adversely affect our business and results of operations.
We may fail
to offer end-to-end managed services to sustain our position.
The
telecommunications market is evolving towards service providers who offer end-to-end managed services that include managing everything
down to desktops. If we are to continue to lead the market, we need to extend our bouquet of services to ensure that our portfolio
helps graduate the market to managed services where we can maintain leadership. It may be difficult for us to offer end-to-end
managed services to sustain our leadership in managed services without significant capital expenditures which would adversely affect
our cash position and results of operations.
We may be unable to replace lost
revenue due to customer cancellations, renewals at lower rates or other less favorable terms
It
is key to our profitability that we offset committed recurring revenue due to customer cancellations, terminations, price reductions
or other less favorable terms by adding new customers, selling more high-margin services, features and functionalities to existing
customers and increasing traffic usage by all customers. Some customers may elect not to renew and others may renew at lower prices,
lower committed traffic levels, or contract only for shorter time frame. Historically, a significant percentage of our renewals,
particularly with larger customers, have led to declines in unit price as competition has increased and the market for certain
parts of our business has saturated. Our renewal rates may decline as a result of a number of factors, including competitive pressures,
customer dissatisfaction with our services, customers' inability to continue their operations and spending levels, the impact of
multi-vendor policies, customers implementing or increasing their use of in-house technology solutions and general economic conditions.
In
addition, as we expand the network to small cities and towns (semi – urban and rural locations), there is an operational
cost involved in both the establishment and operation of these nodes. While the expansion is facilitated by a corporate order,
we have to subsequently get additional business for capacity utilization in these nodes to make them profitable. If we are not
able to do this rapidly by scaling up the business through these towns, we run the risk of overcapacity on the network in new areas,
which results in a higher cost structure and lower margins.
Absence
of policy support will hamper Internet and Data Services.
We
have, and continue to be subject to Indian regulations regarding the VPN license requirements, including the percentage of foreign
holdings to offer VPN services as well the need for NLD/ILD licenses to offer VPN services and carrier voice services. The growth
and development of the data and Internet sector is dependent on the policy support of Department of Telecommunications. Regulatory
changes, as well as the continuing lack of policy initiatives to revitalize the data and Internet sector continue to be a risk.
We cannot influence
policies that facilitate the growth and development of data and Internet connectivity in India. The absence of policy support for
Internet and data services may hamper the growth of such services in the future, which would adversely affect our business and
results of operations.
Constant
improvement of technology standards/ skills and evolving tools and applications are essential to sustain our position in remote
management of IT infrastructure.
We
are relatively unknown outside India in comparison to other established IT players who have a large base of customers. If we are
not able to constantly upgrade our technology standards and skills, and if we are unable to scale for critical mass in the near
term, our competitive position would be adversely affected.
Management of IT infrastructure
is dependent on sophisticated tools and applications to remotely monitor the IT infrastructure and assets of customers. If
we are unable to retain our competitive advantages in terms of the evolving tools & applications, or the maturity of our processes,
we may lose customers and be at a competitive disadvantage compared with our larger competitors
The slower
pace of recovery of the United States economy affects sales of our Remote Infrastructure Managed Services and eLearning services.
The
rate of recovery of the United States may result in reduced demand for our eLearning products, as our customers may reduce their
training budgets and programming. Additionally, we may not be able to acquire new customers due to the social, political,
regulatory and economic environment prevailing in the United States. A prolonged period of reduced customer demand for our
eLearning services may adversely affect our business and results of operations.
Emergence
of Enterprise Software Suites, Artificial Intelligence, Robotics and Machine Learning may hamper the growth of our e-Learning
stream.
The
emergence of competitors such as Oracle, IBM, SAP, SumTotal and SABA offering Enterprise Software Suites for eLearning for
large organizations to develop their own learning platforms could be a threat to our business in the future. We may lose
our business to our competitors, and if we are unable to acquire new customers or retain our existing customers, our revenues
and results of operations may suffer. Additionally, the emergence of Machine Learning and Artificial Intelligence could
adversely impact our revenues.
If we do
not continue to develop and scale compelling content, products and services, our ability to attract new customers or maintain the
engagement of our existing consumers could be adversely affected.
In
order to increase advertising revenues, we need to continue to increase the number of users of our sports, recipes and entertainment
video content through our websites. In order to attract consumers and generate increased engagement on our website portals,
we believe we must offer compelling content, products and services. If we are not able to attract and keep new users in a constantly
evolving user base, we are likely to lose page views, and advertisers may reduce or cease publishing advertisements in our websites. It
is important for us to provide necessary content through our websites (e.g. live videos, new channel based portals, etc.) to attract
more users. However, acquiring, developing and offering new content, products and services, as well as new functionality,
features and enhanced performance of our existing content, products and services, may require significant costs and time to develop.
In addition, consumer tastes are difficult to predict and subject to rapid change.
Cyber security
threats could damage our reputation or result in liability to us.
Our
businesses depend on the reliability and security of our information technology systems and infrastructure. They must remain secure,
and be perceived by our corporate and consumer customers to be secure, as we retain confidential customer information in our database.
Despite the implementation of security measures, our infrastructure may be vulnerable to physical break-ins, computer hacking,
computer viruses, other malware, ransomware or cyber-attacks beyond our control. If our security measures are circumvented, it
would jeopardize the security of confidential information stored on our systems, proprietary information could be misappropriated
or cause interruptions to our operations. We may be required to make significant additional investments and efforts to protect
against or remedy security breaches. Unauthorized disclosure of sensitive or confidential client and customer data, whether through
breach of our computer systems, systems failure or otherwise, could damage our reputation and adversely affect our business and
results of operations
Though
we have not had any attempted cybersecurity breaches reported, the security services that we offer in connection with our business
customers’ networks cannot assure complete protection from computer viruses, break-ins and other disruptive problems and
the occurrence of these problems could result in claims against us or liability on our part. These claims, regardless of their
ultimate outcome, could result in costly litigation and could damage our reputation and hinder our ability to attract and retain
customers for our service offerings.
We face
a competitive labour market for skilled personnel and therefore are highly dependent on our existing key personnel and on our ability
to hire additional skilled employees.
Our
success depends upon the continued service of our key personnel including our senior management team, including our CEO, Chairman
and Managing Director, Mr. Raju Vegesna. Each of our employees may voluntarily terminate his or her employment with us. Our success
also depends on our ability to attract and retain such highly qualified technical, marketing and sales personnel. The labour market
for skilled employees in India is extremely competitive, and the process of hiring employees with the necessary skills is time
consuming and requires significant resources. We may not be able to retain or integrate existing personnel or identify and hire
additional personnel in the future. The loss of the services of key personnel or the inability to attract additional qualified
personnel could disrupt the implementation of our business strategy, upon which the success of our business depends.
The failure
to keep our technical knowledge confidential could erode our competitive advantage.
Our
technical know-how is not protected by intellectual property rights such as patents, and is principally protected by maintaining
its confidentiality. We rely on trade secrets, confidentiality agreements and other contractual arrangements. As a result, we cannot
be certain that our know-how will remain confidential in the long run. Employment contracts with certain of our employees who have
special technical knowledge about our products or our business contain a general obligation to keep all such knowledge confidential.
In addition to the confidentiality provisions, these employment agreements typically contain non-competition clauses.
If
either the confidentiality provisions or the non-competition clauses are unenforceable, we may not be able to maintain the confidentiality
of our know-how. In the event that confidential technical information or know-how about our products or business becomes available
to third parties or to the public, our competitive advantage over other companies in the wireless based IP/VPN industry could be
harmed which could have an adverse material effect on our current business, future prospects, financial condition and results of
operations.
Our inter-city
network is leased from other service providers and is dependent on their quality and availability.
We
have provided inter-city connectivity for our Enterprise customers through lease arrangements rather than through capital investment
in assets, Our ability to offer high quality telecommunications services depends, to a large extent, on the quality of the networks
maintained by other operators, and their continued availability, neither of which is under our control. However, the abundance
of inter-city connectivity provides us with the ability of switching to telcos offering better services. Although we always
use more than one service provider where required, there can be no assurance that this dependence on external parties would not
affect our network availability. Any prolonged loss of network availability could adversely affect our business and results of
operations.
Our current
infrastructure may not accommodate increased use while maintaining acceptable overall performance.
Currently,
only a relatively limited number of customers use our corporate network. We must continue to add to our network infrastructure
to accommodate additional users, increasing transaction volumes and changing customer requirements. We may not be able to project
accurately the rate or timing of increases, if any, in the use of our websites or upgrade our systems and infrastructure to accommodate
such increases. Our systems may not accommodate increased use while maintaining acceptable overall performance. Service lapses
could cause our users to use the online services of our competitors, and numerous customer defections may adversely affect our
results of operations.
Our increasing
work with Governmental agencies may expose us to additional risks.
We
are increasingly bidding for work with Governments and Governmental agencies. Projects involving Governments or Governmental agencies
carry various risks inherent in the Government contracting process, including the following:
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Such projects may be subject to a higher risk of reduction in scope or termination than other contracts due to political and economic factors such as changes in Government, pending elections or the reduction in, or absence of, adequate funding;
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Terms and conditions of Government contracts tend to be more onerous than other contracts and may include, among other things, extensive rights of audit, more punitive service level penalties and other restrictive covenants. Also, the terms of such contracts are often subject to change due to political and economic factors;
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All Government bids are subject to Bank Guarantee depending upon the size of the tender. Any shortfall in service, inability to deliver committed SLA during the project may force the Government to invoke the bank guarantee leading to huge cash losses;
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Government contracts are often subject to more extensive scrutiny and publicity than other contracts. Any negative publicity related to such contracts, regardless of the accuracy of such publicity, may adversely affect our business or reputation;
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Participation in Government contracts could subject us to stricter regulatory requirements, which may increase our cost of compliance; and
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Such projects may involve multiple parties in the delivery of services and require greater project management efforts on our part. Any failure in this regard may adversely impact our performance.
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In addition, we operate within jurisdictions
in which local business practices may be inconsistent with international regulatory requirements, including anti-corruption and
anti-bribery regulations prescribed under the U.S. Foreign Corrupt Practices Act (“FCPA”), which, among other things,
prohibits giving or offering to give anything of value with the intent to influence the awarding of Government contracts. Also,
Prevention of Corruption (Amendment) Bill 2013, (“PCA”) prohibits giving bribe to a public servant. Although we believe
that we have adequate policies and enforcement mechanisms to ensure legal and regulatory compliance with the FCPA, PCA and other
similar regulations, it is possible that some of our employees, subcontractors, agents or partners may violate any such legal and
regulatory requirements, which may expose us to criminal or civil enforcement actions, including penalties. If we fail to comply
with legal and regulatory requirements, our business and reputation may be harmed.
Any of the above factors could have a material
and adverse effect on our business or our results of operations.
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Our
dividend payment policy is contingent upon the Company’s profits each year.
Prior to 2013-14 we
did not pay dividends due to the losses incurred in the previous years and non-availability of divisible profits under Indian law.
In view of the consistent positive performance of the Company for the year 2017-18, the Board of Directors had recommended a 12%
cash dividend to all the shareholders of the Company for the year ended March 31, 2018, which is subject to approval by the shareholders
at the Annual General Meeting to be held on July 6, 2018.
Dividend payment is a function of profits,
and the distribution of profits is based on home country laws and the financial statements prepared under the Indian Accounting
Standards (Ind AS) as specified in Section 133 of the Companies Act 2013 read together with rule 4 of the Companies (Indian Accounting
Standards) Rules 2015 and rule 4 of Companies (Indian Accounting Standards) Amendment Rules 2016 to the extent applicable, pronouncements
of regulatory bodies applicable to the Company and other provisions of the Act. The Board of Directors, after assessing various
factors including the future cash flow requirements of the Company, recommends a dividend payout to the shareholders for approval
at the Annual General Meeting.
The dividend payment policy of the Company
is not certain and is contingent upon the level of performance of the Company and the recommendation of the Board of Directors
and the approval of the shareholders. Thus, there is no assurance that dividends will be paid in the future.
Risks Related to Regulation and Compliance
We may encounter legal confrontations
as the Information Technology Act 2000 lacks specificity as to issues on online processes and/or Internet.
We
believe that the Information Technology Act of 2000, as amended in 2011 (the “ITA”), an Indian regulation, does not
address all areas of online processes or the Internet. In exercise of the powers conferred by the ITA, the Government of India
issued rules in April 2011 called Information Technology rules with stringent privacy norms for Internet Service Providers and
the intermediary who is handling sensitive personal information. The ITA has mandated the service providers to maintain transactions,
receipts and vouchers in specific formats. The records must be produced for inspection and audit by a government nominated agency
or person. The Government of India is authorized to audit security and privacy protection measures. We are exposed to risks
relating to unauthorized access and non-compliance of regulations by our business partners. Such events may negatively affect
our reputation, and violations of the Information Act may result in fines and litigation or cause us to incur legal costs, which
may adversely affect our business and results of operations.
We may encounter legal confrontations
under the Information Technology Act 2000 on our digital certification business.
We have been granted
license as Certifying Authority (CAs) to issue digital signature certificate for electronic authentication of users. The CAs are
governed by Controller of Certifying Authority (CCA) under the ITA which prescribes duties to be followed, standards to be maintained
and a list of documents to be maintained by Certifying Authorities. The guidelines also require the company to bill the end customer
to whom the Digital Signature Certificate (DSC) is sold effective from 1st of August 2017. System development changes have been
made by the company to support the billing to the end customers. Any actual or perceived failure to comply with such obligations
could harm our business. Non Compliance with such laws, rules and regulations may result in fines and litigation or cause us to
incur legal costs, which may adversely affect our business and results of operations.
We may encounter
litigation and penalties due to non-compliance with relevant laws applicable to the products sold and services rendered by us.
The
products and services that we deal with are subject to various laws such as the ITA. We are exposed to risks relating to non-compliance
with such laws which may affect our reputation and also result in litigations and penalties which may adversely affect our business
and results of operations.
We may not
be able to comply with direct & indirect tax laws resulting in litigations and penalties.
Tightening
of regulatory framework, new legislative changes and heightened enforcement activity by the tax departments across the world has
brought the importance of tax risk on the radar of the corporates in India. From a business standpoint, income tax remains the
most important tax for companies because of its impact on corporate bottom-line. Unpredictable rulings & interpretations of
tax authorities are the key reasons leading to tax risks. In India, changes in taxation laws are announced on an annual basis in
February, when the Union Budget is presented. These changes in law may affect the accuracy of our estimated tax obligations, or
the obligations of holders of our equity shares and ADSs. Significant judgment is required in determining our worldwide provision
for income taxes and other tax liabilities. We are regularly under audit by tax authorities and those authorities may not agree
with positions taken by us on our tax returns. Although we believe that our estimates are reasonable, there is no assurance that
the final determination of tax audits or tax disputes will not be different from what is reflected in our historical income tax
provisions and accruals. We are also exposed to risks of non-compliance with the requirement of law which may affect our reputation
and also result in litigations and penalties which may adversely affect our business and results of operations.
Any
of the above could have a material adverse effect on our business and future results. Additionally, due to the complexity of the
fiscal environment, the ultimate resolution of any tax matters may result in payments greater or lesser than amounts accrued.
The
Government of India, through Finance Act, 2016, has introduced a tax on dividends accrued to non-corporate resident investors in
excess of ₹1 million per annum at the rate of 10% (plus applicable surcharge and education cess). This is in addition to
a dividend distribution tax payable by us at the rate of 20.358%. If the effective rate of dividend distribution tax increases
or new forms of taxes on distribution of profits is introduced, the dividend amount receivable by our shareholders after taxes
may decrease. If the Government of India modifies dividend distribution tax rates or introduces new forms of taxes on distribution
of profits or changes the basis of application of these taxes, the same could materially affect the returns to our shareholders.
Furthermore,
the Government of India has rolled out Goods and Service Tax (GST) effective from 1st July 2017. GST has subsumed several central,
state and local tax laws such as excise duty, service tax, value added tax, central sales tax, entry tax, etc. The GST law prescribes
compliance and procedures which are more comprehensive than prior tax laws. The GST Council is planning to implement a new process
which allows credit based on the invoices uploaded by the vendors in their tax returns. Hence, tax credits will be available to
the company based on proper compliance by all the vendors and filing of returns on time. Any failure to comply with the requirement
of law by the vendor will impact availment of input tax credit by the company. We are also exposed to risks of non-compliance with
the requirement of law which may affect our reputation and also result in litigations and penalties which may adversely affect
our business and results of operations.
The legal
system in India does not protect intellectual property rights to the same extent as the legal system of the United States, and
we may be unsuccessful in protecting our intellectual property rights.
Our
intellectual property rights are important to our business. We rely on a combination of copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect our intellectual property.
Our
efforts to protect our intellectual property may not be adequate. We hold no patents, and our competitors may independently develop
similar technology or duplicate our services. Unauthorized parties may infringe upon or misappropriate our services or proprietary
information. In addition, the laws of India do not protect proprietary rights to the same extent as laws in the United States,
and the global nature of the Internet makes it difficult to control the ultimate destination of our services. For example, the
legal processes to protect service marks in India are not as effective as those in place in the United States. The misappropriation
or duplication of our intellectual property could disrupt our ongoing business, distract our management and employees, reduce our
revenues and increase our expenses. In the future, litigation may be necessary to enforce our intellectual property rights or to
determine the validity and scope of the proprietary rights of others. Any such litigation could be time-consuming and costly.
We
could be subject to intellectual property infringement claims as the number of our competitors grows and the content and functionality
of our websites or other service offerings overlap with competitive offerings. Our defenses against these claims, even if not meritorious,
could be expensive and divert management’s attention from operating our Company. If we become liable to third parties for
infringing their intellectual property rights, we could be required to pay a substantial award as damage and forced to develop
non-infringing technology, obtain a license or cease selling the applications that contain the infringing technology. We may be
unable to develop non-infringing technology or even obtain a license on commercially reasonable terms.
Compliance
with new and changing corporate governance and public disclosure requirements adds uncertainty to our compliance policies and increases
our costs of compliance.
Changing
laws, regulations and standards relating to accounting, corporate governance and public disclosure, including the Dodd–Frank
Wall Street Reform and Consumer Protection Act (“Dodd-Frank”)
,
Sarbanes-Oxley Act of 2002 (“SOX”),
new SEC regulations and NASDAQ Stock Market rules, are creating uncertainty for companies like ours. These new or changed
laws, regulations and standards may lack specificity and are subject to varying interpretations. Their application in practice
may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty
regarding compliance matters and higher costs of compliance as a result of ongoing revisions to such governance standards.
Further,
from the year 2011, there has been an increased focus on corporate governance by the U.S. Congress and by the SEC in response to
the credit and financial crisis in the United States. As a result of this increased focus, additional corporate governance
standards have been promulgated with respect to companies whose securities are listed in the United States, including by way of
the enactment of Dodd-Frank, and more governance standards are expected to be imposed in the near future on companies whose securities
are listed in the United States.
Indian
regulatory authorities are increasingly focused on standards of accounting, auditing, public disclosure and corporate governance
and may impose new regulations that can lead to increased general and administrative expenses and a diversion of management time
and attention from revenue-generating activities to compliance activities.
In
addition, it may become more expensive and/or more difficult for us to obtain director and officer liability insurance due to increases
in premium rates. Further, our Board members, CEO, Chairman and Managing Director and our Chief Financial Officer could face an
increased risk of personal liability in connection with their performance of duties and our SEC reporting obligations. As
a result, we may face difficulties attracting and retaining qualified Board members and executive officers, which could harm our
business. If we fail to comply with new or changed laws or regulations, our business and reputation may be harmed.
The Indian Companies
Act, 2013, which replaced the Companies Act, 1956, effective April 1, 2014, has imposed numerous and onerous compliance requirements
on the Corporates in India. The Act introduced significant provisions relating to governance, e-management, compliance and enforcement,
enhanced disclosure norms, accountability of management, stricter enforcement, investor protection, class action suits, corporate
social responsibility, compulsory appointment of Independent and Woman Directors, rotation of Auditors etc. among others. Compliance
with the provisions of the new Act may pose a greater challenge to the Corporates in India both in terms of responsibility and
cost.
We may inadvertently
fail to comply with local laws of other countries in connection with the negotiation and execution of operational agreements.
As
part of our international business, we may negotiate with and enter into contracts with strategic partners, clients, suppliers,
employees and other third parties in various countries. We may inadvertently fail to comply with their laws, which may result
in lawsuits or penalties and could adversely affect our business or results of operations.
We are subject to quality of service
(QOS) guidelines issued by the Telecom Regulatory Authority of India (“TRAI”). Failure to comply with one or more applicable
guidelines may expose us to fines/penalties.
TRAI has issued the following guidelines
to the ISPs for improving the quality of service:
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All Internet service providers shall provide adequate information
to subscribers regarding Internet/broadband services being offered and marketed by them.
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All Internet service providers shall provide information
regarding contention ratios or the number of users competing for the same bandwidth, adopted by them to provide Internet/broadband
service in their tariff plans submitted to TRAI, manual of practice, call centers and on their websites
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All Internet service providers shall publish quarterly
contention ratio for different Internet/broadband services on their website to facilitate subscribers to take informed decision.
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All Internet service providers must use the contention
ratios better than specified ratios for different services to ensure sufficient bandwidth for providing good quality of service
to their subscribers.
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Fixing up a contention
ratio may put standalone ISPs at a disadvantage as cost of delivery of Internet bandwidth may increase. Telecom companies offering
similar internet services are tempted to offer significantly lower prices and incentives as they own the last mile. Also by bundling
telephony along with Internet, they can enhance their otherwise idle last mile. Under such circumstances, it will be very difficult
for ISPs providing retail service to compete with big Telcos which can offer broadband services by cross subsidizing with voice/other
services.
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Submission of Carbon foot print report from the financial
year 2011-12 and also to submit a carbon foot print report twice a year from the financial year 2013-14, for the six months ending
September 30, before 15
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of November and for the six months ending March 31, by 15
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of May each year.
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In the event of our
failure to comply with one or more of the above guidelines, we may expose ourselves to fines/penalties.
We may be liable to third parties
for information retrieved from the Internet.
We could become liable
if confidential information is disclosed inappropriately on or through our websites. Others could also sue us for the content and
services that are accessible from our websites through links to other websites or through content and materials that may be posted
by our users in chat rooms or bulletin boards. The laws in India relating to the liability of companies which provide Internet
services, like ours, for activities of their users, are still relatively unclear. Investigating and defending these claims is expensive,
even if they do not result in liability Allegations of impropriety, even if unfounded, could damage our reputation, disrupt
our ongoing business, distract our management and employees, reduce our revenues and increase our expenses.
Risks Related to the ADSs and Our Trading
Market
We may fail to meet the continued listing
requirements of the NASDAQ, which could cause our ADS to be delisted.
Pursuant to the listing
requirements of the NASDAQ, if a company’s share price is below $1.00 per share for 30 consecutive trading days, NASDAQ will
notify the company that it is no longer in compliance with the NASDAQ continued listing qualifications. If a company is not
in compliance with the minimum bid price rule, the company will have 180 calendar days to regain compliance. If the company
does not regain the compliance within the initial 180 days, the company may be eligible for an additional 180 day period
as set forth in NASDAQ listing rule 5810(c)(3)(A). The company may regain compliance if the bid price of its shares closes at $1.00
per share or more for a minimum of ten consecutive business days at any time during the cure period.
On December 27,
2016, the Company received notice from NASDAQ that the minimum bid price for our ADS was below $1.00 per ADS for a period of 30
consecutive business days, and that we therefore did not meet the minimum bid price requirement of the NASDAQ Listing Rule. Based
on the Company’s application, on July 11, 2017, NASDAQ approved the transfer of the Company’s ADS to the NASDAQ
Capital Market under the same symbol “SIFY” and granted additional 180 days calendar period to cure the minimum bid
price deficiency.
On September 28, 2017,
the Company received a letter from NASDAQ stating that the closing bid price of the Company’s ADS had been $1 or greater
for 10 consecutive trading days. Accordingly, the Company regained compliance with the Listing Rule 5550(a)(2).
Though the Company
regained compliance with the NASDAQ continued listing requirements during the previous year, we may not be able to meet the continued
listing requirements of NASDAQ in the future. If we are unable to satisfy the NASDAQ criteria for maintaining our listing, our
securities could be subject to delisting. As a consequence of any such delisting, our ADS holders would likely find it more difficult
to dispose of or to obtain accurate quotations as to the prices of our securities, and there would likely be less liquidity in
our stock. In the event of a delisting, we could face significant material adverse consequences including a limited availability
of market quotations for our securities and a decreased ability to issue additional securities or obtain additional financing in
the future.
The interests
of our significant shareholder, Mr Raju Vegesna, our CEO, Chairman and Managing Director may differ from your interests.
Effective
as of October 30, 2010, upon the consummation of the private placement to an entity controlled by Mr Raju Vegesna, our , CEO, Managing
Director and Chairman of the Board of Directors of the company, Mr Raju Vegesna beneficially owns approximately 86.22% of our outstanding
equity shares. As a result, Mr Raju Vegesna will be able to exercise control over many matters requiring approval by our Board
of Directors and / or shareholders, including the election of directors and approval of significant corporate transactions, such
as a sale of our company. Under Indian law, a simple majority is sufficient to control all shareholder action except for those
items, which require approval by a special resolution. If a special resolution is required, the number of votes cast in favour
of the resolution must not be less than three times the number of votes cast against it. Examples of actions that require a special
resolution include:
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altering our Articles of Association;
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issuing additional shares of capital stock, except for pro rata issuances to existing shareholders;
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commencing any new line of business; and
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commencing a liquidation.
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Circumstances
may arise in which the interests of Mr Raju Vegesna could conflict with the interests of our other shareholders or holders of our
ADSs. Mr. Vegesna, or the entities that he controls, could delay or prevent a change of control of our Company even if a transaction
of that sort would be beneficial to our other shareholders, including the holders of our ADSs. This concentrated control will
limit your ability to influence corporate matters and as a result, we may take actions that our ADS holders do not view as beneficial. As
a result, the market price of our ADS could be adversely affected.
An investor in our ADSs may not be
able to exercise preemptive rights for additional shares and may thereby suffer dilution of such investor's equity interest in
us.
Under the Companies
Act, 2013, or the Indian Companies Act, a Company incorporated in India must offer its holders of equity shares pre-emptive rights
to subscribe and pay for a proportionate number of shares to maintain their existing ownership percentages prior to the issuance
of any new equity shares, unless such pre-emptive rights have been waived by three-fourths of the shares voting on the resolution
to waive such rights.
Holders of ADSs may
be unable to exercise pre-emptive rights for equity shares underlying ADSs unless a registration statement under the Securities
Act of 1933, as amended, or the Securities Act, is effective with respect to such rights or an exemption from the registration
requirements of the Securities Act is available. To the extent that holders of ADSs are unable to exercise pre-emptive rights granted
in respect of the equity shares represented by their ADSs, their proportional interests in us would be reduced.
ADS holders
may be restricted in their ability to exercise voting rights.
At
our request, Citibank N.A, (the
“Depository”)
will mail to holders of our ADSs any notice of shareholders’
meeting received from us together with information explaining how to instruct the Depository to exercise the voting rights of the
securities represented by ADSs. If the Depository receives voting instructions from a holder of our ADSs in time, relating to matters
that have been forwarded to such holder, it will endeavor to vote the securities represented by such holder’s ADSs in accordance
with such voting instructions. However, the ability of the Depository to carry out voting instructions may be limited by practical
and legal limitations and the terms of the securities on deposit. We cannot assure you that the holders of our ADSs will receive
voting materials in time to enable such holders to return voting instructions to the Depository. Securities for which no voting
instructions have been received will not be eligible to vote.
Under Indian law, subject
to the presence in person at a shareholder meeting of persons holding equity shares representing a quorum, all resolutions proposed
to be approved at that meeting are voted on by a show of hands unless shareholders present in person and holding (a) not less than
one-tenth of the total voting power entitled to vote on a resolution or (b) shares with an aggregate paid up capital of at least
₹ 500,000 demand that a poll be taken. Equity shares not represented in person at the meeting, including equity shares underlying
ADSs for which a holder has provided voting instructions to the Depository, are not counted in a vote by show of hands. As a result,
only in the event that a shareholder present at the meeting demands that a poll be taken will the votes of ADS holders be counted.
Securities for which no voting instructions have been received will not be voted on a poll. Accordingly, you may not be able to
participate in all offerings, transactions or votes that are made available to holders of our equity shares.
As
a foreign private issuer, we are not subject to the SEC’s proxy rules, which regulate the form and content of solicitations
by United States-based issuers of proxies from their shareholders. To date, our practice has been to provide advance notice
to our ADS holders of all shareholder meetings and to solicit their vote on such matters through the Depository, and we expect
to continue this practice. The form of notice and proxy statement that we have been using does not include all of the information
that would be provided under the SEC’s proxy rules.
The market
price of our ADSs has been and may continue to be highly volatile. Many factors could cause the market price of our ADSs to rise
and fall. Some of these factors include:
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perception of the level of political and economic stability in India;
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actual or anticipated variations in our quarterly operating results;
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announcement of technological innovations;
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conditions or trends in the network/data services, Internet and electronic commerce industries;
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the competitive and pricing environment for network services in India and the related cost and availability of bandwidth;
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the perceived attractiveness of investment in Indian companies;
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acquisitions and alliances by us or others in the industry;
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changes in estimates of our performance or recommendations by financial analysts;
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market conditions in the industry and the economy as a whole;
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introduction of new services by us or our competitors;
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changes in the market valuations of other Internet service companies;
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announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
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our failure to integrate successfully our operations with those of any acquired companies;
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other events or factors, many of which are beyond our control.
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The
financial markets in the United States and other countries have experienced significant price and volume fluctuations, and the
market prices of technology companies, particularly Internet-related companies, have been and continue to be extremely volatile
with negative sentiment prevailing. Volatility in the price of our ADSs may be caused by factors outside of our control and may
be unrelated or disproportionate to our operating results, which may adversely affect the value of your investment and the price
of our ADSs.
An active
or liquid market for the ADSs is not assured.
We
cannot predict that an active, liquid public trading market for our ADSs will continue to exist. Although ADS holders are entitled
to withdraw the equity shares underlying the ADSs from the Depository at any time, there is no public market for our equity shares
in India or the United States. The loss of liquidity could increase the price volatility of our ADSs.
The future
sales of securities by us or existing shareholders may reduce the price of our ADSs.
Any
significant sales of our equity shares or ADSs or a perception that such sales may occur might reduce the price of our ADSs and
make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. We may
issue additional equity shares to raise capital and to fund acquisitions and investments, and the parties to any such future transactions
could also decide to sell them.
Capital
and credit market conditions may adversely affect our access to capital, the cost of capital, and ability to execute our business
plan.
Access
to capital markets is critical to our ability to operate. We may require additional financing in the future for the development
of our business. Declines and uncertainties in the global capital markets over the years have severely restricted raising
new capital and have affected companies’ ability to continue to expand or fund new projects. If these economic conditions
continue or become worse, our future cost of equity or debt capital and access to the capital markets could be adversely affected. Our
ability to obtain future financing will depend on, among other things, our financial condition and results of operations as well
as the condition of the capital markets or other credit markets at the time we seek financing. In addition, an inability to
access the capital markets on favourable terms due to our low stock price, or upon our delisting from the NASDAQ Capital Market
if we fail to satisfy a listing requirement, could affect our ability to execute our business plan as scheduled.
We
can give no assurance as to the availability of such additional capital or, if available, whether it would be on terms acceptable
to us. In addition, we may continue to seek capital through the public or private sale of securities, if market conditions are
favourable for doing so. If we are successful in raising additional funds through the issuance of equity securities, stockholders
will likely experience substantial dilution. If we are unable to enter into the necessary financing arrangements or sufficient
funds are not available on acceptable terms when required, either due to market fluctuations or regulations imposed by the Indian
Governmental authorities, we may not have sufficient liquidity and our business may be adversely affected.
We may be required to list our Equity
Shares on an Indian stock exchange. If we were to list our Equity Shares on an Indian stock exchange, conditions in the Indian
securities market may require compliance with new and changing regulations framed by Securities Exchange Board of India, listing
requirements of stock exchange, corporate governance, accounting and public disclosure requirements which might add uncertainty
to our compliance policies and increases our costs of compliance.
In 2006, The Ministry of Finance (MoF),
issued a press release by which Indian companies cannot raise new capital abroad unless, the securities of the company are listed
on a stock exchange in India. However, by virtue of notification issued by the MoF on October 21, 2014, the issuance of depository
receipts has been taken out of the 1993 Scheme and is now regulated by the Depository Receipts Scheme, 2014. The 2014 Scheme allows
Indian companies, whether listed or unlisted, to access the international capital markets using depository receipts. Such issuances
can either be through a public offering of depository receipts or through a preferential allotment or qualified institutional placement.
They can also either be sponsored by the issuer company or unsponsored (such as when an existing shareholder sells its holding
through the issue of depository receipts). These issuances are subject to the usual foreign investment regime, including in relation
to sectoral caps as well as pricing. Moreover, such issuances are permitted only to investors in certain specific jurisdictions
as listed in the 2014 Scheme, which currently consists of a list of 34 countries. The earlier condition of mandatory listing in
India is dispensed with.
However, in the future
we may be required by the Government of India to list on the Indian stock exchange. We may not be able to comply with any timeline
for listing and other standards imposed on us, and we are uncertain as to the consequences to us of any non-compliance. If we were
to list our equity shares on an Indian stock exchange, we would have to comply with changing laws, regulations and standards relating
to accounting, corporate governance and public disclosure, including the SEBI rules and regulations and stock exchange listing
requirements which may create uncertainty for companies like ours. These new or changed laws, regulations and standards may lack
specificity and are subject to varying interpretations. Their application in practice may evolve over time as new guidance is provided
by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs of
compliance as a result of ongoing revisions to such governance standards.
Risks Related to Investments in Indian
Companies
We
are incorporated in India, and a significant majority of our assets and employees are located in India. Consequently, our financial
performance and the market price of our ADSs will be affected by changes in exchange rates, interest rates, Government of India
policies, including taxation policies, as well as political, social and economic developments affecting India.
Changes
in the policies of the Government of India could delay the further liberalization of the Indian economy and adversely affect economic
conditions in India generally, which could impact our business and prospects.
Since
1991, successive Indian Governments have pursued policies of economic liberalization, including significantly relaxing restrictions
on the private sector. Nevertheless, the role of the Central and State Governments in the Indian economy as producers, consumers
and regulators has remained significant. The rate of economic liberalization could change, and specific laws and policies affecting
technology and telecom companies, foreign investment, exchange rate regime and other matters affecting investment in our securities
could change as well. A significant change in India's economic liberalization and deregulation policies could adversely affect
business and economic conditions in India generally, and our business in particular.
Regional
conflicts in South Asia could adversely affect the Indian economy, disrupt our operations and cause our business to suffer.
South
Asia has, from time to time, experienced instances of civil unrest and hostilities among neighbouring countries, including between
India and Pakistan. Military activity or terrorist attacks in the future could influence the Indian economy by disrupting communications
and making travel more difficult and such political tensions could create a greater perception that investments in Indian companies
involve higher degrees of risk. This, in turn, could have a material adverse effect on the market for securities of Indian companies,
including our equity shares and our ADSs, and the market for our services.
Terrorist
attacks or a war could adversely affect our business, results of operations and financial condition.
Terrorist
attacks, such as the attacks of July 25, 2008 in Bangalore, the attacks of November 26 to 29, 2008 in Mumbai, the attack at
New Delhi High Court on September 7, 2011 and other acts of violence have the potential to affect us or our clients. In addition,
such attacks may destabilize the economic and political situation in India. Furthermore, such attacks could cause a disruption
in the delivery of our services to our clients, and could have a negative impact on our business, personnel, assets and results
of operations, and could cause our clients or potential clients to choose other vendors for the services we provide. Terrorist
threats, attacks or war could make travel more difficult, may disrupt our ability to provide services to our clients and could
delay, postpone or cancel our clients' decisions to use our services.
The markets
in which we operate are subject to the risk of earthquakes, floods and other natural disasters.
Some
of the regions that we operate in, are prone to earthquakes, flooding and other natural disasters. In the event that any of our
business centers are affected by any such disasters, we may sustain damage to our operations and properties, suffer significant
financial losses and be unable to complete our client engagements in a timely manner, if at all. Further, in the event of a natural
disaster, we may also incur costs in redeploying personnel and property. In addition, if there is a major earthquake, flood or
other natural disaster in any of the locations in which a significant number of our customers are located, we face the risk that
our customers may incur losses, or sustained business interruption and/or loss which may materially impair their ability to continue
their purchase of products or services from us. A major earthquake, flood or other natural disaster in the markets in which we
operate could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We are subject
to foreign investment restrictions under Indian law that limit our ability to attract foreign investors which, together with the
lack of a public market for our equity shares, may adversely impact the value of our ADSs.
Currently,
there is no public trading market for our equity shares in India or elsewhere nor can we assure you that we will take steps to
develop one. Our equity securities are only traded on NASDAQ through the ADSs. Under prior Indian laws and regulations, our Depository
could not accept deposits of outstanding equity shares and issue ADRs evidencing ADSs representing such equity shares without prior
approval of the Government of India. The Reserve Bank of India has announced fungibility regulations permitting, under limited
circumstances, the conversion of ADSs to equity shares and the reconversion of equity shares to ADSs provided that the actual number
of ADSs outstanding after such reconversion is not greater than the original number of ADSs outstanding. If you elect to surrender
your ADSs and receive equity shares, you will not be able to trade those equity shares on any securities market and under present
law, likely will not be permitted to reconvert those equity shares to ADSs.
If in the
future a market for our equity shares is established in India or another market outside of the United States, those shares may
trade at a discount or premium to the ADSs. Under current Indian regulations and practice, the approval of the Reserve Bank of
India is not required for the sale of equity shares underlying ADSs by a non-resident Indian to a resident India as well as for
renunciation of rights to a resident of India, unless the sale of equity shares underlying the ADSs is through a recognized stock
exchange or in connection with the offer made under the regulations regarding takeovers. Since exchange controls still exist in
India, the Reserve Bank of India will approve the price at which the equity shares are transferred based on a specified formula,
and a higher price per share may not be permitted. Holders who seek to convert the rupee proceeds from a sale of equity shares
in India into foreign currency and repatriate that foreign currency from India will have to obtain Reserve Bank of India approval
for each transaction. We cannot assure you that any required approval from the Reserve Bank of India or any other government agency
can be obtained.
The Government
of India may change its regulation of our business or the terms of our license to provide Internet access services, Voice over
Internet Protocol (VoIP) and VPN services without our consent, and any such change could decrease our revenues and/or increase
our costs, which would adversely affect our operating results.
Our business is highly
regulated as per extant telecom policy of the Government of India (the “GOI”). Our ISP license issued in the year 1998
was valid for a term of 15 years. We have been issued new licenses under the Unified License dated June 2, 2014 with a validity
of 20 years. If we are unable to renew the licenses for any reason, we will not be able to carry on the said business beyond license
term, which may adversely affect our business or results of operations
The GOI has right to
revoke, terminate or suspend or take over entire operations for reasons such as national security or similar reasons without compensation
to us. In view of increasing cyber threats and attacks, the GOI may require telecom licensees (including ISPs) at their costs to
provide monitoring facility across its network, and facilities for capture and retention of data in terms of traffic flow, usage
details, etc. This would result in significant increase in costs and possible lesser usage due to perceived invasion of privacy
by customers.
Certain government
departments have been making queries whether use of Session Initiation Protocol, or SIP, terminal to make calls to phones abroad
is permissible within ISP license. We believe that such overseas phone calls are permitted, since, SIP terminal is a “computer”
as defined in Information Technology Act, 2000. We may have to make a significant investment as capital outlay in SIP terminals
to make it a PC-equivalent, if the government authorities issue regulations governing SIP usage contrary to our beliefs, which
would have a material effect on our results of operations.
Our profits may be impacted due to
the increase in license fee on the NLD/ILD license and inclusion of pure Internet service and non-licensed activities under such
license fee by the Department of Telecommunications, Government of India.
Effective
July 2012, the Government of India amended the NLD/ILD/ISP license agreements with respect to Annual License Fee.
Under such amendment,
all services under the NLD/ILD license have been subjected to an increased license fee from the existing 6% to 7% from July 2012
to March 2013 and 8% from April 2013 onwards. In addition, the Government has also amended the ISP license and brought the same
under such license fee of 7% from July 2012 till March 2013 and 8% from April 2013 onwards. Our present license for Unified License
ISP issued on June 2, 2014 provides for payment of License fee on pure
Internet services also. The Company had approached Honourable High Court of Madras (Court) by filing a writ petition prohibiting
Department of Telecommunications (DOT) from levying license fee on non-licensed activities.
Such
amendments to the license agreements will significantly impact the profitability of the Company by way of additional expense
due to increased license fees.
Increase
in license fees paid for the licensed spectrum to Department of Telecommunications (‘DoT’) may adversely affect our
cost and in turn our cash flow and profitability
DoT may increase
significantly the license fees to be paid for using the licensed spectrum. This will adversely affect our profitability. We cannot
assure you that there would not be any increases of license fees in the future.
In the event that the Government
of India or the Government of another country changes its tax policies in a manner that is adverse to us, our tax expense may materially
increase, reducing our profitability.
The
statutory corporate income tax rate in India was 30% during fiscal year 2018 and was subject to a 12% surcharge where the
taxable total income exceeds ₹ 10 crore (7% where the taxable total income is less than ₹ 10 crores but greater
than ₹ 1 crore), 2% education cess and 1% secondary and higher education cess, resulting in an effective tax rate of
34.61%. However for fiscal year 2019 the Government has proposed to replace the existing 3 per cent education cess with a 4
per cent 'Health and Education Cess' resulting in effective tax rate of 34.94%.
We
cannot assure you that the surcharge will be in effect for a limited period of time or that additional surcharges will not be implemented
by the Government of India. We may be subject to tax claims by the Government of India against us in the future. Defending these
claims would be expensive, time consuming and may divert our management's attention and resources from our operations.
Goods
and Services Tax has replaced the majority of the existing indirect tax regulations in India. The point of taxation has been
changed and also rates for our services were increased from 15% to 18%. Consequently the incremental costs will impact the
profitability and cash flow of the company. There may be future increases in tax rate that will impact our profitability and
cash flows adversely.
Item 4
.
Information on the Company
History and Development
We were incorporated
on December 12, 1995 in Andhra Pradesh, India as Satyam Infoway Private Limited, a Company under the Indian Companies Act, 1956
to develop and offer connectivity-based corporate services in India. Until December 2002, we were a majority-owned subsidiary of
Satyam Computer Services Limited, an Indian information technology Services Company traded on the New York Stock Exchange and the
principal Indian Stock Exchanges. We changed our name from Satyam Infoway Limited to Sify Limited in January 2003 and from Sify
Limited to Sify Technologies Limited in October 2007. We completed our initial public offering of ADSs in the United States in
October 1999. We listed our ADS on the NASDAQ Global Market on October 19, 1999. In February 2000, we completed our secondary offering
of ADS in the United States.
Sify Technologies (Singapore)
Pte. Ltd, Sify Technologies North America Corporation, Sify Data and Managed Services Limited and Sify Infinit Spaces Limited are
our wholly owned subsidiaries.
The address of our
principal executive office is TIDEL Park, 2nd Floor, 4, Rajiv Gandhi Salai, Taramani, Chennai 600 113 India, and our telephone
number is 91-44-2254-0770. Our agent for Investors Relations in the United States is Grayling Global, 101 Avenue of the Americas,
14th Floor, NY 10013, United States, phone +1-646-284-9400. Our website address is
www.sifytechnologies.com
and the information
contained in our website does not constitute a part of this Annual Report.
From December 1995
through 1997, we focused on the development and testing of our private data network. In 1997, we began forming strategic partnerships
with a number of leading technology and electronic commerce companies, including UUNet Technologies, in order to broaden our service
offerings to our corporate customers. In March 1998, we obtained network certification for conformity with Indian and international
network operating standards from the Technical Evaluation Committee of India. In April 1998, we began offering private network
services to businesses in India. Our initial services included electronic data interchange, e-mail and other messaging services,
virtual private networks and related customer support.
We started development
of
www.sify.com
, our online portal, and other related content sites for news, travel, finance, health and shopping with
the goal of offering a comprehensive suite of websites offering content specifically tailored to Indian interests worldwide.
On November 6, 1998,
the Indian Government opened the Internet service provider (ISP) market to private participation. Capitalizing on our existing
private data network, we launched our Internet service provider business, Sify
Online
(formerly known as Satyam
Online
),
on November 22, 1998 and became the first private national Internet service provider in India. We began offering Sify
Online
Internet access and related services to India’s consumer market as a complement to the network services offered to our
business customers. Our Sify
Online
service was the first in India to offer ready-to-use CD-ROMs enabling online registration
and immediate usage.
In March 2000, we launched
our network of public Internet cafés called
iways
to cater to the needs of Indians who do not have access to the
Internet. In September 2000, we commenced our hosting services from our India’s first concurrently maintainable Data Center
at Vashi, Mumbai to provide co-location and managed services to our clients. In June 2001, we obtained permission to provide wireless
connectivity on the 5.7 GHz spectrum from the Wireless Planning Commission. This enabled us to convert all our
iways
from
Integrated Services Digital Network, or ISDN, connectivity on the last mile to wireless connectivity. This technology also enabled
us to commence our high-speed/broadband access to homes, which began in March 2003. To enable quicker access to homes, we developed
a model of partnering with Cable Television Operators, or CTOs, who already interface with households for providing cable television
facilities to millions of households in India.
In April 2002, ISP’s
were permitted to provide restricted VoIP limited to outbound calls to International destinations and personal computer to personal
computer calls in India. We started providing this service through our network of cybercafés, and later on through VoIP
booths located in large commercial areas and corporate office complexes across major cities in India.
From the time we launched
our corporate services in 1997, we have continually upgraded our technology to provide data services to corporate clients. We were
the first Internet service provider in India to make our entire network IP-based and subsequently Multi-Protocol Label Switching
(MPLS)-enabled, which permitted us to continue to grow our corporate customer base. As of March 31, 2018, we provide services to
over 8,500 corporate clients in industries ranging from information technology, manufacturing, banking and financial services industry,
pharmaceuticals, retail distribution and the Government.
Initial Public Offering
and Subsequent Financing Transactions
In October 1999, we
completed our initial public offering on the NASDAQ National Market and issued 4,801,250 ADSs at a price of $18.00 per ADS. We
received proceeds of approximately $79.2 million, net of underwriting discounts, commissions and other offering costs. In connection
with our initial public offering, we received the benefit of exemptions from the NASDAQ corporate governance rules relating to
shareholder meeting quorum, solicitation of proxies and shareholder approval for issue of shares other than in a public offering
under NASDAQ rules. We will continue to avail of the exemptions from the NASDAQ corporate governance rules.
In February 2000, we
completed a secondary offering and issued 467,175 ADSs at a price of $320.00 per ADS. We received proceeds of approximately $141.2
million, net of underwriting discounts, commissions and other costs.
In October 2002, we
agreed to sell an aggregate of 7,558,140 ADSs to SAIF for consideration of $13.0 million and to sell an aggregate of 2,034,883
equity shares to VentureTech for consideration of $3.5 million. This transaction was approved by our shareholders at our Extraordinary
General Meeting held on December 9, 2002. In December 2002, we completed the sale of the ADSs to SAIF and the sale of 2,034,883
equity shares to VentureTech. In April 2003, we sold an additional 1,017,442 equity shares to VentureTech. In July 2003, we sold
an additional 1,017,441 ADSs to an affiliate of Venture Tech.
On November 10, 2005,
Infinity Capital Ventures, LP (“Infinity Capital”) acquired 11,182,600 ADS of our Company from Satyam Computer Services
Limited (“Satyam”) for US $5.60 per share in cash through a Sponsored ADR Programme arranged by the Company. The total
purchase price for the Satyam shares was approximately US $62.6 million.
In a separate transaction,
also on November 10, 2005, Infinity Capital entered into a Subscription Agreement with us pursuant to which, upon the terms and
subject to the conditions set forth therein, Infinity Capital agreed to purchase from us approximately 6.7 million newly-issued
equity shares or ADSs at a purchase price of US $5.60 per share in cash. The total purchase price for the newly issued shares was
approximately US $37.5 million. This transaction was approved by our shareholders at our Extraordinary General Meeting held on
December 23, 2005. In January 2006, we completed the transaction. Also on November 10, 2005, Sify, Infinity Capital and Mr. Raju
Vegesna entered into a Standstill Agreement pursuant to which, upon the terms and subject to the conditions set forth therein,
Infinity Capital agreed not to purchase more than 45% of our fully diluted equity. The Board of Directors waived the above clause
in the standstill agreement passed through a Board resolution dated January 22, 2008.
Following the transactions,
Mr. Raju Vegesna of Infinity Capital was appointed as the Chairman of our Board of Directors. Mr. P. S. Raju was the second nominee
of Infinity Capital to our Board of Directors.
On March 24, 2008,
the Company entered into a Subscription Agreement with Infinity Satcom Universal Private Limited (Infinity Satcom Universal), a
private limited Company in India which is controlled by Ananda Raju Vegesna and brother of Raju Vegesna, CEO, Chairman and Managing
Director, for issuance of 12,817,000 Equity Shares of the Company with face value of
₹
10/- per share at a premium of
₹
165/-. It was approved by
the Company’s shareholders at the Extraordinary General Meeting held on March 17, 2008.
On March 24, 2008,
we received a sum of
₹
112.14 million (comprising of
₹
12.81 million towards face value and
₹
99.33 million towards
securities premium). Subsequently, Infinity Satcom Universal communicated to the Company that they would focus their attention
on the business of Sify Communication Limited (erstwhile subsidiary) and hence shall not contribute the balance money towards the
subscription of 12,817,000 Equity Shares on call. On August 29, 2008, the Board of Directors, forfeited the shares allotted and
the application monies collected (
₹
112.14 million including
sums towards capital and premium).
On October 30, 2010,
we consummated the issuance and sale of 125,000,000 of our equity shares in a private placement to Raju Vegesna Infotech and Industries
Private Limited, our promoter group, and an entity affiliated with our CEO, Managing Director and Chairman, Mr Raju Vegesna. See
note 37 in the notes to the financial statements in this Annual Report.
Acquisition of Minority
Interest in Subsidiary
In January 2008, our
Board of Directors of Sify approved the merger of our subsidiary, Sify Communications Limited (“Sify Comm”) with our
Company. The Boards of each of Sify and Sify Comm determined that a merger would produce cost savings efficiencies and as a combined
entity, benefit all shareholders. The Board then submitted the proposed merger to the shareholders and to the High Court of Madras
for approval. In August 2008, while approval for the merger was pending, the Indian Government proposed new regulations regarding
the delivery of Internet services and was expected to announce changes to the policy governing the spectrum for the delivery of
wireless data. The Board reviewed these regulatory changes and determined that it would be in the best interest of each Company
to remain as separate entities, as opposed to combining the entities as contemplated by the proposed merger. The Company submitted
a petition to the High Court of Madras to withdraw the merger, and such petition was approved.
In October 2008, the
Company again evaluated the feasibility of a merger between Sify and Sify Comm and the Board of Directors of the Company at their
meeting held on November 24, 2008 approved the merger of Sify Comm with retrospective effect from April 1, 2008, subject to approval
by the Shareholders, the Honourable High Court and other statutory authorities. The Board considered the deterioration of the Indian
and global economy, and its effect on the Company’s performance during the first half of fiscal 2009 as well as the impact
of a prolonged economic downturn on the Company during the third and fourth 2009 fiscal quarters. The Board evaluated these issues
and determined that a combined entity would provide cost savings and increased cash flow, and strengthen the Company’s ability
to borrow additional funds, if necessary. Accordingly, the Board of Sify determined that the merger should again proceed and sought
shareholder approval, and submitted the merger to the High Court of Madras for approval. The Honourable High Court approved the
merger on 26th June, 2009. In connection with such merger the Company has issued 10.53 million equity shares to Infinity Satcom
Universal Private Limited, a 26% stake holder in the erstwhile Sify Communications Limited prior to merger.
On July 15, 2009, Infinity
Satcom Universal Private Limited has acquired 4,000,000 shares of the Company from Infinity Capital LP, USA in a private transaction.
Principal Capital Expenditures
In fiscal years 2018, 2017 and 2016, we
spent
₹
1,475 million (US$ 22.67 million),
₹
1,940 million (US$ 29.92 million) and
₹
2,811 million (US$
43.35 million) respectively, on capital expenditures of which
₹
0.31 million (US$ 0.004 million),
₹
1 million (US$
0.02 million) and
₹
4 million (US$ 0.06 million) were incurred
in North America in fiscal years 2018, 2017 and 2016 respectively.
₹
2.19 million (US$ 0.34 million) were incurred in Singapore in fiscal years 2018. The remaining amounts were incurred in India.
As of March 31, 2018, we had contractual commitments of approximately
₹
1,033 million (US $15.88 million) for capital expenditures towards the acquisition of property, plant and equipment. These commitments
included approximately
₹
784 million (US $ 12.06 million)
in domestic purchases and
₹
248 million (US $ 3.82 million)
in imports and overseas commitments for products and spares. The total capital expenditure with respect to capital work in progress
as on March 31, 2018 amounted to ₹ 1,228 million (US$ 18.88 million). All our capital expenditures were financed out of cash
generated from operations, equity infusion, finance leases and borrowings from banks.
Investment Strategy
In evaluating investment
opportunities, we consider important factors, such as strategic fit, competitive advantage and financial benefit, through a formal
net present value evaluation.
Sify Software Limited (formerly Sify
Networks Private Limited)
In March 2004, we acquired
E Alcatraz Consulting Private Limited, a Company engaged in the business of providing security services to corporate customers,
for a consideration of
₹
32.7 million.
During October 2009,
Sify Technologies transferred eLearning, Software Development and other related businesses, which are non-telecom businesses, to
the subsidiary Company for a consideration of
₹
450 million,
which was discharged by way of issue of 4.5 million ordinary shares in Sify Software Limited. Consequently, the name of E Alcatraz
Consulting Private Limited was changed to Sify Software Limited in order to reflect the activities relating to Software Development
business.
Due to continuous losses
and the consequent erosion of the net worth, Sify Software Limited was merged with Sify Technologies Limited effective April 1,
2013.
Globe Travels, USA.
In April 2006, we acquired
Globe Travels, USA engaged in the business of selling online airline tickets in the U.S. with a special focus on the U.S.-India
sector along with its Indian arm for a consideration of US $2.50 million, apart from 125,000 stock options and some conditional
earn out payments. On account of continued decline in business, the company has ceased its travel business operations.
Due to the decline
in business travels on account of the global economic environment, the company tested impairment for goodwill and intangibles,
and recorded impairment charges of
₹
1,857,
₹
47,269 and
₹
15,200 (thousand) during the years 2010-11,
2009-10 and 2008-09 respectively.
India World Communication Limited
India World Communications
Limited filed an application with the Registrar of Companies (ROC), Tamil Nadu in 2008 for the winding up of its business under
section 560 of the Indian Companies Act, 1956. The Registrar had struck off its name from the register. Since then, India World
Communications Limited ceased to exist from the date of order of the ROC.
Sify Technologies (Singapore) Pte Ltd
Sify Technologies (Singapore)
Pte Ltd incorporated in Singapore as a wholly owned subsidiary of Sify Technologies Limited to pursue the business of Information
Technology Enabled Services, Sourcing and Selling of Networking Equipment and IT Software and Software Consultancy Services. During
fiscal 2016 further investment of US $ 500,000 was made in the equity shares of subsidiary.
Sify International Inc
Sify International
Inc incorporated in the United States of America (US) was a wholly owned subsidiary of Sify. On July 18, 2012, the Company filed
a Certificate of Dissolution with Secretary of the State, State of California, USA for winding up and dissolving the wholly owned
subsidiary in US. The company has since received the dissolution certificate.
Hermit Projects Private Limited and
Pace Info Com Park Private Limited
In November 2011, we
acquired Hermit Projects Private Limited (HERMIT) for the implementation of a state-of-art Data Center Project at Noida, U.P, along
with its wholly owned subsidiary Pace Info Com Park Private Limited (PACE), the original allottee of the land at Noida, U.P. for
a consideration of
₹
1,140 million. As HERMIT was acquired
only as a Special Purpose Vehicle for acquiring PACE, HERMIT merged with Sify Technologies Limited, the holding Company effective
April 1, 2013.
Effective April 1, 2014, PACE was merged
with the holding company, Sify Technologies Limited. We are in the process of obtaining the requisite approval for incorporating
the name change from PACE to Sify in the statutory records maintained by the Government with respect to land located at Noida.
Sify Empower India Foundation
Sify Empower India
Foundation (SEIF) was incorporated as a non-profit organisation in November 2010 to carry on the activity of promoting employability,
education, financial inclusion and healthcare for urban and rural consumers through the innovative use of ICT in an integrated
and sustainable manner.
Initially, the Company
had a 10% holding in SEIF and acquired an additional 89.80% in October 2012.
Due to changes in the
Company’s business model, SEIF had not started its commercial activities and hence, SEIF was closed in 2014 by filing the
necessary application with the statutory authorities.
Sify Technologies North America Corporation
Sify Technologies North
America Corporation was incorporated in the State of Delaware, USA on May 7, 2014 as a wholly owned subsidiary of Sify Technologies
Limited to pursue the overseas market for eLearning and Infrastructure Managed Services in the US region.
Sify Data and Managed Services Limited
Sify Data and Managed
Services Limited was Incorporated on March 16, 2017 as a wholly owned subsidiary of Sify Technologies Limited, to carry on Data
Center centric IT service business. During the year 2017, the Company has invested
₹
250
million in the Subsidiary.
Sify Infinit Spaces Limited
Sify Infinit Spaces
Limited was incorporated on November 20, 2017 as a wholly owned subsidiary company of Sify Technologies Limited, to carry on Data
Center centric IT service business. During the fiscal year 2018, the Company has invested
₹
50
million in the subsidiary.
Business Overview
We are among the largest integrated ICT
Solutions and Services companies in India, offering end-to-end solutions with a comprehensive range of products delivered over
a common telecom data network infrastructure reaching more than 1550 cities and towns in India. This telecom network also connects
45 Data Centers across India including Sify’s 6 concurrently maintainable Data Centers across the cities of Chennai, Mumbai,
Delhi and Bengaluru and customer Data Centers.
In late 2012, we reorganised our business
to enable scale, flexibility and the ability to cross pollinate our business across multiple verticals. The focus of the business
shifted to Solutions and Services from a hitherto infrastructure focus. This, we call Sify 3.0.
Post the re- organization along service
lines, a significant part of our revenue is derived from services to enterprise customers, comprising Telecom services, Data Center
services, Cloud and Managed services, Applications Integration services and Technology Integration services. Sify also provides
services that cater to the burgeoning demands of the small and medium business (SMB) community, much of it on its Cloud services
platform.
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a)
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Telecom-centric services
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The Core service in
the portfolio is the Telecom Services which is also among the most matured, tracing its legacy back to earlier years as India’s
first Private Internet Service Provider. The slower pace of use of private computers led a midway diverge to build networks that
could be used by large Enterprises for their business needs. The early start has helped us to leverage the market potential; we
are today India’s leading network provider offering the highest wireless endpoints and an equal number of wired terminations.
Forecasting the explosive
growth that the telecom market will see, we were the first in the country to offer an IPv6 ready network; a fact underscored by
the Telecom policy of 2012. This network reaches more than 1550 towns and cities and gives a prospect of more than 3000 points
of presence.
The focus of the Telecom Services is on
the following lines:-
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§
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India Data Business
– Addressing the Data Communication needs of Large and Emerging Enterprises in India across each of their distributed points of business. We do this by leveraging our network span across 1550 towns and cities.
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§
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Global Network Business
– Addressing the connectivity needs of Enterprises and Carriers to connect in and out of India. Our partnerships with multiple international carriers provides for a seamless integration into and out of the India network.
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§
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Wholesale Voice
– Addressing the ‘India termination’ and several other countries for Hubbing. Our cable landing station is our strategic investment to address this business need and currently facilitates three international cables servicing the Middle East and a majority of Europe. Investments into strategic global assets will continue to address the opportunity in-and-out India
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§
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Retail Voice
– The company offers services
in the retail voice market in partnership with International players.
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b)
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Data Center-centric IT services
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We are among the earliest to invest in
the Data Center landscape in the country with our first Data Center in Vashi, Mumbai in the year 2000. Even in the early days of
the IT revolutions, we set very high benchmarks with each of our subsequent Data Center. We currently have 6 concurrently maintainable
Data Centers across various geographical locations in India. This business offers services such as co-location, regular backup,
server load balancing, remote backup; Managed Services like Messaging, shared Hosting, network and security; Storage and Virtualization
and Managed Voice services to all resident Enterprises.
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(ii)
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Cloud and Managed services
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The Data explosion witnessed by the country
opened up many opportunities and challenges. This has driven Indian Enterprises towards asset light solutions aiming at lower Total
Cost of Ownership (TCO). Foremost among them were for Managed Services, Data Security and cloud services. Cloud services was a
product of the market demand from Enterprises who sought to de-focus themselves from operating cumbersome IT infrastructure and
moving towards an Opex based computing practice. Today, this practice follows both a collaborative and standalone approach offering
Cloud services from industry leaders like HP and VMware, and also through home grown solutions.
This business provides On-Demand, anywhere,
Flexible, Multi-tenant and Dedicated storage solutions, Public, Private and Hybrid cloud platforms and IaaS, Paas and DR as services.
We are also the only company offering Cloud Delivery solutions on a home grown tool with an objective of reducing the TCO offering
value to customers, on a completely automated platform called Cloudinfinit.
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(iii)
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Technology Integration services
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Strategic investment of time and focus
over a decade to build India’s premier ICT network has resulted in an admirable knowledge base of products and technologies.
With Sify 3.0, we chose to package this into a knowledge offering to the market and thus, emergence of Technology Integration services.
Technology Integration Services (TIS) combines Sify’s IT capabilities with its core telecom and Data Center products to provide
a converged turn-key ICT solution to the customer.
TIS leverages Sify’s home-grown expertise
in design, implementation and maintenance to deliver end- to-end managed IT services across Data Centers, network and security.
Major focus is as follows:
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•
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Service Desks and Command Centers
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•
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Voice and Video Conferencing
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•
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Unified Communication and Unified Access
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•
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Campus/LAN/Data Center Networking
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•
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Enterprise and End Point Security
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(iv)
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Applications Integration services
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Aligning to the market opportunity and
expectation from our customers on high end value chain services, Sify’s in house team of application developers have designed
and developed a full suite of applications to ride on top of our network infrastructure. Some of these have been trailblazers like
the Supply Chain management application, Forum and the online assessment tool, iTest. We had invested early on, in the sunrise
business eLearning recognizing the demand of Enterprises to take forward a uniform training platform to all branches and subsidiaries.
Today, this business caters to various
verticals with offerings like Talent management, and automated platform that enables multi city, multiple point recruitments and
test platform, Sales and Distribution platform, eLearning platform primarily for Enterprises outside of India for local and Internet
based training, Web solutions like portals and also in industry standard applications like SAP, Oracle and Microsoft.
Industry Overview
The last decade was significant in the
IT industry landscape because of several reasons. First was the galloping rate at which IT infrastructure grew along with mobile
penetration. Second was the emergence of convergence technology and smartphones becoming the
defacto
norm. The third was
the network penetration into the hinterland thereby mitigating the connectivity issues and paring the technology landscape. Importantly,
the recognition of IT as an infrastructure industry, thus helping in access to power and much needed capital investments.
In the process, India saw the sprouting
of a new breed of business, one that viewed IT more as a productive tool that enhanced their business capability while simultaneously
lowering their TCO. These businesses set in motion the dual benefits of affordable IT and serviceable IT, thus leading it to being
delivered in scalable, flexible and location-agnostic formats.
Today, both network and device convergence
has become a necessity in order to reduce the complexity of multiple technology or networks and also because of the increased use
of server virtualization technology. Network convergence along with virtualization of the server, network and storage infrastructure
are driving the next generation Data Center towards cloud based service model.
But the Cloud requires a viable eco-system
to thrive. An eco-system that we have been steadily building for two decades for our clients. We have strategized these offerings
in the form of Sify 3.0, Sify’s third phase of growth. The focus shifted from Capex intensive infrastructure to offering
our Solutions and Services as much as on pay per use model. In order to achieve our Sify 3.0 objective and market orientation,
we have restructured ourselves into five business lines of Telecom Services, Data Center services, Cloud and Managed Services,
Technology Integration Services and Applications Integration Services.
Sify Business Model
Drawing from the Company’s Vision
statement, we endeavour to provide the entire eco-system of ICT services. In doing so, we have to accede to the demands of both
the traditional Telecom and IT services markets.
The first few years of growth of the IT
and Telecom industries were driven primarily in garnering maximum market share and an enviable roster of blue chip clients. With
changing dynamics and demands of the market, the two industries have to find a middle ground to retain and expand the market. It
was the time of convergence and the perfect fertile ground for our services.
Until 2012, our primary strategy was to
invest in infrastructure and being ready before the market cycle demanded our services. Once we attained critical mass, we shifted
focus to packaging our products and practices as tangible offerings to the market.
In Sify 3.0, we have restructured our business
segments into 5 distinct lines of business in two broad categories,
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1)
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Telecom centric services
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2)
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Data Center centric IT services
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Telecom centric services
Having invested heavily in building among
India’s best last mile network services, it was time to scale the utilization through cross alignment with traditional telecom
players who were looking to expand our markets to Tier II and Tier III cities and towns and also to IT players who wished to leverage
the cost benefits of relocating to Tier II towns.
We do this by leveraging our state-of-the
art last mile wireless connectivity and the dense spread of network. Enterprise customers who seek to utilise the network have
the choice of being connected to the DC of their choice or any one of our concurrently maintainable Data Centers. Today, this multi-mode,
multi-mesh network connects 45 of India’s DCs
Our network, reaches 1550 cities and towns
with more than 3000 Points of Presence and 100,000+ links, thus making us the largest MPLS network in India.
Data Center centric IT services
Right from our first Data Center at Vashi,
Mumbai in 2000, we have invested in the top of the line technologies across all our networks with every new Data Center taking
the game forward. The Sify SDA (Sify Data Center Architecture) 4.0 is an IP that has found acceptance in the several Data Centers
that we have built for our customers.
These DCs also offer a multitude of Value
Added services over the traditional notion of basic collocation and Opex driven storage solutions. With approximately 0.2 million
square feet coverage today including the new Data Centers, we are among the largest to offer Data Center space in the market.
|
b)
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Cloud and Managed services
|
The last few years saw the emergence of
Cloud or virtual storage as a tangible product offering. Several Emerging Enterprises saw the benefits of buying-space-as-you-go
as against investing in Capex loaded infrastructure. The advent of this business was the quality of high class networks and promise
to remotely store your data immaterial of where it was connected from and plugging into it when the enterprises chose to. This
eliminated the need for cumbersome server monitoring and the associated cost of ownership.
In order to offer the best-of-breed services,
we chose to work with the leaders in the business like HP and VMware. Our hosting services are also SAP Gold certified giving the
much needed SLAs to our customers about the level of our offerings.
|
c)
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Technology Integration services
|
Sify offers turnkey
solutions to clients who are new to both technology and technology refreshes. We do this by leveraging our home-grown expertise
in design, implementation and maintenance to deliver end-to-end managed IT services across datacenters, network and security.
As described, this business takes the knowledge
developed from building Network architecture, Unified Communication and Unified Access, Collaborative tools, Data Center build,
Virtualization, LAN and WAN Architecture and End Point Security and offers them as a complete solution package to customers.
|
d)
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Applications Integration services
|
As with every industry major who chose
to offer IT and managed services, Applications were also demanded by several of our clients. While we chose not to be a core Software
player, we do enable the integration of multiple technologies and platforms and the cross breeding of existing ones.
This way, the clients can slowly transition
the maturity cycle with their existing application before switching over to newer ones. That said on our services, some of our
home grown applications, like Forum and iTest have found favour with a large number of our clientele.
We are looking to strengthen our bouquet
of offerings in the years to come.
Strategy
Our vision statement is explicit on our
strategy.
We are building a world in which our
converged ICT eco-system and our bring-it-on attitude will be the competitive advantage to our customers.
To build a converged ICT eco-system calls
for a multidisciplinary approach. While maintaining the tempo of investment in infrastructure, we will, in parallel, strengthen
our current offerings of services. The description below provides an explanation on this approach.
•
Cover
more of the country with our network, increase the bandwidth support and drive more customer usage.
Our network is based on
Internet Protocol, or IP, and we are the first Indian service provider to have made our network Multi-Protocol Label Switching
(MPLS) compliant. We are also the first IPv6 ready network having laid it down as early as 2000. In the fiscal year 2013-14, we
implemented the proprietary CloudCover to connect Data Centers across India with a multi-mode, multi-mesh network. This builds
redundancy at multiple levels across the network. This network connects 45 of India’s Data Centers including 6 of our own.
To ensure undisrupted high quality service and to achieve cost efficiencies, we have invested in an undersea cable consortium.
The capacity went live during the Q1 of 2012-13. We have further increased the capacity during the fiscal 2016. We have also leased
intercity links from multiple suppliers including BSNL, Bharti Airtel, TATA, Railtel and Power Grid Corporation, such that each
one of our nodes is accessible from at least two other nodes, if not by two long distance operators. We believe that as the size
and capacity of our network infrastructure grows, its structure and national coverage will create economies of scale. Being vendor
neutral, we are able to procure bandwidth in a cost effective manner.
•
Increase
penetration in our existing markets by expanding awareness of the “Sify” brand name to capitalize on our first mover
advantage in India.
Over time, Sify as a brand has expanded its offerings from the retail broadband segment to the Enterprise
buyer in India. But as with every brand’s birth, our first offerings gave us the identity as India’s most aggressive
Internet player. We built on those strengths and with time, have built a complete ecosystem of Enterprise offerings.
•
Create
pull with newer more efficient technology and hence draw more customers into the Sify fold.
In order to transition to being
an Enterprise player, we began by expanding our bouquet of services in line with market demand. A nascent retail broadband gave
rise to data storage and hence our first Data Center was born at Vashi Mumbai in 2000. As a brand, we have consciously aligned
with the best-of-breed technology and benchmarks. Our managed services bouquet has been a mix of home grown applications and offerings
through tie ups with industry leaders like HP, VMware, Akamai, SAP etc.
•
Expand
the bouquet of services and cater to an audience that does not mind paying a premium and hence realise better margins.
As competition
heats up in the IT and Telecom sector, there will be a squeeze on our margins for the traditional offerings. Hence it is imperative
to create a segment of premium paying customers who see value in the differential on their services. We will also continuously
expand our service offerings and expand into a broader geographical domain. We actively spread to Tier II and III cities much before
we had customers there. This helped us to demonstrate a robust working model of our services in geographically challenged places
as and when the demand arose.
•
Expand
our customer distribution channels through strategic alliances to take advantage of the sales and marketing capabilities of our
strategic partners.
Each of our business delivers a certain level of legitimacy when aligned with the industry leaders. Most
MNCs see this as a comfort factor and a reassurance of global standards that they have enjoyed. So, whether it is Telecom business
aligning with international carriers, our DC business being the best of the global standards, our Managed services having tied
up with leaders like HP, VMware, SAP, Hitachi etc or Applications Integration services or our content delivery assurance with Akamai
under our Technology Integration services ambit, the assurance is the same; global standards, local deliverance. On the delivery
front, this doubles our marketing strength while allowing for a cross selling of products and services to both the partner’s
audiences.
•
Pursue
selective strategic investments, alliances and acquisitions to expand our customer base, increase utilization of our network and
add new technologies to our service mix.
India's financial nerve center, Mumbai has long been a focus of our expansion plans
given the concentration of Enterprise players. That, along with a stable administration and power supply, well developed suburbs,
and a native market was responsible for us launching our 6th concurrently maintainable DC at Rabale, near Navi Mumbai. All along,
we have invested ahead of the demand curve across all our services. That said, the focus has also been to add value by partnering
with the best of breed technology companies. Towards that, our hosting services are now SAP certified giving us the much needed
fillip to pitch it to discerning Enterprise customers. Content delivery for Enterprise customers was underlined with our partnership
with the world leaders, Akamai. We will continue to pursue opportunities to grow both organically and inorganically, in our endeavor
to spread into newer geographies.
•
Expand
into international markets for providing managed network services.
We are now at a crucial phase in our growth. Over the years,
we have built a substantial knowledge house of services and they are ready to be delivered to clients beyond India’s borders.
We are actively pursuing an agenda of tying up with international IT majors and taking these strengths to customer worldwide, starting
with North America. Our in-house IP services like eLearning are already being offered to multiple geographies in the US and Europe.
Service Offerings
Telecom Service:
These primarily consist of network service which addresses the domestic connectivity needs of Indian enterprises and international
inward and outward connectivity needs of International Enterprises. We do this by leveraging our national Tier 1 IPv6 network infrastructure.
The services include a comprehensive range of Internet protocol based Virtual Private Network, offerings, including intranets,
extranets and remote access applications to both small and large corporate customers. There is a strong focus on industry verticals
such as IT/ITES (IT enabled services), banking and financial services industry (BFSI), Government, manufacturing, pharmaceutical
and FMCG. We were one of the first service providers in India to provide MPLS-enabled IPVPN’s on our entire network. We have
entered into a strategic partnership with leading Telcos for providing last mile connectivity to customers. Our entire network
is MPLS enabled with built in redundancy with world class design and service standards. We have built a stack of managed services
for our network customers, like Managed WLAN, Managed DDoS and security solutions. We have built a carrier neutral internet exchange
in India in partnership with Amsterdam Internet Exchange.
Our cable landing
station and our investment in a submarine cable consortium are our other assets that we extend to our International partners for
their international inward and outward connectivity needs. Our cable landing station currently lands 2 major submarine cables;
namely Gulf Bridge International (GBI) and the Middle Eastern and North African cable (MENA).
Our
connectivity clients can pick from a range of services; namely the following.
|
·
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SecureConnect
(TM)
is our comprehensive offering of secure, reliable and scalable IPVPN solutions that meet both mission- critical data networking and converged voice, video and data connectivity needs. It offers a variety of intranet and extranet configurations for connecting offices, remote sites, traveling employees and business partners, whether in India or abroad. Our platform of services includes:
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·
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SiteConnect
(TM)
which offers site-to-site managed MPLS-enabled IPVPN solutions for securely connecting regional and large branch offices within India to the corporate Intranet.
|
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·
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GlobalSite Connect
(TM)
, an international site-to-site managed MPLS-enabled IPVPN solution, is used for securely connecting international branch offices to the corporate offices. It provides connectivity anywhere in the world through Sify’s alliances and partnerships with global overseas service providers such as Level 3, KDDI, and PCCW Global to name a few.
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·
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ExpressConnect
(TM)
, which offers a premium range of high-performance Internet bandwidth solutions for connecting regional offices, branch offices and remote locations to the corporate network. These solutions complement our SiteConnect range of MPLS enabled IPVPN solutions, provide high-speed bandwidth in those situations where basic connectivity and cost are the top concerns.
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·
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RoamConnect
(TM),
is our national and international remote access VPN, which is used for securely connecting employees, while they are traveling, to the corporate intranet. Roam Connect features “single number access” to SifyNet from anywhere in the country and provides access from anywhere in the world through Sify’s alliances with overseas service providers.
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·
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PartnerConnect
(TM)
is our remote access VPN offering, for providing secure and restricted dial-up access to business partners such as dealers, distributors and suppliers to the corporate extranet.
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·
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CleanConnect
(TM)
which
provides managed and secured internet connectivity to customers.
|
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·
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Managed DDoS which offers protection from DDoS attack to corporate customers.
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·
|
Managed WLAN provides Managed Wi-Fi solutions offering connect devices to the network of the customer and the internet at customer locations.
|
Data
Center Services
. We operate 6 concurrently maintainable Data Centers of which three are located in Mumbai (Bombay), one each
at Noida (UP), Chennai (Madras) and Bengaluru, which are designed to act as reliable, secure and scalable facilities to host mission-critical
applications. We offer co-location services which allow customers to bring in their own rack-mountable servers and house them in
shared racks or hire complete racks, and even rent ‘secure cages’ at the hosting facility as per their application
requirements. We also offer a wide variety of managed hosting services, such as storage, back-up and restoration, performance monitoring
and reporting hardware and software procurement and configuration and network configuration.
Cloud
and Managed Services.
Our on-demand hosting (cloud) services offers end-customers with the best in class solutions to
Enterprises. We have joined the global program of two world majors and offer their suite of on-demand cloud services giving them
the option to “rent” software licenses on a monthly “pay as you go” basis. This model is aimed at helping
Indian companies, both large and small, to safely tap computing capacity inside and outside their firewalls to help ensure quality
of service for any application they want to run.
Our
Remote and Onsite Infrastructure Managed services provides continuous proactive management and support of customer operating systems,
applications and database layers through deploying specialized monitoring tools and infrastructure experts to ensure that our customers’
infrastructure is performing optimally.
Our
innovative SLA driven utility-based On-Demand storage service manages the complete lifecycle of enterprise information, from its
inception to its final disposal. The fully managed, utility based, On-Demand, scalable storage platform is powered by global major
in Data Systems. Sify's On-Demand storage service reduces the complexities of deploying and managing multiple storage tiers, and
lowers operational costs by automating management with flexible need based pricing.
Technology
Integration services:
Our myriad mix of solutions gives us the scope to band and extend any or all of these services in
multiple formats and scales for client who wish to rest their entire infrastructure with us. Clients get the benefit of our accumulated
knowledge base and technical expertise across all points of the ICT spectrum. In terms of cost, these translate into better cost
efficiencies. In terms of monitoring, the client interacts with a singular service provider saving them both implementation and
documentation efforts.
Our
suite of conferencing tools consist of Audio and Video solutions; most differentiating among being that the video solution in partnership
with a world leader, does not require a room conferencing solution thereby arming the modern enterprise with real time data straight
from the markets.
Applications
Integration services:
Our range of web-applications include sales force automation, supply chain management, workflow engine
and knowledge management systems.
Our Applications
Integration services operates two of India’s biggest online portals, www.sify.com and www.samachar.com, that function
as principal entry points and gateway for accessing the Internet by providing useful web-related services and links. We also offer
related content sites specifically tailored to Indian interests worldwide.
Sify.com
provides a gateway to the Internet by offering communication and search tools such as travel, online portfolio management and channels
for personal finance, astrology, lifestyle, shopping, movies, sports and news. We have also launched mobile applications to offer
the below-mentioned services on the mobile.
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·
|
The finance channel of Sify
http://sify.com/finance/
covers the entire spectrum of equity markets, business news, insurance, mutual funds, loans, SME news and a host of paid and free financial services.
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·
|
The sports channel
http://sify.com/sports/
covers the entire gamut of Indian and international sports with special focus on cricket.
|
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·
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The food channel
www.bawarchi.com
focuses on
Indian recipes and cooking and is especially popular among non-resident Indians (NRIs) audiences with over 90% of its content
being user generated
|
|
·
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Our NRI news portal,
www.samachar.com
focuses on Indian news and allows NRIs to stay connected to India by aggregating news from across all popular newspapers and other news portals. This portal provides a range of news in English and five Indian languages. Apart from Samachar we have another India targeted news channel
http://sify.com/news
which offers national and international general, political and offbeat news.
|
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·
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Movies channel on Sify
http://sify.com/movies
is one of the key channels which offer updates from Bollywood/ Hollywood and all regional film industries. The content includes movie reviews, industry news, video galleries, photo galleries, downloads (photos) etc.
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|
·
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Games channel of Sify
http://games.sify.com
offers multiple scoring and non-scoring games. Games include cricketing games, racing games, football specific games.
|
We
offer value-added services to organizations such as website design, development, content management, Online assessment tools, search
engine optimization, including domain name management, secure socket layer (SSL) certificate for websites, and server space in
required operating system and database. We provide state of the art messaging and collaboration services and solutions such as
e-mail servers, LAN mail solutions, anti-spam appliances, bulk mail services, instant messaging, and also offer solutions and services
to enable data & access security over the Internet. We also provide infrastructure-based services on demand, including on-line
testing engine and network management. On-line testing services include test management software, required servers and proctored
examination facilities at Sify’s franchisee points. On-line exam engine offered allows a secure and flexible way of conducting
examinations involving a wide range of question patterns.
Corporate Customers
Our base of corporate
customers spread across information technology enabled services (ITES), banking financial services and insurance (BFSI), publishing,
retail, pharmaceuticals and manufacturing. The reorganization of our business has helped us expand our customer base to over 8,500
customers to date. This is not inclusive of customers who have brought piece-meal services from us. A good number of these customers
have matured from our initial set of offerings like Network and Data Center services. With the launch of our cable landing station,
we are able to cater to international carriers as well as domestic voice and data players. Our alliance with world leaders across
our other services is giving us the opportunity to extend our services to customers of our alliance partners.
The Company does not
currently anticipate that it will serve markets in, or have any contacts with, Sudan, Iran or Syria, or any other countries which
are designated as state sponsors of terrorism by the U.S. Department of State. As of the date of this Annual Report, the Company
has not provided any service to Iran, Sudan, or Syria, or any other countries which are designated as state sponsors of terrorism
by the U.S. Department of State directly or indirectly, any products, equipment, software, technology, information or support,
and has no agreements, arrangements, or other contacts with the governments of those countries or entities they control.
Customer Service and Technical Support
The implementation of the single UAN for
all Enterprise customers across India has centralised all customer enquiries to one point, thus enabling us to pour resources and
efforts into a single minded endeavor. We support both telephonic and email interactions from our clients and support for Enterprises
services is 24x7.
Sales and Marketing
From a business standpoint, we have 5 different
lines of business. But on the sales front, the entire team is trained to upsell and cross sell across the entire bandwidth of services.
We believe this is essential and imperative given the space for bundling of our services. The 473 person Sales team caters to the
demand of Enterprises and the growing SMB market.
Technology and Network Infrastructure
Geographic coverage:
Our network
today reaches more than 1550 towns and cities and between them have more than 100,000+ links. This network is completely owned
giving us complete control on the technology, traffic and speed over them. These points of presence, or primary nodes, reside at
the core of a larger Internet protocol network with a Star and meshed topology architecture thereby building in redundancy at every
point and translating into minimum or no downtime for customers.
Today we offer the following services to
our Enterprise and consumer customers using our network.
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Internet access services,
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·
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IP/ MPLS Virtual private networks,
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·
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Internet based Voice services
|
Each point of presence contains data communications
equipment housed in a secure facility owned, leased or operated on an infrastructure co-location basis by our Company. The last
mile connecting to the customer can be a leased line, ISDN or point-to-multipoint radio link which we have licensed from the Wireless
Planning Commission. We also use certain frequency radios, which do not require an operating license, in some locations. Our larger
corporate customers access the point of presence directly through leased lines or wireless links.
Network Architecture
: We ensure
network reliability through several methods and have invested in proven technologies. We use routers to route traffic between nodes
interconnected using a high speed interface. Most of our applications and network verification servers are manufactured by IBM,
Sun and Hewlett-Packard.
The primary nodes on the backbone network
are connected by multiple high-speed fiber optic lines that we lease from long distance operators. The secondary nodes are connected
by lower speed leased lines. A number of nodes are accessible from at least two other nodes, if not, by two long distance operators,
allowing us to reroute traffic in the event of failure on one route. We reduce our exposure to failures on the local loop by usually
locating our points of presence within range of service providers switching equipment and purchasing connectivity from multiple
providers. To further maximize our network uptime, we are almost completely connected on fiber optic cables to the switching points
of our service providers from our POPs.
In addition to a fundamental emphasis on
reliability and security, our network design philosophy has focused on compatibility, interoperability, scalability and quality
of service. We use Internet protocol with Multi-Protocol Label Switching, or MPLS, to transmit data, thus ensuring that our network
is completely interoperable with other networks and systems and that we may port any application onto our network. The modular
design of our network is fully scalable, allowing us to expand without changing the network design or architecture.
Network Operations Center:
We maintain
a network operation center located in Chennai (Madras) and a backup facility in Mumbai (Bombay). The Chennai facility houses our
central network servers as well as our network staff who monitors network traffic, service quality and equipment at all our points
of presence to ensure a reliable Internet service. These operation centers are staffed 24-hours-a-day, seven-days-a-week. We have
backup power generators and software and hardware systems designed to prevent network downtime in the event of system failures.
In the future, we may add additional facilities to supplement or add redundancy to our current network monitoring capability.
Data Center Infrastructure.
We operate
6 concurrently maintainable Internet Data Centers, three in Mumbai, one each at Chennai, Bangalore and Noida (UP). We offer managed
hosting, security and infrastructure managed services from these facilities. These Data Centers are completely integrated with
our IP / MPLS network which provides seamless connectivity for our customers from their premise to their applications hosted in
the Data Centers. The Data Centers conform to the standards to cater to the security consideration of our customer servers.
Competition
Given our wide spread of services, our
competition is also long and varied. As the markets in India for corporate network/data services, Internet access services and
online content develop and expand, we will continue to see the entry of newer competitors and those with deeper pockets.
Individually, we will see competition intensify
from established players like Reliance, TATA Communications and Bharti for Telecom services, Ctrl S, Reliance and Net Magic for
Data Centers, proprietary leaders like IBM and localized players like Ramco for Cloud services, traditional software majors like
Infosys, HP, Wipro and TCS for Applications Integration services and large entities like Reliance and TCS for our Technology Integration
services.
Intellectual Property
Our intellectual property
rights are important to our business. We rely on a combination of copyright and trademark laws, trade secrets, confidentiality
procedures and contractual provisions to protect our intellectual property. We have filed trademark and service mark applications
in India for registering our product and service offerings.
Our efforts to protect
our intellectual property may not be adequate. We hold no patents, and our competitors may independently develop similar technology
or duplicate our services. Unauthorized parties may infringe upon or misappropriate our services or proprietary information. In
addition, the laws of India do not protect proprietary rights to the same extent as laws in the United States, and the global nature
of the Internet makes it difficult to control the ultimate destination of our services. For example, the legal processes to protect
service marks in India are not as effective as those in place in the United States. The misappropriation or duplication of our
intellectual property could disrupt our ongoing business, distract our management and employees, reduce our revenues and increase
our expenses. In the future, litigation may be necessary to enforce our intellectual property rights or to determine the validity
and scope of the proprietary rights of others. Any such litigation could be time-consuming and costly.
We could be subject
to intellectual property infringement claims as the number of our competitors grows and the content and functionality of our websites
or other service offerings overlap with competitive offerings. Defending against these claims, even if not meritorious, could be
expensive and divert management’s attention from operating our Company. If we become liable to third parties for infringing
their intellectual property rights, we could be required to pay a substantial damage award and forced to develop non-infringing
technology, obtain a license or cease selling the applications that contain the infringing technology. We may be unable to develop
non-infringing technology or obtain a license on commercially reasonable terms, or at all.
We also rely on a variety
of technologies that are licensed from third parties. We use software developed by these and other companies to perform key functions.
These third-party licenses may not be available to us on commercially reasonable terms in the future. The loss of any of these
licenses could delay the introduction of software enhancements, interactive tools and other features until equivalent technology
could be licensed or developed. Any such delays could materially adversely affect our business, results of operations and financial
condition.
Government Regulation
Our business is subject
to comprehensive regulation by the Ministry of Communications through the Telecom Commission and the DoT, pursuant to the provisions
of the Indian Telegraph Act of 1885, or Telegraph Act, the India Wireless Telegraphy Act, 1933, or Wireless Act, the Information
Technology Act, 2000 or IT Act and the terms of our Internet service provider license issued by the DoT under which we operate.
Pursuant to the Telegraph Act, the provision of any telecommunications services in India requires a license from the Government
of India, obtained through the DoT. While the Telegraph Act sets the legal framework for regulation of the telecommunications sector
and the Wireless Act regulates the possession of wireless telegraphy equipment, much of the supervision and regulation of our Company
is implemented more informally through the general administrative powers of the DoT, including those reserved to the DoT and other
governmental agencies under our license.
In March 1997, the
Government of India established the TRAI, an independent regulatory authority, under the provisions of the Telecom Regulatory Authority
of India Act. The TRAI is an autonomous body consisting of a chairperson and at least two and not more than four members.
Under the Telecom Regulatory
Authority of India Act, the functions of the TRAI are to:
|
•
|
make recommendations on (i) the need and timing for the introduction of new service providers, (ii) the terms and conditions of licenses granted to service providers, (iii) the revocation of licenses for non-compliance, (iv) measures to facilitate competition and promote efficiency in the operation of telecommunications services so as to facilitate growth in such services, (v) technological improvements in the services provided by service providers, (vi) the type of equipment to be used by service providers, (vii) measures for the development of telecommunications technology and the telecommunications industry and (viii) the efficient management of the available spectrum;
|
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•
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discharge the following functions: (i) ensure compliance of the terms and conditions of licenses, (ii) fix the terms and conditions of interconnectivity between service providers, (iii) ensure technical compatibility and effective interconnection between service providers, (iv) regulate revenue sharing arrangements between service providers, (v) establish standards of quality of service, (vi) establish time periods for providing local and long distance telecommunications circuits between service providers, (vii) maintain and keep for public inspection a register of interconnect agreements and (viii) ensure effective compliance of universal service obligations;
|
|
•
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levy fees and other charges at such rates and in respect of such services as may be determined by regulation; and
|
|
•
|
perform such other functions as may be entrusted to it by the Government of India or as may be necessary to carry out the provisions of the Telecom Regulatory Authority of India Act.
|
The TRAI also has the
authority to, from time to time, set the rates at which domestic and international telecommunications services are provided in
India. The TRAI does not have authority to grant licenses to service providers or renew licenses, functions that remain with the
DOT. The TRAI, however, has the following powers:
|
•
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to call on service providers to furnish information relating to their operations;
|
|
•
|
to appoint persons to make official inquiries;
|
|
•
|
to inspect the books of service providers; and
|
|
•
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to issue directives to service providers to ensure their proper functioning.
|
Failure to follow TRAI directives may lead
to the imposition of fines. Decisions of the TRAI may be appealed to the Telecom Disputes Settlement and Appellate Tribunal.
On May 31, 2012, the Union Cabinet approved
the National Telecom Policy-2012 (NTP-2012) and the Cabinet also approved introduction of Unified License (UL), a new regime wherein
all telecom based government approvals are handled under one umbrella and authorized the Department of Telecommunications (DoT)
to finalize the new Unified Licensing regime. DoT issued Guidelines for Grant of Unified License - vide No. 20-281/2010-AS-I (Vol.VI)
dated August 19, 2013 and also notified Unified License agreement on August 2, 2013 with the Corrigendum dated August 29, 2013
As per the new Guidelines, any company
applying for renewal of any license under New Unified License regime, such company has to apply for all the required licenses for
such company from DoT under new Unified License regime. The Company signed Unified License agreement with Government of India on
June 2, 2014 valid for 20 years.
In 2016, TRAI announced a new VNO (Virtual
Network Operator) license as a part of the Unified License regime for bringing in more players in the market through resale model.
The company applied and has been allotted this license for Chennai circle.
Organizational Structure
We are not part of
any group. A list of subsidiaries and relevant information about them is provided in Exhibit 8.1 to this Annual Report.
Property, Plants and Equipment
We own approximately
100,000 square feet corporate headquarters located in Chennai (Madras), India and an approximately 20,000 square feet regional
office in Mumbai (Bombay). We have leased approximately 3,500 square feet network operations center in Chennai, a 27,000 square
feet Data Center in Vashi, Mumbai, 95,250 square feet Data Center in Airoli, 46,600 square feet in Bangalore Data Center and 65,000
square feet Data Center in Rabale, Mumbai. In November 2011, we acquired 175,000 square feet of building space for construction
of a Data Center space in Noida, UP on acquisition of Pace Info Com Park Private Limited, through Hermit Projects Private Limited,
its holding company. Construction in the said Data Center was completed and went live during fiscal 2015. We have acquired over
200,000 square feet of building space for construction of a Data Center space in Rabale, Mumbai which is completed and became operational
during fiscal 2016. We have also acquired another building measuring 83,450 square feet at Rabale, Mumbai for Expansion.
Our Chennai facility
houses our central network servers as well as our network staff who monitors network traffic, service quality and equipment at
all our points of presence, or POPs, to ensure a reliable Internet service. We have POPs in over 1,550 towns/cities across India.
Most of our POPs are staffed 24-hours-a-day, seven-days-a-week. Our POPs average approximately 750 square feet at each location.
We have backup power generators and software and hardware systems designed to prevent network downtime in the event of system failures.
In the future, we may add additional facilities to supplement or add redundancy to our current network monitoring capability. Our
property, plants and equipment are pledged towards obtaining loans / working capital facilities from banks.
The Company had entered
into a contract with Emirates Integrated Telecom (“the Emirates”) for the construction and supply of undersea cable
capacity from the Europe India Gateway (EIG). The Capacity went live during fiscal 2013 and was upgraded during fiscal 2015, 2016
and 2018. This enables significant capacity on ground leading to ability to service larger customers.
Item 4A. Unresolved Staff Comments
None.
Item
5.
Operating and Financial Review and Prospects
The financial
statements of the Company included in this Annual Report on Form 20-F have been prepared in accordance with the English
version of International Financial Reporting Standards as issued by International Accounting Standards Board. The information
set forth in Operating and Financial Review and Prospects is also for the Company's three most recent fiscal years. The
discussion, analysis and information presented in this section should be read in conjunction with our financial statements
included herein and the notes thereto.
Operating Results
This information is
set forth under the caption entitled 'Management's Discussion and Analysis of Financial Condition and Results of Operations' below.
Further, information relating to any governmental, economic policies or other factors which have materially affected, or could
materially affect, directly or indirectly, the company’s operations is set forth under the caption entitled ‘Risk Factors’
above.
Liquidity and Capital Resources
This information is
set forth under the caption entitled 'Management's Discussion and Analysis of Financial Condition and Results of Operations' below.
Research and Development
This information is
set forth under the caption entitled 'Management's Discussion and Analysis of Financial Condition and Results of Operations' below.
Trend Information
This information is
set forth under the caption entitled 'Management's Discussion and Analysis of Financial Condition and Results of Operations' below.
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
(
₹ in million, except share
data and where otherwise stated)
Overview
Sify
is among the largest integrated ICT Solutions and Services companies in India, offering end-to-end solutions with a comprehensive
range of products delivered over a common data network infrastructure reaching more than 1550 cities and towns in India. This telecom
network today connects 45 client Data Centers across India, including Sify’s own 6 concurrently maintainable Data Centers
across the cities of Chennai, Mumbai, Delhi and Bengaluru.
Sify
is ISO 9001:2008 certified for Enterprise Sales, Provisioning, support and customer relationship management of ICT solutions and
services including VPN, Network, Voice, Data Center hosting, Integration services, security services and managed services. Sify
has been certified in SSAE16 - SOC2 Type II for Cloud Infrastructure. Sify has licenses to operate NLD (National Long Distance)
and ILD (International Long Distance) services and offers VoIP backhaul for international carriers. With the Sify Cable landing
station and partnerships with submarine cable companies globally, Sify is present in almost all the spheres of the ICT eco system.
The company has
an expanding base of Managed Services customers, both in India and overseas, and is India’s first enterprise managed services
provider to launch a Security Operations Center (SOC) to deliver managed security services. Sify develops applications and
offers services to improve business efficiencies of its current and prospective client bases. Sify also offers services in the
specialized domains of eLearning, both in India and globally. The business also operates two of the most popular Internet portals
in India, Sify.com and Samachar.com.
Telecom
Services
:
These primarily consist of network service which addresses the domestic connectivity needs of Indian enterprises
and international inward and outward connectivity needs of International Enterprises. We do this by leveraging our national Tier
1 IPv6 network infrastructure. The services include a comprehensive range of Internet protocol based Virtual Private Network, offerings,
including intranets, extranets and remote access applications to both small and large corporate customers. There is a strong focus
on industry verticals such as IT/ITES (IT enabled services), banking and financial services industry (BFSI), Government, manufacturing,
pharmaceutical and FMCG. We were one of the first service providers in India to provide MPLS-enabled IPVPN’s on our entire
network. We have entered into a strategic partnership with leading Telcos for providing last mile connectivity to customers. Our
entire network is MPLS enabled with built in redundancy with world class design and service standards. We have built a stack of
managed services for our network customers, like Managed WLAN, Managed DDoS and security solutions. We have built a carrier neutral
internet exchange in India in partnership with Amsterdam Internet Exchange.
Our
cable landing station and our investment in submarine cable consortium are our other assets that we extend to our International
partners for their international inward and outward connectivity needs. Our cable landing station currently lands 2 major submarine
cables; namely Gulf Bridge International (GBI) and the Middle Eastern and North African cable (MENA).
Data
Center Services:
We operate 6 concurrently maintainable Data Centers of which three are located in Mumbai (Bombay) and
one each at Noida (UP), Chennai (Madras) and Bengaluru, which are designed to act as reliable, secure and scalable facilities to
host mission-critical applications. We offer co-location services which allow customers to bring in their own rack-mountable servers
and house them in shared racks or hire complete racks, and even rent ‘secure cages’ at the hosting facility as per
their application requirements. We also offer a wide variety of managed hosting services, such as storage, back-up and restoration,
performance monitoring and reporting hardware and software procurement and configuration and network configuration.
Cloud
and Managed Services:
Our on-demand hosting (cloud) services offers end-customers
with the best in class solutions to Enterprises. We have joined the global program of two world majors and offer their suite of
on-demand cloud services giving them the option to “rent” software licenses on a monthly “pay as you go”
basis. This model is aimed at helping Indian companies, both large and small, to safely tap computing capacity inside and outside
their firewalls to help ensure quality of service for any application they want to run.
Our
Remote and Onsite Infrastructure Managed services provides continuous proactive management and support of customer operating systems,
applications and database layers through deploying specialized monitoring tools and infrastructure experts to ensure that our customers’
infrastructure is performing optimally.
Our
innovative SLA driven utility-based On-Demand storage service manages the complete lifecycle of enterprise information, from its
inception to its final disposal. The fully managed, utility based, On-Demand, scalable storage platform is powered by global major
in Data Systems. Sify's On-Demand storage service reduces the complexities of deploying and managing multiple storage tiers, and
lowers operational costs by automating management with flexible need based pricing.
Technology
Integration services:
Our mix of solutions give us the scope to band and extend any or all of these
services in multiple formats and scales for client who wish to rest their entire infrastructure with us. Clients get the benefit
of our accumulated knowledge base and technical expertise across all points of the ICT spectrum. In terms of cost, these translate
into better cost efficiencies. In terms of monitoring, the client need to interact with a singular service provider saving them
both implementation and documentation efforts.
Applications
Integration service:
Our range of web-applications includes sales force automation, supply chain management, intranet and
extranets, workflow engine and knowledge management systems.
Our
Applications Integration services operates two of India’s biggest online portals,
www.sify.com and www.samachar.com
,
that function as principal entry points and gateway for accessing the Internet by providing useful web-related services and links.
We also offer related content sites specifically tailored to Indian interests worldwide and launched the services on mobile applications.
Sify.com
provides a gateway to the Internet by offering communication and search tools such as travel, online portfolio management and channels
for personal finance, astrology, lifestyle, shopping, movies, sports and news.
We
offer value-added services to organizations such as website design, development, content management, Online assessment tools, search
engine optimization, including domain name management, secure socket layer (SSL) certificate for websites, and server space in
required operating system and database. We provide state of the art messaging and collaboration services and solutions such as
anti-spam appliances, bulk mail services, instant messaging, and also offer solutions and services to enable data and access security
over the Internet. We also provide infrastructure-based services on demand, including online testing engine and network management.
Online testing services include test management software, required servers and proctored examination facilities at Sify’s
franchisee points. On-line exam engine offered allows a secure and flexible way of conducting examinations involving a wide range
of question patterns.
We
have been historically including the results of Digital Certification services under the Technology Integration Services segment.
The Industry in which this product competes has witnessed newer competitions, business models resulting in dynamic market changes.
In order to leverage the versatility and the organizational capability, the Chief Operations Decision Maker (CODM) has evaluated
options of reorganizing this product into Applications Integration Services segment with effect from April 1, 2016. This will enable
the product to address customers across segments, achieve better marketability, flexibility and scale. The corresponding revenue
and costs of this product have been regrouped under the respective segments. Consequently, the figures for the years ended March
31, 2016 and March 31, 2015 are adjusted accordingly.
There are numerous
risks and challenges affecting the business. These risks and challenges are discussed in detail in the section entitled 'Risk Factors'
and elsewhere in this Annual Report.
Revenues
Telecom Services
These
primarily include revenue from connectivity services, NLD/ILD services and to a lesser extent, revenues from the installation
of the connectivity link. In certain cases, these elements are sold as a package consisting of all or some of the elements.
We sell hardware and software purchased from third party vendors to our high value corporate clients. Our connectivity
services include IPVPN services, Internet connectivity and last mile connectivity (predominantly through wireless). We
provide these services for a fixed period of time at a fixed rate regardless of usage, with the rate for the services
determined based on the type of service and capacity provided, scope of the engagement and the Service Level Agreement, or
SLA. We provide NLD (National Long Distance) and ILD (International Long Distance) services and carry voice traffic for
Inter-connect Operators. Revenue is recognized based upon metered call units of voice traffic terminated on our network. The
company offers services in the retail voice market in partnership with Skype Communications, S.a.r.l. The company realized
revenue from the sale of voice credits and subscriptions of Skype.
Data Center
services
Revenue from Data
Center services includes revenue from co-location of space and racks on usage of power from large contracts. The contracts are
mainly fixed rate for a period of time based on the space or the racks used and usage revenue is based on consumption of power
on large contracts.
Cloud and Managed
Services
Revenue
from Cloud and Managed services, are primarily from “Cloud and on demand storage”, “Domestic managed services
and “International managed services”. Contracts from Cloud and on demand storage, are primarily fixed and for a period
of time. Revenues from Domestic and International managed services, comprises of value added services, operations and maintenance
of projects and from remote infrastructure management. Contracts from this segment are fixed and could also be based on T&M.
Technology
Integration Service (TIS)
Revenues
from TIS comprises of DC build services and Security services. Contracts under TIS are based on completion of projects and could
also be based on T & M.
Applications
Integration Services
Revenue
from Applications Integration Services (Apps SI) comprises of Online Assessment, Web development, supply chain solutions, content
management, sale of Digital certificates and sale, implementation and maintenance of Industry Specific applications like SAP, Oracle
and Microsoft. Contracts are primarily fixed in nature for a period of time and also could be based on T & M.
Expenses
Cost of goods
sold and services rendered
Telecom Services
Cost
of goods sold and services rendered for the corporate network/data services division consists of telecommunications costs necessary
to provide services and cost of goods in respect of communication hardware and security services sold, commission paid to franchisees
and cable television operators, the cost of voice termination for voice and VoIP services and other direct costs. Telecommunications
costs include the costs of international bandwidth procured from TELCOs and are required for access to the Internet, providing
leased lines to our points of presence, the costs of using third-party networks pursuant to service agreements, leased line costs
and costs towards spectrum fees payable to the Wireless Planning Commission or WPC for provision of spectrum to enable connectivity
to be provided on the wireless mode for the last mile. Other costs include cost incurred towards annual maintenance contract and
the cost of installation in connectivity business. In addition, the Government of India levies an annual license fee of 8% of the
adjusted gross revenue generated from IP-VPN services and Voice services under the Unified license.
Data Center
Services
Cost
of goods sold and services rendered for the Data Center services consists of cost of electrical power consumed, cost of rental
servers offered to customers and cost of licences used to provide services.
Cloud and Managed
Services
Cost
of goods sold and services rendered for the Cloud and Managed services consists of cost of licences in providing services, cost
of billable resources in case of Infrastructure Managed services, Third party professionals engaged in providing services, associate
costs of the delivery teams and cost of operations of DC build BOT projects.
Technology
Integration Services
Cost
of goods sold and services rendered consists of cost of hardware and software supplied for DC build projects, cost of security
hardware and software supplied and cost of hardware and software procured for System integration projects.
Applications
Integration Services
Cost
of goods sold and services rendered consists of professional charges payable to domain specialists and subject matter experts,
cost of billable associates of e-learning business, cost of operating in third party facility for online assessment including invigilator
costs and cost of procuring and managing content for the websites, cost of digital certificates and platform usage and other direct
costs for the revenue streams.
Selling, general and administrative
expenses
Selling, general and
administrative expenses consists of salaries and commissions for sales and marketing personnel, salaries and related costs for
executive, financial and administrative personnel, advertising and other brand building costs, travel costs, and occupancy and
overhead costs.
Depreciation and amortization
We depreciate our tangible
assets on a straight-line basis over the useful life of assets, ranging from three to eight years and, in the case of buildings,
28 years. Undersea cable capacity is amortised over a period of 12 years and other intangible assets with finite lives are amortised
over three to five years.
Impairment
The carrying amounts of the
Group’s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine
whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
For goodwill, the recoverable amount is estimated each year at December 31.
The recoverable amount
of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value
in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets
that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing
use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).
The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that
are expected to benefit from the synergies of the combination. Corporate assets for the purpose of impairment testing are allocated
to the cash generating units on a reasonable and consistent basis.
An impairment loss
is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment
losses are recognized in profit or loss. Impairment losses recognized in respect of cash-generating units are allocated first to
reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in
the unit or group of units on a
pro rata basis.
Inventories
Inventories comprising traded hardware
and software are measured at the lower of cost (determined using first-in first-out principle) and net realizable value. Net realizable
value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
Deferred tax
Deferred tax is recognized
using the balance sheet method, providing for temporary differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences:
the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting
nor taxable profit or loss, and differences relating to investments in subsidiaries and associates to the extent that it is probable
that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences
arising on the initial recognition of goodwill, as the same is not deductible for tax purposes. Deferred tax is measured at the
tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted
or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable
right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same
taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their
tax assets and liabilities will be realized simultaneously.
Deferred tax arising on investments in
subsidiaries and associates is recognized except where the Group is able to control the reversal of the temporary difference and
it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax arising on the temporary
differences arising out of undistributed earnings of the equity method accounted investee is recorded based on the management's
intention. If the intention is to realize the undistributed earnings through sale, deferred tax is measured at the capital gains
tax rates that are expected to be applied to temporary differences when they reverse. However, when the intention is to realize
the undistributed earnings through dividend, the Group’s share of the income and expenses of the equity method accounted
investee is recorded in the statement of income, after considering any taxes on dividend payable by the equity method accounted
investee and no deferred tax is set up in the Group's books as the tax liability is not with the group.
Stock compensation expense
A total of 25 million
equity shares are reserved for issuance under our Associate Stock Option Plans (ASOPs). Our ASOP 2014 was adopted at the Eighteenth
Annual General Meeting held on July 28, 2014. As of March 31, 2018, we had an aggregate outstanding of 5.18 million options under
our ASOP with a weighted average exercise price equal to approximately ₹ 78.79 ($1.21) per equity share. Unamortized stock
compensation expense as of March 31, 2018 on these options is ₹ 10.35 million ($ 0.16 million).
Results of Operations
The following table sets forth certain financial
information as a percentage of revenues:
|
|
Fiscal
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
|
Revenues
|
|
|
100
|
|
|
|
100
|
|
|
|
100
|
|
Cost of goods sold and services rendered
|
|
|
(64.95
|
)
|
|
|
(64.40
|
)
|
|
|
(60.55
|
)
|
Other income/(expense)
|
|
|
0.92
|
|
|
|
0.79
|
|
|
|
0.70
|
|
Selling, general and administrative expenses
|
|
|
(21.25
|
)
|
|
|
(21.65
|
)
|
|
|
(23.14
|
)
|
Depreciation and amortization expenses
|
|
|
(8.48
|
)
|
|
|
(9.54
|
)
|
|
|
(10.63
|
)
|
Profit from operating activities
|
|
|
6.24
|
|
|
|
5.20
|
|
|
|
6.38
|
|
Finance income
|
|
|
0.63
|
|
|
|
0.66
|
|
|
|
0.30
|
|
Finance expenses
|
|
|
(2.41
|
)
|
|
|
(2.38
|
)
|
|
|
(3.76
|
)
|
Net finance income/(Loss)
|
|
|
(1.78
|
)
|
|
|
(1.72
|
)
|
|
|
(3.46
|
)
|
Profit before tax
|
|
|
4.46
|
|
|
|
3.48
|
|
|
|
2.92
|
|
Income tax (expense)/ benefit
|
|
|
0.00
|
|
|
|
-
|
|
|
|
-
|
|
Net profit for the year
|
|
|
4.46
|
|
|
|
3.48
|
|
|
|
2.92
|
|
Results of year ended March 31, 2018
compared to year ended March 31, 2017
The growth in our revenues in fiscal 2018
from fiscal 2017 is given below:
|
|
2017 – 18
|
|
|
2016 – 17
|
|
|
Increase/
(decrease)
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
20,686
|
|
|
|
18,432
|
|
|
|
2,254
|
|
|
|
12
|
%
|
Year 2017-18 had a 12% growth with an increase
in revenues of ₹ 2,254 million ($34.65 million) contributed largely by Applications Integration Services with a revenue growth
of ₹ 1,192 million ($18.33 million), Technology Integration services with ₹757 million ($11.64 million), Data Center
Services with ₹460 million ($7.07 million) and Cloud and Managed Services with ₹37 million ($0.57 million). The increase
is offset by decrease in revenue from Telecom Services by ₹192 million ($2.95 million).
The revenue by operating segments is as
follows:
|
|
Revenue
|
|
|
Percentage of revenue
|
|
|
Growth %
|
|
|
|
2017-18
|
|
|
2016-17
|
|
|
2017-18
|
|
|
2016-17
|
|
|
2017-18
|
|
Telecom Services
|
|
|
9,981
|
|
|
|
10,173
|
|
|
|
48
|
%
|
|
|
55
|
%
|
|
|
(2
|
)%
|
Data Center Services
|
|
|
2,435
|
|
|
|
1,975
|
|
|
|
12
|
%
|
|
|
11
|
%
|
|
|
23
|
%
|
Cloud and Managed Services
|
|
|
957
|
|
|
|
920
|
|
|
|
5
|
%
|
|
|
5
|
%
|
|
|
4
|
%
|
Technology Integration Services
|
|
|
3,445
|
|
|
|
2,688
|
|
|
|
17
|
%
|
|
|
15
|
%
|
|
|
28
|
%
|
Applications Integration Services
|
|
|
3,868
|
|
|
|
2,676
|
|
|
|
18
|
%
|
|
|
14
|
%
|
|
|
45
|
%
|
Total
|
|
|
20,686
|
|
|
|
18,432
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
12
|
%
|
Revenue from Telecom Service reduced by
₹192 million ($2.95 million) primarily due to (i) an increase in revenue of ₹536 million ($8.22 million) from Connectivity
Services, contributed by net increase in number of links by 8,269 with existing and new customer engagements, and (ii) the increase
is offset by decrease in revenue of ₹728 million ($11.17 million) in Voice Services, which is on account of a decrease of`
₹1332 million ($20.47 million) from ILD business, contributed by volume decrease of 1673 million minutes and decrease of
₹6 million ($0.10 million) from VoIP services, partially offset by increase of ₹20 million ($0.31 million) from Voice
Retail services and partially offset by an increase of ₹590 million ($9.09 million) from Hubbing services.
Revenue from Data Center Services increased
by ₹460 million ($7.07 million) due to increase of new contracts and capacities sold.
Revenue from Cloud and Managed Services
has increased by ₹37 million ($0.57 million), primarily on account of increase in revenue of ₹15 million ($0.23 million)
from cloud based offerings on account of new customer engagements and this is offset by decrease in revenue of ₹33 million
($0.51 million) from Infrastructure Managed Services and increase in revenue of ₹55 million ($0.85 million) from Domestic
Managed Services.
Revenue from Technology Integration Services
increased by ₹757 million ($11.64 million), on account of increase in revenues from large network integration and security
services.
Revenue from Applications Integration Services
increased by ₹1,192 million ($18.33 million). The increase is attributable to increase in (i) Online Assessment services
revenue by ₹843 million ($12.94 million) (ii) revenue by ₹316 million ($4.84 million) from SAP and App-led SI (iii)
Digital certification business by ₹56 million ($0.87 million) (iv) Forum business revenue by ₹20 million ($0.31 million)
and the above increase is offset by decrease in (v) eLearning services by ₹26 million ($0.39 million) (vi) Web Services business
by ₹9 million ($0.14 million) (vii) Portals business by ₹8 million ($0.12 million) on account of decrease in customer
engagements.
Other income
The change in other income is as follows:
|
|
2017 -18
|
|
|
2016 -17
|
|
|
Increase/
(decrease)
|
|
|
% Change
|
|
Other income
|
|
|
190
|
|
|
|
146
|
|
|
|
44
|
|
|
|
30
|
%
|
The increase in other income is on account
of reimbursement received from depository for ADR expenses reimbursement scheme ₹ 49 million ($0.76 million), rebate received
from a vendor ₹ 12 million ($0.18 million), write back of provision for expenses no longer required ₹ 4 million ($0.06
million) and increase on account of sale of property plant & Equipment by ₹ 1 million ($0.02 million) the above increases
was partially offset by decrease in net gain on forex exchange fluctuations amounting to ₹ 22 million ($0.34 million).
Cost of goods sold and services rendered
(COGS)
Our cost of goods sold and services rendered
in each of the business segment is set forth in the following table:
|
|
2017-18
|
|
|
2016-17
|
|
|
Increase/
(decrease)
|
|
|
% change
|
|
Telecom Services
|
|
|
6,303
|
|
|
|
6,632
|
|
|
|
(329
|
)
|
|
|
(5
|
)%
|
Data Center Services
|
|
|
1,223
|
|
|
|
1,030
|
|
|
|
193
|
|
|
|
19
|
%
|
Cloud and Managed Services
|
|
|
522
|
|
|
|
382
|
|
|
|
140
|
|
|
|
37
|
%
|
Technology Integration Services
|
|
|
2,563
|
|
|
|
2,088
|
|
|
|
475
|
|
|
|
23
|
%
|
Applications Integration Services
|
|
|
2,824
|
|
|
|
1,738
|
|
|
|
1,086
|
|
|
|
62
|
%
|
Total
|
|
|
13,435
|
|
|
|
11,870
|
|
|
|
1,565
|
|
|
|
13
|
%
|
The cost of goods sold has increased by
13% on overall basis and the movement in COGS by nature of expense is explained in detail below:
|
|
2017-18
|
|
|
2016-17
|
|
|
Increase/
(decrease)
|
|
|
% change
|
|
Network Costs
|
|
|
4,950
|
|
|
|
5,419
|
|
|
|
(469
|
)
|
|
|
(9
|
)%
|
License fees (revenue share)
|
|
|
562
|
|
|
|
519
|
|
|
|
43
|
|
|
|
8
|
%
|
Cost of goods sold
|
|
|
3,132
|
|
|
|
2,067
|
|
|
|
1065
|
|
|
|
51
|
%
|
- Sale of products
|
|
|
1,331
|
|
|
|
1,225
|
|
|
|
106
|
|
|
|
9
|
%
|
- Integration services
|
|
|
1,801
|
|
|
|
842
|
|
|
|
959
|
|
|
|
114
|
%
|
Direct Resources costs
|
|
|
1,126
|
|
|
|
924
|
|
|
|
202
|
|
|
|
22
|
%
|
Power costs
|
|
|
1,153
|
|
|
|
984
|
|
|
|
169
|
|
|
|
17
|
%
|
Other direct costs
|
|
|
2,512
|
|
|
|
1,957
|
|
|
|
555
|
|
|
|
28
|
%
|
Total
|
|
|
13,435
|
|
|
|
11,870
|
|
|
|
1,565
|
|
|
|
13
|
%
|
Network costs comprises cost of Bandwidth
leased out from TELCOS, Inter connect charges and IP termination costs payable to carriers. Decrease in Network costs of ₹469
million ($7.22 million) is due to (i) ₹241 million ($3.71 million) increase in Bandwidth costs incurred on account of capacity
upgrades and newer links and (ii) decrease of ₹710 million ($10.93 million) of Inter connect charges due to the decrease
in 1673 million minutes in the volume of International Long distance.
License fees (Revenue share) cost comprises
revenue share payable to DOT on licensed services. Increase in revenue share is on account of increase of ₹43 million ($0.66
million) in the revenue share payable to DOT on account of increase in licensed Revenues.
Cost of Goods sold consists of cost of
Hardware and Software and integration services. Cost of Hardware and Software sold increased by ₹1065 million ($16.36 million).
The same being on account of increase in projects in Technology Integration business by ₹971 million ($14.93 million) and
increase in cost related to one time sales by ₹94 million ($1.43 million)
Direct Resource costs comprises the cost
of resources deployed on the Network Infrastructure Delivery (Part of Telecom service), and resources involved in delivery of applications
integration services, cost of billable resources of e Learning (Part of Applications Integration services) and Infrastructure Managed
services (Part of Cloud and Managed Services). Increase in resources costs of 202 million ($3.11 million) is primarily on account
of increase of (i) ₹105 million ($1.62 million) increase in delivery telecom services, (ii) Applications Integration Services
by ₹64 million ($0.98 million), (iii) Technology Integration Services by ₹18 million ($0.28 million), (iv) DC services
increase by ₹10 million ($0.15 million) and (v) Managed Services Delivery (Part of Cloud and Managed services) increase by
₹5 million ($0.08 million) on account of increase in number of employees.
Power cost comprises of electricity charges
incurred for our Data Center operations. Power cost increased by ₹169 million ($2.60 million) due to increase in occupancy
of Rabale DC and also increase in consumption in existing Data Centers and increased power tariff.
Other direct cost, comprises Link implementation
and maintenance charges pertaining to Telecom services, direct cost of Applications Integration services business containing Online
Exams, digital certificate platform, content costs and subject matter experts for international businesses. The increase in other
direct costs of ₹555 million ($8.53 million) is primarily on account of increase of (i) ₹413 million ($6.34 million)
in applications integrations services on account of operating cost of online assessment due to new customer engagements with higher
volumes (ii) ₹136 million ($2.09 million) on account of operating costs of cloud and managed services and. (iii) Increase
of ₹2 million ($0.03 million) on account Content cost, (iv) Increase of ₹12 million ($0.18 million) on account of Data
Center new contract executions, and the above increase is offset by a decrease of ₹8 million ($0.11 million) in link maintenance
charges.
Selling, General and Administrative
expenses
Selling, General and Administrative expenses
of the Company by nature of expenses are set forth as follows:
|
|
2017-18
|
|
|
2016-17
|
|
|
Increase/
(decrease)
|
|
|
% change
|
|
Operating costs
|
|
|
1,000
|
|
|
|
980
|
|
|
|
20
|
|
|
|
2
|
%
|
Selling and Marketing Expenses
|
|
|
147
|
|
|
|
136
|
|
|
|
11
|
|
|
|
8
|
%
|
Associate Expenses
|
|
|
1,863
|
|
|
|
1549
|
|
|
|
314
|
|
|
|
20
|
%
|
Other Indirect expenses
|
|
|
1,001
|
|
|
|
940
|
|
|
|
61
|
|
|
|
6
|
%
|
Allowance for doubtful receivables/advances
|
|
|
384
|
|
|
|
386
|
|
|
|
(2
|
)
|
|
|
(1
|
)%
|
Total
|
|
|
4,395
|
|
|
|
3,991
|
|
|
|
404
|
|
|
|
10
|
%
|
Operating costs includes rental, repairs
and maintenance charges of our network operating centers, base stations and other co-location sites including the rent and maintenance
for our Data Centers. Operating costs increased by ₹20 million ($0.31 million) primarily on account of increase in repairs
and maintenance and network operating cost.
Selling and Marketing expenses consist
of, selling commission payable to sales partners, incentive to salesmen and, marketing and promotion costs. The Selling and Marketing
expenses increased by ₹11 million ($0.17 million).
Associate expenses consist of cost of the
employees who are part of the Sales and marketing, Business development, General management and support services. Associate expenses
increased by ₹314 million ($4.82 million) between two periods due to increase in headcounts and regular Increments.
Other indirect expense consists of, rental
and electricity cost of office, travel cost, legal charges, professional charges, communication and others. During the year Other
Indirect costs have increased by ₹61 million ($0.94 million) primarily on account of office repair and maintenance expenses
in various locations.
Allowance for doubtful receivables/advances
consists of the charge on account of the provisions created during the year against doubtful receivables/advances. Allowance for
doubtful receivables/advances decreased by ₹2 million ($0.03 million).
Depreciation and amortization
Depreciation and amortization is set forth
in the table below:
|
|
2017 -18
|
|
|
2016 -17
|
|
|
Increase/
(Decrease)
|
|
|
% Change
|
|
Depreciation and amortization
|
|
|
1,755
|
|
|
|
1,759
|
|
|
|
(4)
|
|
|
|
(0.23
|
)%
|
As a percentage of carrying value
|
|
|
22.51
|
%
|
|
|
24.49
|
%
|
|
|
|
|
|
|
|
|
The depreciation during the current year
remained flat in comparison with the previous year.
Profit from operating activities
|
|
2017 -18
|
|
|
2016-17
|
|
|
Increase/
(Decrease)
|
|
|
% Change
|
|
Operating profit
|
|
|
1291
|
|
|
|
958
|
|
|
|
333
|
|
|
|
34.77
|
%
|
As a percentage of revenue
|
|
|
6.24
|
%
|
|
|
5.20
|
%
|
|
|
|
|
|
|
|
|
The operating profit as a percentage of
revenue has increased due to percentage decrease in selling and distribution expenses and depreciation and amortization expense
and this increase was partially offset by percentage increase in cost of goods sold and services rendered as explained above.
Finance income/expense
|
|
2017 -18
|
|
|
2016 -17
|
|
|
Increase/
(Decrease)
|
|
|
%
Change
|
|
Finance income
|
|
|
129
|
|
|
|
123
|
|
|
|
6
|
|
|
|
5
|
%
|
Finance expense
|
|
|
(497
|
)
|
|
|
(437
|
)
|
|
|
60
|
|
|
|
14
|
%
|
Net finance income/expense
|
|
|
(368
|
)
|
|
|
(314
|
)
|
|
|
54
|
|
|
|
17
|
%
|
Finance income:
The finance income
primarily consists of interest received from bank deposits of ₹25 million ($0.39 million), and interest income on other deposits
of ₹104 million ($1.60 million). The interest received from bank decreased by ₹1 million ($0.02 million) from last
year, and interest income on other deposits increased by ₹8 million ($0.12 million) on account of interest on income tax
refund received during current year amounting to ₹ 92 million ($ 1.41 million).
Finance expense:
The finance expense
primarily consists of ₹31 million ($0.48 million) of interest expense on leases, ₹373 million ($5.73 million) of interest
paid on borrowings and ₹93 million ($1.42 million) of other borrowing costs paid in respect of utilization of non-fund facilities
from the banks and other processing charges.
The increase in finance expense is on account
of increase in borrowings taken mainly to fund upcoming Data Centers in Chennai and Hyderabad and other working capital arrangements.
Net Profit
|
|
2017-18
|
|
|
2016-17
|
|
|
Increase/
(Decrease)
|
|
|
% Change
|
|
Net Profit
|
|
|
923
|
|
|
|
642
|
|
|
|
281
|
|
|
|
44
|
%
|
As a percentage of revenue
|
|
|
4.46
|
%
|
|
|
3.48
|
%
|
|
|
|
|
|
|
|
|
The
increase in the net profit during the year 2017-18 is mainly attributable to increase in operating margins.
Results of year ended March 31, 2017
compared to year ended March 31, 2016
Revenues
The growth in our revenues in fiscal 2017
from fiscal 2016 is given below:
|
|
2016 – 17
|
|
|
2015 – 16
|
|
|
Increase/
(decrease)
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
18,432
|
|
|
|
15,035
|
|
|
|
3,397
|
|
|
|
23
|
%
|
Year 2016-17 had a 23% growth with an increase
in revenues of ₹ 3,397 million ($52.39 million) contributed largely by Applications Integration Services with a revenue growth
of ₹ 1,360 million ($20.97 million), Technology Integration services with ₹982 million ($15.14 million), Telecom Services
with ₹624 million ($9.62 million) and Data Center Services with ₹452 million ($6.97 million). The increase is offset
by decrease in revenue from Cloud and Managed Services by ₹21 million ($0.32 million).
The revenue by operating segments is as
follows:
|
|
Revenue
|
|
|
Percentage of revenue
|
|
|
Growth %
|
|
|
|
|
2016-17
|
|
|
|
2015-16
|
|
|
|
2016-17
|
|
|
|
2015-16
|
|
|
|
|
|
Telecom Services
|
|
|
10,173
|
|
|
|
9,549
|
|
|
|
55
|
%
|
|
|
64
|
%
|
|
|
|
|
Data Center Services
|
|
|
1,975
|
|
|
|
1,523
|
|
|
|
11
|
%
|
|
|
10
|
%
|
|
|
|
|
Cloud and Managed Services
|
|
|
920
|
|
|
|
941
|
|
|
|
5
|
%
|
|
|
6
|
%
|
|
|
|
|
Technology Integration Services
|
|
|
2,688
|
|
|
|
1,706
|
|
|
|
15
|
%
|
|
|
11
|
%
|
|
|
|
|
Applications Integration Services
|
|
|
2,676
|
|
|
|
1,316
|
|
|
|
14
|
%
|
|
|
9
|
%
|
|
|
|
|
Total
|
|
|
18,432
|
|
|
|
15,035
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
23
|
%
|
Revenue from Telecom Service increased
by ₹624 million ($9.62 million) primarily due to (i) an increase in revenue of ₹758 million ($11.69 million) from Connectivity
Services, contributed by net increase in number of links by 7,180 with existing and new customer engagements, and (ii) the increase
is offset by decrease in revenue of ₹134 million ($2.07 million) in Voice Services, which is on account of a decrease of`
₹343 million ($5.29 million) from ILD business, contributed by volume decrease of 491 million minutes and decrease of ₹24
million ($0.37 million) from VoIP services, partially offset by increase of ₹233 million ($3.59 million) from Voice Retail
services.
Revenue from Data Center Services increased
by ₹452 million ($6.97 million) due to increase of new contracts and capacities sold.
Revenue from Cloud and Managed Services
is decreased by ₹21 million ($0.32 million), primarily on account of decrease in revenue of ₹72 million ($1.11 million)
from Infrastructure Managed Services and this decrease is offset by increase in revenue of ₹51 million ($0.79 million) from
cloud based offerings on account of new customer engagements.
Revenue from Technology Integration Services
is increased by ₹982 million ($15.14 million), on account of increase in revenues from large network integration and security
services.
Revenue from Applications Integration Services
is increased by ₹1,360 million ($20.97 million). The increase is attributable to increase in (i) Online Assessment services
revenue by ₹1,515 million ($23.37 million) and the above increase is offset by decrease in (ii) revenue by ₹47 million
($0.72 million) from Industry standard application services (iii) eLearning services by ₹82 million ($1.27 million) (iv)
Digital certification business by ₹5 million ($0.08 million) (v) Portals business by ₹21 million ($0.32 million) on
account of decrease in customer engagements.
Other income
The change in other income is as follows:
|
|
2016 -17
|
|
|
2015 -16
|
|
|
Increase/
(decrease)
|
|
|
% Change
|
|
Other income
|
|
|
146
|
|
|
|
104
|
|
|
|
42
|
|
|
|
40
|
%
|
The increase in other income is on account
of increase in rental income by ₹51 million ($0.79 million), net gain on forex exchange fluctuations amounting to ₹
29 million ($0.45 million). The increase is offset by decrease in provision for expenses and doubtful debts written back by ₹
41 million ($0.63 million) compared to previous year.
Cost of goods sold and services rendered
(COGS)
Our cost of goods sold and services rendered
in each of the business segment is set forth in the following table:
|
|
2016-17
|
|
|
2015-16
|
|
|
Increase/
(decrease)
|
|
|
% change
|
|
Telecom Services
|
|
|
6,632
|
|
|
|
6,031
|
|
|
|
601
|
|
|
|
10
|
%
|
Data Center Services
|
|
|
1,030
|
|
|
|
817
|
|
|
|
213
|
|
|
|
26
|
%
|
Cloud and Managed Services
|
|
|
382
|
|
|
|
341
|
|
|
|
41
|
|
|
|
12
|
%
|
Technology Integration Services
|
|
|
2,088
|
|
|
|
1,201
|
|
|
|
887
|
|
|
|
74
|
%
|
Applications Integration Services
|
|
|
1,738
|
|
|
|
714
|
|
|
|
1,024
|
|
|
|
143
|
%
|
Total
|
|
|
11,870
|
|
|
|
9,104
|
|
|
|
2,766
|
|
|
|
30
|
%
|
The cost of goods sold has increased by
30% on overall basis and the movement in COGS by nature of expense is explained in detail below:
|
|
2016-17
|
|
|
2015-16
|
|
|
Increase/
(decrease)
|
|
|
% change
|
|
Network Costs
|
|
|
5,419
|
|
|
|
5,165
|
|
|
|
254
|
|
|
|
5
|
%
|
License fees (revenue share)
|
|
|
519
|
|
|
|
463
|
|
|
|
56
|
|
|
|
12
|
%
|
Cost of goods sold
|
|
|
2,067
|
|
|
|
1,271
|
|
|
|
796
|
|
|
|
63
|
%
|
- Sale of products
|
|
|
1,225
|
|
|
|
815
|
|
|
|
410
|
|
|
|
50
|
%
|
- Integration services
|
|
|
842
|
|
|
|
456
|
|
|
|
386
|
|
|
|
85
|
%
|
Direct Resources costs
|
|
|
924
|
|
|
|
862
|
|
|
|
62
|
|
|
|
7
|
%
|
Power costs
|
|
|
984
|
|
|
|
775
|
|
|
|
209
|
|
|
|
27
|
%
|
Other direct costs
|
|
|
1,957
|
|
|
|
568
|
|
|
|
1,389
|
|
|
|
245
|
%
|
Total
|
|
|
11,870
|
|
|
|
9,104
|
|
|
|
2,766
|
|
|
|
30
|
%
|
Network costs comprises cost of Bandwidth
leased out from TELCOS, Inter connect charges and IP termination costs payable to carriers. Increase in Network costs of ₹254
million ($3.92 million) is due to (i) ₹398 million ($6.14 million) increase in Bandwidth costs incurred on account of capacity
upgrades and newer links and (ii) decrease of ₹144 million ($2.22 million) of Inter connect charges due to the decrease in
491 million minutes in the volume of International Long distance.
License fees (Revenue share) cost comprises
revenue share payable to DOT on licensed services. Increase in revenue share is on account of increase of ₹56 million ($0.86
million) in the revenue share payable to DOT on account of increase in licensed Revenues.
Cost of Goods sold consists of cost of
Hardware and Software and integration services. Cost of Hardware and Software sold increased by ₹796 million ($12.28 million).
The same being on account of increase in projects in Technology Integration business by ₹876 million ($13.51 million) which
is partially offset by decrease in cost related to one time sales by ₹80 million ($1.23 million)
Direct Resource costs comprises the cost
of resources deployed on the Network Infrastructure Delivery (Part of Telecom service), and resources involved in delivery of applications
integration services, cost of billable resources of e Learning (Part of Applications Integration services) and Infrastructure Managed
services (Part of Cloud and Managed Services). Increase in resources costs of ₹62 million ($0.96 million) is primarily on
account of increase of (i) ₹109 million ($1.68 million) increase in delivery telecom services, (ii) Applications Integration
Services by ₹7 million ($0.11 million), (iii) Technology Integration Services by ₹10 million ($0.15 million) and (iv)
DC services increase by ₹1 million ($0.02 million) on account of increase in number of employees. (v) The above increase
is partially offset by decrease of ₹63 million ($0.97 million) in resource cost of Managed Services Delivery (Part of Cloud
and Managed services) due to decrease in number of employees in Infrastructure managed services due to customer churn.
Power cost comprises of electricity charges
incurred for our Data Center operations. Power cost increased by ₹209 million ($3.22 million) due to increase in occupancy
of Rabale DC and also increase in consumption in existing Data Centers and increased power tariff.
Other direct cost, comprises Link implementation
and maintenance charges pertaining to Telecom services, direct cost of Applications Integration services business containing Online
Exams, digital certificate platform, content costs and subject matter experts for international businesses. The increase in other
direct costs of ₹1,389 million ($21.42 million) is primarily on account of increase of (i) ₹1,071 million ($16.51 million)
in applications integrations services on account of operating cost of online assessment due to new customer engagements with higher
volumes (ii) ₹105 million ($1.62 million) on account of operating costs of cloud and managed services and. (iii) Increase
of ₹182 million ($2.81 million) on account of link maintenance charges, (iii) Increase of ₹7 million ($0.10 million)
on account of Data Center new contract executions.
Selling, General and Administrative
expenses
Selling, General and Administrative expenses
of the Company by nature of expenses are set forth as follows:
|
|
2016-17
|
|
|
2015-16
|
|
|
Increase/
(decrease)
|
|
|
% change
|
|
Operating costs
|
|
|
980
|
|
|
|
861
|
|
|
|
119
|
|
|
|
14
|
%
|
Selling and Marketing Expenses
|
|
|
136
|
|
|
|
136
|
|
|
|
-
|
|
|
|
-%
|
|
Associate Expenses
|
|
|
1549
|
|
|
|
1,308
|
|
|
|
241
|
|
|
|
18
|
%
|
Other Indirect expenses
|
|
|
940
|
|
|
|
986
|
|
|
|
(46
|
)
|
|
|
-5
|
%
|
Allowance for doubtful receivables/advances
|
|
|
386
|
|
|
|
182
|
|
|
|
204
|
|
|
|
112
|
%
|
Net Forex Loss
|
|
|
-
|
|
|
|
6
|
|
|
|
(6
|
)
|
|
|
-100
|
%
|
Total
|
|
|
3,991
|
|
|
|
3,479
|
|
|
|
512
|
|
|
|
15
|
%
|
Operating costs includes rental, repairs
and maintenance charges of our network operating centers, base stations and other co-location sites including the rent and maintenance
for our Data Centers. Operating costs increased by ₹119 million ($1.84 million) primarily on account of increase in repairs
and maintenance and network operating cost.
Selling and Marketing expenses consist
of, selling commission payable to sales partners, incentive to salesmen and, marketing and promotion costs. The Selling and Marketing
expenses were flat when compared to previous year.
Associate expenses consist of cost of the
employees who are part of the Sales and marketing, Business development, General management and support services. Associate expenses
increased by ₹241 million ($3.72 million) between two periods due to increase in headcounts and regular Increments.
Other indirect expense consists of, rental
and electricity cost of office, travel cost, legal charges, professional charges, communication and others. During the year Other
Indirect costs have decreased by ₹46 million ($0.71 million)
Allowance for doubtful receivables/advances
consists of the charge on account of the provisions created during the year against doubtful receivables/advances. Allowance for
doubtful receivables/advances increased by ₹204 million ($3.15 million) between two periods.
Depreciation and amortization
Depreciation and amortization is set forth
in the table below:
|
|
2016 -17
|
|
|
2015 -16
|
|
|
Increase/
(Decrease)
|
|
|
% Change
|
|
Depreciation and amortization
|
|
|
1,759
|
|
|
|
1,598
|
|
|
|
161
|
|
|
|
10
|
%
|
As a percentage of carrying value
|
|
|
24.49
|
%
|
|
|
23.04
|
%
|
|
|
|
|
|
|
|
|
As the business is continuing to expand,
the amount of depreciation is increasing on account of constructing and deploying new facilities by the Company. Increase in depreciation
is primarily on account of expansion of existing Data Center at Rabale, during fiscal 2017.
Profit from operating activities
|
|
2016 -17
|
|
|
2015 -16
|
|
|
Increase/
(Decrease)
|
|
|
% Change
|
|
Operating profit
|
|
|
958
|
|
|
|
959
|
|
|
|
(1
|
)
|
|
|
-0.1
|
%
|
As a percentage of revenue
|
|
|
5.20
|
%
|
|
|
6.38
|
%
|
|
|
|
|
|
|
|
|
The operating profit as a percentage of
revenue has decreased due to percentage increase in cost of goods sold partially offset by percentage decrease in selling and distribution
expenses and depreciation and amortization expense as explained above.
Finance income/expense
|
|
2016 -17
|
|
|
2015 -16
|
|
|
Increase/
(Decrease)
|
|
|
% Change
|
|
Finance income
|
|
|
123
|
|
|
|
45
|
|
|
|
78
|
|
|
|
173
|
%
|
Finance expense
|
|
|
(437
|
)
|
|
|
(565
|
)
|
|
|
(128
|
)
|
|
|
-23
|
%
|
Net finance income/expense
|
|
|
(314
|
)
|
|
|
(520
|
)
|
|
|
(206
|
)
|
|
|
-40
|
%
|
Finance income:
The finance income
primarily consists of interest received from bank deposits of ₹27 million ($0.42 million), and interest income on other deposits
of ₹96 million ($1.48 million). The interest received from bank decreased by ₹2 million ($0.03 million) from last year,
and interest income on other deposits increased by ₹78 million ($1.22 million) on account of interest on income tax refund
received during current year amounting to ₹ 82 million ($ 1.26 million).
Finance expense:
The finance expense
primarily consists of ₹88 million ($1.36 million) of interest expense on leases, ₹255 million ($3.93 million) of interest
paid on borrowings and ₹94 million ($1.45 million) of other borrowing costs paid in respect of utilization of non-fund facilities
from the banks and other processing charges.
The decrease in finance expense is on account
of the fact that during previous year exchange loss amounting to ₹ 66 million ($1.02 million) on foreign currency loans was
classified as interest costs. During current year there is net exchange gain on foreign currency loans. Also, during previous year
an amount of ₹17 million ($0.26 million) was recognized as finance expense arising on account of loss on cross currency and
interest rate swap transactions. During current year there is net gain on such transactions amounting to ₹ 4 million ($0.06
million). Further, decrease in finance expenses being on account of reduction in interest rates and repayment of loans and leases
during current year.
Net Profit
|
|
2016-17
|
|
|
2015-16
|
|
|
Increase/
(Decrease)
|
|
|
% Change
|
|
Net Profit
|
|
|
642
|
|
|
|
438
|
|
|
|
204
|
|
|
|
47
|
%
|
As a percentage of revenue
|
|
|
3.48
|
%
|
|
|
2.92
|
%
|
|
|
|
|
|
|
|
|
The
increase in the net profit during the year 2016-17 is mainly attributable to reduction in net finance costs as explained above.
Foreign Exchange Fluctuations and Forwards
We enter into foreign exchange derivative
contracts to mitigate the risk of changes in foreign exchange rates on cash flows denominated in U.S. dollars. We enter into forward
contracts where the counter party is a bank. Forward contracts generally mature between one to six months. These contracts do not
qualify for hedge accounting under IFRS. These contracts are marked to market as at the balance sheet date and recognized in the
consolidated income statement.
Liquidity and capital resources
We have financed our operations largely
through cash generated from operations, equity issuance and bank borrowings. Our liquidity requirements are for meeting working
capital needs and capital expenditures required to upgrade and maintain our existing infrastructure.
The following table summarises our cash
flows for periods presented:
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2018
|
|
|
|
₹ In million
|
|
|
₹ In million
|
|
|
₹ In million
|
|
|
US $ in million
|
|
Net cash from / (used in) operating activities
|
|
|
2,121
|
|
|
|
1,748
|
|
|
|
2,442
|
|
|
|
33
|
|
Net cash from / (used in) investing activities
|
|
|
(1,794
|
)
|
|
|
(1,610
|
)
|
|
|
(1,566
|
)
|
|
|
(28
|
)
|
Net cash from / (used in) financing activities
|
|
|
(1,048
|
)
|
|
|
(257
|
)
|
|
|
(580
|
)
|
|
|
(16
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(5
|
)
|
|
|
(4
|
)
|
|
|
(1
|
)
|
|
|
(0
|
)
|
Net increase / (decrease) in cash and cash equivalents
|
|
|
(722
|
)
|
|
|
(119
|
)
|
|
|
296
|
|
|
|
(11
|
)
|
As of March 31, 2018, 2017 and 2016 we
had working capital of ₹ 1,851 million, ₹ 701 million, ₹ 1,047 million which includes cash and cash equivalents
of ₹ 167 million, ₹ 893 million and ₹ 1,016 million. Our working capital net of cash and cash equivalents is
₹1,684 million, ₹192 million (negative) and ₹ 31 million as of March 31, 2018, 2017 and 2016. We believe that
cash from operations, existing lines of credit and capital availability from promotor group, we have sufficient resources to meet
our liquidity requirements.
Our short term borrowings to finance working
capital requirements are primarily financed by cash credit facilities with banks. Borrowings for capital expenditures are financed
through capital leases and long term loans. We have foreign currency demand loans, which carry lower interest rates compared to
loans in Indian currency but are subject to exchange fluctuations, due to which there could be an adverse impact on cash outflows.
On October 22 2010, the company entered
into a subscription agreement with Mr Ananda Raju Vegesna, acting as representative (the “Representative”) of the purchasers
in connection with the offering. Pursuant to the terms of this subscription agreement, the company issued and allotted 125,000,000
equity shares to an entity affiliated and controlled by Mr. Raju Vegesna, our CEO, Chairman and Managing Director. In accordance
with Indian law, the purchase price is to be paid at such time as determined by Board of Directors of the company. During the fiscal
year 2017 and 2014, the Company has received an aggregate of ₹ 300 million each year, in connection with this private placement,
resulting in an aggregate of ₹ 3,100 million received till date. Although all 125,000,000 shares are deemed issued and outstanding,
the unpaid portion of the equity shares issued pursuant to the subscription agreement do not have any voting rights and are not
entitled to dividends, if declared. As of the date of this Report, Mr. Vegesna has paid for 77.50% of the shares of the subscription
.
The balance of the proceeds from the allotment of the equity shares to our promoter group, or ₹ 900 million, will take
place in tranches as per the amended subscription agreement and the Board of Directors assessment from time to time of the Company’s
capital requirements, as regards both timing and amount. See note 37 in the notes to the financial statements included in this
Annual Report.
We have borrowings of ₹ 5,793 million
as of March 31, 2018 out of which ₹ 3,946 million will be repaid within a period of 12 months. Interest outflow on existing
borrowings for next year is expected to be ₹ 454 million. We have utilized working capital facility of ₹ 2,469 million
out of limit of ₹ 2,500 million during fiscal 2018. We have unutilized non fund limit of ₹ 815 million as of March
31, 2018.
Our ongoing working capital requirements
are significantly affected by the profitability of our operations and we continue to periodically evaluate existing and new sources
of liquidity and financing. We are taking steps to improve the cash position to meet our currently known requirements at least
over the next twelve months. In light of the highly dynamic nature of our business, however, we cannot assure you that our capital
requirements and sources will not change significantly in the future.
Cash and cash equivalents:
Cash and cash equivalents comprise of ₹
1,875 million, ₹ 1,434, million, ₹ 1,123million, in bank accounts and ₹ 413 million, ₹ 449 million, ₹
613 million in the form of bank deposits as on March 31, 2018, 2017, 2016 out of which cash deposits in the form of margin money
is restricted for use by us amounting to ₹ 296 million, ₹ 263 million, ₹ 345million. Balances in foreign currency
amount to ₹ 249 million, ₹ 336 million and ₹ 285 million as of March 31, 2018, 2017and 2016.
Net cash generated
from operating activities for the year ended March 31, 2018 was ₹ 2,121 million ($ 32.61 million). This is mainly attributable
to cash generated during the year before changes in working capital ₹ 3,440 million ($ 52.89 million), increase in trade
and other payables by ₹605 million ($ 9.30 million), increase in employee benefits ₹29 million ($ 0.45 million) and
increase in deferred revenue by ₹297 million ($ 4.56 million) on account of increase in advance billing in long term projects,
decrease in inventories by ₹ 536 million ($ 8.24 million) and partially offset by increase in trade and other receivables
by ₹ 2,221 million ($ 34.14 million), increase in other assets by ₹ 519 million ($ 7.98 million).
Net cash generated
from operating activities for the year ended March 31, 2017 was ₹ 1,748 million ($ 26.96 million). This is mainly attributable
to cash generated during the year before changes in working capital ₹ 3,064 million ($ 47.25 million), increase in trade
and other payables by ₹1,379 million ($ 21.27 million), increase in employee benefits ₹27 million ($ 0.42 million)
and increase in deferred revenue by ₹173 million ($ 2.67 million) on account of increase in advance billing in long term
projects and partially offset by increase in trade and other receivables by ₹ 1,844 million ($ 28.43 million), increase in
inventories by ₹ 441 million ($ 6.80 million), other assets by ₹ 618 million ($ 9.53 million).
Net cash generated
from operating activities for the year ended March 31, 2016 was ₹ 2,442 million ($ 36.81 million). This is mainly attributable
to cash generated during the year before changes in working capital ₹ 2,785 million ($ 41.99 million), increase in trade
and other payables by ₹1,347 million ($ 20.31 million), increase in employee benefits and other assets by ₹ 36 million
($ 0.54 million) and increase in deferred revenue by ₹220 million ($ 3.32 million) on account of increase in advance billing
in long term projects and partially offset by increase in trade and other receivables by ₹ 946 million ($ 14.26 million),
increase in inventories by ₹ 508 million ($ 7.66 million).
Net cash used in investing
activities for the year ended March 31, 2018 was ₹ 1,794 million ($ 27.58 million) primarily on account of additional expenditure
on Data Center, upgradation of network backbone and investment in corporate debt securities.
Net cash used in investing
activities for the year ended March 31, 2017 was ₹ 1,610 million ($ 24.83 million) primarily on account of additional expenditure
on Data Center in Rabale, upgradation of network backbone and investment in corporate debt securities.
Net cash used in investing activities for
the year ended March 31, 2016 was ₹ 1,566 million ($ 23.61 million) primarily on account of additional expenditure on Data
Center in Rabale.
Net cash used in financing activities for
fiscal year 2018 was ₹ 1,048 million ($ 16.11 million). The increase is mainly due to repayment of lease liabilities of ₹403
million ($ 6.20 million) and finance expenses paid amounting to ₹491 million ($ 7.55 million). Also, dividend of ₹209
million ($ 3.20 million) was paid during the year. The increase is partially offset by borrowings amounting ₹43 million ($
0.66 million) and proceeds from issue of shares including share premium under ESOP ₹12 million ($ 0.19 million) received
during the year.
Net cash used in financing activities for
fiscal year 2017 was ₹ 257 million ($ 3.96 million). The increase is mainly due to repayment of lease liabilities of ₹603
million ($ 9.30 million) and finance expenses paid amounting to ₹427 million ($ 6.59 million). Also, dividend of ₹170
million ($ 2.62 million) was paid during the year. The increase is partially offset by borrowings amounting ₹643 million
($ 9.92 million) and call money on shares amounting to ₹300 million ($ 4.63 million) received during the year.
Net cash used in financing
activities for fiscal year 2016 was ₹ 580 million ($ 8.75 million). The increase is mainly due to repayment of lease liabilities
of ₹543 million ($ 8.20 million) and finance expenses paid amounting to ₹568 million ($ 8.56 million). Also dividend
of ₹170 million ($ 2.56 million) was paid during the year. The increase is partially offset by borrowings amounting ₹701
million ($ 10.57 million) during the year.
Capital expenditure
We incurred
₹
1,475 million (US$ 22.68 million) towards capital expenditure for the year ended March 31, 2018. We expect further capital expenditure
to be incurred during the fiscal year 2019 to strengthen our infrastructure capabilities. The capital expenditure was funded out
of internal accruals, bank borrowings and finance leasing arrangements. Also refer to section “Principal Capital Expenditures”
under Item 4 for capital commitments as on March 31, 2018.
Research and development
The Company does not
have research and development activities and has also not undertaken any sponsored research and development activities.
Trends
The information is
set forth under the caption ‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’
- ‘Operating and Financial review and Prospects’.
Off-balance sheet arrangements
We have not entered into any off-balance
sheet arrangements as defined by SEC Final Rule 67 (FR-67), “Disclosure in Management’s Discussion and Analysis
about Off-Balance Sheet Arrangements and Aggregate Contractual Obligations”.
Contractual obligations
Set forth below are our contractual obligations
as of March 31, 2018:
Payments due by period (₹ 000s)
|
Contractual Obligations
|
|
Total
|
|
|
Less
than 1 year
|
|
|
1-3 years
|
|
|
3-5 years
|
|
|
More
than 5
years
|
|
Long Term Debt Obligations
|
|
|
3,615,748
|
|
|
|
1,242,517
|
|
|
|
2,102,955
|
|
|
|
270,276
|
|
|
|
-
|
|
Short Term Borrowings
|
|
|
2,597,781
|
|
|
|
2,597,781
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Finance Lease Obligations
|
|
|
210,302
|
|
|
|
105,274
|
|
|
|
101,888
|
|
|
|
3,140
|
|
|
|
-
|
|
Non-cancellable Operating Lease obligations
|
|
|
990,859
|
|
|
|
112,358
|
|
|
|
238,218
|
|
|
|
253,730
|
|
|
|
386,553
|
|
Purchase Obligations
|
|
|
1,032,695
|
|
|
|
1,032,695
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
8,447,385
|
|
|
|
5,090,625
|
|
|
|
2,443,061
|
|
|
|
527,146
|
|
|
|
386,553
|
|
Recent Accounting Pronouncements
|
(i)
|
IFRS 15 Revenue from Contracts with Customers:
In May 2014, the International
Accounting Standards Board (IASB) issued IFRS 15, Revenue from Contracts with Customers. The core principle of the new
standard is that an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount
that reflects the consideration which the entity expects to receive in exchange for those goods or services. Further the new
standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising
from the entity’s contracts with customers. The standard permits the use of either the retrospective or cumulative
effect transition method. The effective date for adoption of IFRS 15 is annual periods beginning on or after January 1, 2018,
the Group will adopt the standard with effect from April 1, 2018 by using the cumulative effect transition method and
accordingly comparatives will not be retrospectively adjusted. The effect on adoption of IFRS 15 on Statement of Profit and
Loss is not expected to be significant and the Group will recognise the effect of initial application in the opening retained
earnings as per the transitional provisions prescribed under this Standard.
|
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(ii)
|
IFRS 16 leases:
IFRS 16 on lease was issued on January 13, 2016 and is effective from the
year January 1, 2019. The standard replaces all existing lease accounting requirements and represents a significant change in accounting
and reporting of leases, with more assets and liabilities to be reported on the Statement of Financial Position and a different
recognition of lease costs. The Group is currently evaluating the effect of the standard on the consolidated financial statements.
|
|
(iii)
|
IFRIC 22 Foreign currency transactions and advance consideration:
IFRIC 22 was issued on
December 8, 2016 which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial
recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency.
The effective date for adoption of IFRIC 22 is annual reporting periods beginning on or after January 1, 2018. The Group will adopt
the amendment with effect from April 1, 2018, the Group has evaluated the requirements of amendment and the effect on the financial
statement is expected to be insignificant.
|
|
(iv)
|
IFRIC 23 Uncertainty over income tax treatments:
IFRIC
23 was issued on June 7, 2017 to clarify the accounting for uncertainties in income taxes.
The effective date for adoption
of IFRIC 23 is annual reporting periods beginning on or after January 1, 2019, though early adoption is permitted. The Group is
currently evaluating the effect of the same on the consolidated financial statements.
|
|
(v)
|
Amendments to IFRS 2, Share-based payment:
In June
2016, the International Accounting Standards Board issued the amendments to IFRS 2, providing specific guidance for measurement
of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding
taxes. It clarifies that the fair value of cash-settled awards is determined on a basis consistent with that used for equity-settled
awards. Market-based performance conditions and non-vesting conditions are reflected in the ‘fair values’, but non-market
performance conditions and service vesting conditions are reflected in the estimate of the number of awards expected to vest. Also,
the amendment clarifies that if the terms and conditions of a cash-settled share-based payment transaction are modified with the
result that it becomes an equity-settled share-based payment transaction, the transaction is accounted for as such from the date
of the modification. Further, the amendment requires the award that includes a net settlement feature in respect of withholding
taxes to be treated as equity-settled in its entirety. The cash payment to the tax authority is treated as if it was part of an
equity settlement. The effective date for adoption of the amendments to IFRS 2 is annual reporting periods beginning on or after
January 1, 2018, though early adoption is permitted. The Group has evaluated the requirements of amendment and the effect on the
financial statement is expected to be insignificant.
|
|
(vi)
|
Ammendments in IAS 19 – Employee Benefits:
In
February 2018, the IASB issued amendments to IAS 19 – “Employee Benefits” regarding plan amendments, curtailments
and settlements. The amendments in Plan Amendment, Curtailment or Settlement are as follows;
|
a)
If a plan amendment, curtailment or settlement occurs, it is now mandatory that the current service cost and the net interest
for the period after the remeasurement are determined using the assumptions used for the remeasurement;
b)
In addition, amendments have been included to clarify the effect of a plan amendment, curtailment or settlement on the requirements
regarding asset ceiling.
The
above amendments are effective for annual periods beginning on or after January 1, 2019. Earlier application is permitted but must
be disclosed.
The
Company is currently evaluating the impact of these amendments on its consolidated financial statements
.
Critical Accounting Policies
Our accounting policies affecting our financial
condition and results of operations are more fully described in Note 3 to our Consolidated Financial Statements included in Item
18 of this Annual Report on Form 20-F. Certain of our accounting policies require the application of judgment by management in
selecting appropriate assumptions for calculating financial estimates, which inherently contain some degree of uncertainty. Management
bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the reported carrying values of assets and liabilities and the reported
amounts of revenues and expenses that may not be readily apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.
We believe the following are the critical
accounting policies and related judgments and estimates used in the preparation of the company’s Consolidated Financial Statements.
Management has discussed the application of these critical accounting estimates with our Board of Directors and Audit Committee.
Revenue Recognition
Revenue from the sale of goods is measured
at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized
when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable,
the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with
the goods, and the amount of revenue can be measured reliably. Transfers of risks and rewards vary depending on the individual
terms of the contract of sale.
Revenue from services
rendered is recognized in the consolidated income statement in proportion to the stage of completion of the transaction at the
reporting date. Revenue is recognized when the following conditions are met:
|
o
|
the amount of revenue can be measured reliably;
|
|
o
|
it is probable that the economic benefits will flow to the seller;
|
|
o
|
the stage of completion at the balance sheet date can be measured reliably; and
|
|
o
|
the costs incurred, or to be incurred, in respect of the transaction can be measured reliably.
|
The revenue recognition in respect of the
various streams of revenue is described below:
(i) Telecom Services:
Revenue from
Telecom services includes Data network services and Voice services. Telecom services primarily include revenue from
connectivity services, NLD/ILD services and to a lesser extent, revenues from the installation of connectivity links. The
Company provides connectivity for a fixed period of time at a fixed rate regardless of usage. The revenue attributable
to connectivity services is recognized rateably over the period of the contract. The revenue attributable to the installation
of the link is recognised on completion of the installation work. The Group provides NLD (National Long Distance) and ILD
(International Long Distance) services through Company’s network. The Group carries voice traffic, both national
and international, using the network back-bone and delivers voice traffic to Inter-connect Operators. Revenue is
recognized based upon metered call units of voice traffic terminated on the Company’s network.
(ii) Data Center Services:
Revenues from DC services consists co-location
of racks and power charges. The contracts are mainly for a fixed rate for a period of time and are recognised over the period during
which the service is provided.
(iii) Cloud and Managed Services:
Revenue from Cloud and managed services
includes revenue from “Cloud and storage solutions, managed services, value added services and Remote Infrastructure Management.
Revenues from Cloud and on demand compute and storage, are primarily fixed for a period of time. Revenues from domestic and international
managed services, comprise of value added services, operations and maintenance of projects and from remote infrastructure management.
Contracts from this segment are fixed and could also be based on time and material.
(iv) Technology Integration Services:
Revenue from Technology Integration Services
includes system integration services, revenue from construction of Data Centers, network services, security solutions and to a
lesser extent, revenue from hardware and software.
Revenue from construction contracts represents
revenue from construction of Data Centers to the specific needs and design of the customer. Such contract revenue includes the
initial amount agreed in the contract plus any variations in contract work, claims and incentive payments, to the extent that it
is probable that they will result in revenue and can be measured reliably. As soon as the outcome of a construction contract can
be estimated reliably, contract revenue is recognised in profit or loss in proportion to the stage of completion of the contract.
Contract expenses are recognised as incurred unless they create an asset related to future contract activity. The stage of completion
is assessed by reference to the cost incurred till date to the total estimated costs. When the outcome of a construction contract
cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be
recoverable. An expected loss on a contract is recognised immediately in the statement of profit or loss.
(v) Applications Integration Services:
Revenue from Applications Integration services
includes online assessment, document management services, web development, mailing solutions, supply chain software, digital certificate
based authentication services and e-learning software development services. E-learning software development services consist
of structuring of content, developing modules, delivery and training users in the modules developed. Revenue from Applications
Integration Services is recognised based on percentage of completion method. Percentage completion is measured based on the amount
of time/effort spent on a project. Revenue in relation to ‘time’ is measured as the agreed rate per unit of time multiplied
by the units of time expended. The element of revenue related to materials is measured in accordance with the terms of the contract.
The Company enters into contracts with
customers to serve advertisements in the portal and the Company is paid on the basis of impressions, click-throughs or leads and
in each case the revenue is recognised rateably over the period of the contract based on actual impressions/click-throughs / leads
delivered. Revenue from commissions earned on electronic commerce transactions are recognised when the transactions are completed.
Digital Certification revenues include
income received on account of Web certification. Generally the Company does not hold after sale service commitments after the activation
of the Digital Certificates sold and accordingly, revenue is recognised fully on the date of activation of the respective certificate.
Billing towards one time installation / training is recognised upon completion thereof.
In certain cases, some elements belonging
to the services mentioned above are sold as a package consisting of all or some of the elements. In these cases it is necessary
to apply the recognition criteria to the separately identifiable components of a single transaction in order to reflect the substance
of the transaction with different revenue allocations for each component. These multiple element arrangements are recognised as
separable elements because each element constitutes a separate earning process, each element has a fair value that is reliable,
verifiable and objectively determinable, and the undelivered element is not essential to functionality of the delivered elements.
Income from operating leases:
Lease rentals arising on assets given on
operating leases are recognised over the period of the lease term on a straight line basis.
Indefeasible Right of Use (IRU)
The Company has entered into IRU arrangements
through which it entitles its customers to right of use of specified bandwidth capacity for a specified period of time. The upfront
payment received towards right of use of bandwidth capacities under such agreements have been treated as deferred revenue and is
recognised on a straight line basis over the term of the arrangement.
Accounting Estimates
While preparing financial
statements we make estimates and assumptions that affect the reported amount of assets, liabilities, disclosure of contingent liabilities
at the date of financial statements and the reported amount of revenues and expenses for the reporting period.
Our estimate of liability
relating to pending litigation is based on currently available facts and our assessment of the probability of an unfavorable outcome.
Considering the uncertainties about the ultimate outcome and the amount of losses, we re-assess our estimates as additional information
becomes available. Such revisions in our estimates could materially impact our results of operations and our financial position.
Management believes that the estimates used in the preparation of the Consolidated Financial Statements are prudent and reasonable.
The actual results could differ from these estimates.
Business Combinations, Goodwill and Intangible
Assets
Business combinations
are accounted for using IFRS 3 (Revised), Business Combinations. IFRS 3 requires the identifiable intangible assets and contingent
consideration to be fair valued in order to ascertain the net fair value of identifiable assets, liabilities and contingent liabilities
of the acquiree. Significant estimates are required to be made in determining the value of contingent consideration and intangible
assets. These valuations are conducted by independent valuation experts.
Business combinations have been accounted
for using the acquisition method under the provisions of IFRS 3 (Revised). The cost of acquisition is measured at the fair value
of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of acquisition. The cost of
acquisition also includes the fair value of any contingent consideration. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their fair value on the date of acquisition.
Transactions costs
that the group incurs in connection with a business combination such as finder’s fees, legal fees, due diligence fees, and
other professional and consulting fees are expensed as incurred.
We amortize intangible
assets on straight line basis over their respective individual estimated useful lives. Our estimates of the useful lives of identified
intangible assets are based on a number of factors including the effects of obsolescence, demand, competition, and other economic
factors (such as the stability of the industry, and known technological advances), and the level of maintenance expenditures required
to obtain the expected future cash flows from the asset.
Estimated Useful Lives of Property, Plant
and Equipment
In accordance with IAS 16,
Property,
Plant and Equipment
, we estimate the useful lives of plant and equipment in order to determine the amount of depreciation expense
to be recorded during any reporting period. If technological changes were to occur more rapidly than anticipated or in a different
form than anticipated, the useful lives assigned to these assets may need to be shortened, resulting in the recognition of increased
depreciation expense in future periods. Likewise, if the anticipated technological or other changes occur more slowly than expected,
the useful lives could be extended. This could result in a reduction of depreciation expense in future periods.
Impairment
Financial
assets
Trade receivables, contract assets, lease
receivables under IFRS 9, investments in debt instruments that are carried at amortised cost, investments in debt instruments that
are carried at FVTOCI are tested for impairment based on the expected credit losses for the respective financial asset.
Trade receivables
An impairment analysis is performed at
each reporting date. The expected credit losses over lifetime of the asset are estimated by adopting the simplified approach using
a provision matrix which is based on historical loss rates reflecting current condition and forecasts of future economic conditions.
In this approach assets are grouped on the basis of similar credit characteristics such as industry, customer segment, past due
status and other factors which are relevant to estimate the expected cash loss from these assets.
Other financial assets
Other financial assets are tested for impairment
based on significant change in credit risk since initial recognition and impairment is measured based on probability of default
over the lifetime when there is significant increase in credit risk.
Non-financial assets:
The carrying amounts
of the Group’s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount
is estimated. For goodwill, the recoverable amount is estimated each year at 31 December.
The recoverable amount
of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value
in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets
that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing
use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).
The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that
are expected to benefit from the synergies of the combination. Corporate assets for the purpose of impairment testing are allocated
to the cash generating units on a reasonable and consistent basis.
An impairment loss
is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment
losses are recognized in profit or loss. Impairment losses recognized in respect of cash-generating units are allocated first to
reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in
the unit or group of units on a
pro rata basis.
Reversal of impairment loss:
An impairment loss
in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed
at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there
has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation
or amortization, if no impairment loss had been recognized.
Income taxes:
Income
tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it
relates to items recognized directly in equity, in which case it is recognized in other comprehensive income.
Current
tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting
date.
Deferred
tax is recognized using the balance sheet method, providing for temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the
following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination
and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and associates
to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized
for taxable temporary differences arising on the initial recognition of goodwill, as the same is not deductible for tax purposes.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on
the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset
if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by
the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities
and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
A
deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which
the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent
that it is no longer probable that the related tax benefit will be realized.
Deferred
tax arising on investments in subsidiaries and associates is recognized except where the Group is able to control the reversal
of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred
tax arising on the temporary differences arising out of undistributed earnings of the equity method accounted investee is recorded
based on the management’s intention. If the intention is to realize the undistributed earnings through sale, deferred tax
is measured at the capital gains tax rates that are expected to be applied to temporary differences when they reverse. However,
when the intention is to realize the undistributed earnings through dividend, the Group’s share of the income and expenses
of the equity method accounted investee is recorded in the statement of income, after considering any taxes on dividend payable
by the equity method accounted investee and no deferred tax is set up in the Group's books as the tax liability is not with the
Group.
Item 6.
Directors,
Senior Management and Employees
Directors and Executive Officers
The following table
sets forth the name, age and position of each director and senior management executive officer of our Company as of March 31, 2018:
Name
|
|
Age
|
|
|
Designation
|
Raju Vegesna (4)
|
|
|
58
|
|
|
CEO, Chairman & Managing Director
|
Ananda Raju Vegesna (2) (4) (5)
|
|
|
58
|
|
|
Executive Director
|
C B Mouli (1)
|
|
|
71
|
|
|
Director, Chairman & Financial Expert of Audit Committee
|
S K Rao (1) (2) (3) (5) (6)
|
|
|
74
|
|
|
Director
|
T H Chowdary (2) (3) (5)
|
|
|
86
|
|
|
Director & Chairman of Compensation & Nominating Committees
|
Vegesna Bala Saraswathi
|
|
|
54
|
|
|
Director
|
C E S Azariah (1) (2) (3) (4) (5)
|
|
|
70
|
|
|
Director
|
Kamal Nath
|
|
|
53
|
|
|
Chief Executive Officer - Sify Technologies Limited, India
|
M P Vijay Kumar
|
|
|
48
|
|
|
Chief Financial Officer
|
C R Rao
|
|
|
58
|
|
|
Chief Operating Officer
|
|
(1)
|
Member of the Audit Committee.
|
|
(2)
|
Member of the Compensation Committee.
|
|
(3)
|
Member of the Nominating Committee.
|
|
(4)
|
Member of the Corporate Social Responsibility Committee.
|
|
(5)
|
Member of Nomination and Remuneration Committee.
|
|
(6)
|
Dr S K Rao, an
Independent Director of the Company, a member of the Audit Committee, Compensation Committee and Nominating Committee has
resigned from Board on June 4, 2018 due to health conditions. As a result of Dr. Rao’s resignation, the Company is
currently not compliant with NASDAQ Listing Rule 5605(b), which requires a majority of the Board of Directors to be comprised
of independent directors, and Rule 5605(c)(2), which requires a company to have an Audit Committee comprised of at least
three independent directors. The Company intends to regain compliance by adding a new independent director before the end of
the cure period allowed under NASDAQ rules. Dr S K Rao’s position on the Board, Audit Committee, Compensation Committee
and Nominating Committee will remain vacant till the vacancy is filled up.
|
Raju Vegesna, CEO,
Chairman and Managing Director, has served as a Director of our Company since November 2005. He was appointed as the Chief Executive
Officer and Managing Director of the Company effective July 18, 2006. Mr. Raju Vegesna is a Silicon Valley entrepreneur who founded
several leading edge technology companies, including Server Works Corporation, acquired by Broadcom in 2001. After that acquisition
he had a brief stint with Broadcom. He holds a BS in Electrical Engineering from the University of Bangalore and holds an MS in
Computer Engineering from Wayne State University, USA, and holds several patents in Microprocessor and Multiprocessor technology.
He is also a Director of Server Engines LLC, Nulife Corp, USA. and Raju Vegesna Infotech & Industries Private Limited.
Ananda Raju Vegesna,
brother of Mr Raju Vegesna, CEO, Chairman and Managing Director, has served as an Executive Director of our Company since June
2007. He is the Director of Infinity Satcom Universal Private Limited, Village Inns (India) Limited, Raju Vegesna Infotech and
Industries Limited, Raju Vegesna Developers Private Limited, Ramanand Core Investment Company Private Limited, .
C.B. Mouli has served
as a Director of our Company since July 2005. Mr. Mouli is a member of the Institute of Chartered Accountants of India and also
holds a Bachelor of Law Degree. Mr Mouli, a partner of C.B. Mouli & Associates, a Chartered Accountants firm. He is a Director
of Ammana Equity Fund Private Limited.
S.K. Rao served as
a Director of our Company from July 2005 until his recent resignation on June 4, 2018. Mr Rao retired as the Director General,
Administrative Staff College of India, Hyderabad. Mr Rao previously worked at the Commonwealth Secretariat in London in various
diplomatic capacities. He also acted as the Consultant for the United Nations and represented the Commonwealth Secretariat as an
Observer at the meetings of the UN General Assembly. Mr. Rao holds a MA and a PhD in Economics from Trinity College, Cambridge,
U.K
.
T.H. Chowdary has served
as a Director of our Company since February 1996. Dr. Chowdary retired as the Chief Executive Officer of VSNL. He has held key
positions in the ITU, Intelsat and other international telecommunications organizations during the course of his career, and was
involved in the establishment of the Center for Telecommunications Management Studies (CTMS) at Hyderabad. Dr. Chowdary is also
a director in Softsol India Limited and Tera Software Limited.
Ms Vegesna Bala Saraswathi,
spouse of Mr Raju Vegesna, CEO, Chairman and Managing Director, served as Director of our Company since July 2015. Ms Vegesna Bala
Saraswathi is a Commerce Graduate, Associate Course Work in Computer Skills (US) and Associate Course Work in US Federal and State
Taxes (US).
C E S Azariah has served
as a Director of our Company since March 2013. Prior to joining the Company, he served as CEO of Fixed Income Money Market and
Derivatives Association of India (FIMMDA). He has vast experience of more than 35 years in different segments of operations in
State Bank of India and retired as Chief General Manager.
Kamal Nath has served
as the Chief Executive Officer of Sify Technologies Limited, India, since August 2012. He is a Graduate in Electronics & Communications
from BIT, Sindri. He has an overall experience of close to three decades in reputed organizations. Prior to joining Sify, he was
with HCL Technologies Limited, a major IT company, responsible for the Infrastructure Services Division. He was with Larsen &
Toubro Limited and Uptron India Limited in the early part of his career. He is responsible for the business operations in India.
M P Vijay Kumar has
served as Chief Financial Officer since October 2007 and has over two decades of experience in corporate audits, financial/management
consulting, legal advisory services, management audit and investment banking. He is a Chartered Accountant and a Fellow Member
of the Institute of Chartered Accountants of India, Fellow Member of the Institute of Company Secretaries of India and Associate
member of the Institute of Cost and Works Accountants of India.
C R Rao, the Chief
Operating Officer, has served as Vice President - Head HR & Administration since March 2009. He is a Graduate in Commerce
and Law and also holds an MBA. He comes with an overall experience of close to three decades in Strategic
Planning and Operations Management. Prior to joining Sify, he was with GSA Lufthansa as Vice President, responsible
for Tamil Nadu and Andhra Pradesh. His key responsibilities included Strategic Planning, Business Development, Sales and
Marketing for the Cargo division.
Infinity Capital Ventures,
LP beneficially owned 7.78 % of our equity shares as of March 31, 2018. This shareholder is a party to the Subscription Agreement
dated November 10, 2005 with our Company. The Subscription Agreement provides that, among other things, the Company shall appoint
Mr Raju Vegesna as the Chairman of the Board of Directors, Infinity Capital shall also nominate another person to the Board of
Directors and so long as Infinity Capital continues to own at least 10% of the Company’s outstanding Equity Shares, the Company
shall not enter into any agreement pursuant to which it would provide a third party with registration rights for Company securities,
without the consent of Infinity Capital. In November 2005, Mr Raju Vegesna, a nominee of Infinity Capital Ventures, LP, was appointed
as Chairman of our Board of Directors. In February 2006, the Company also appointed Mr. P S Raju as the second nominee of Infinity
Capital to the Board of Directors. Consequent to the resignation of Mr P S Raju, as a Director effective May 31, 2015, Ms Vegesna
Bala Saraswathi was appointed as an additional Director effective July 22, 2015 of our Company as a Nominee. Further, she was elected
by shareholders as a Director at the Annual General Meeting held on July 4, 2016. She got re-elected as a director in Annual General
Meeting held on July 6, 2017.
Infinity Satcom Universal
Private Limited beneficially owned 8.13% of our equity shares as of March 31, 2018. Mr Ananda Raju Vegesna, Executive Director
of the Company and brother of Mr Raju Vegesna, is the Director of Infinity Satcom. Infinity Satcom is presently controlled by Mr
Raju Vegesna.
Director Compensation
Our Articles of Association
provide that each of our directors may receive a sitting fee not exceeding the maximum limits prescribed under the provisions of
the Indian Companies Act, 2013. Accordingly, our Directors, other than the Chairman and Managing Director and Executive Director,
have been receiving ₹ 20,000 for each committee meeting and ₹ 50,000 for each Board meeting attended by them.
Mr Raju Vegesna, who is our CEO, Chairman
and Managing Director, does not receive any compensation for his service on our Board of Directors. Similarly, Mr Ananda Raju Vegesna,
who is employed as our Executive Director, also does not receive any compensation for his service on our Board of Directors. Directors
are reimbursed for travel and out-of-pocket expenses in connection with their attendance at Board and Committee meetings. T. H.
Chowdary, a Director of our Company, has been receiving ₹ 20,000 per month till January 2018, and the same has been revised
to ₹ 25,000 per month with effect from February 1, 2018 for the technical services rendered by him, after obtaining requisite
approval.
Officer Compensation
The following table
sets forth all compensation paid by us during the fiscal year ended March 31, 2018 to our executive officers:
|
|
Summary Compensation Table
(
₹
in million)
|
|
|
|
|
|
|
|
|
|
|
Salary(1)
|
|
|
Bonus
|
|
Name
|
|
|
|
|
(Performance
based incentive)
|
|
Kamal Nath
|
|
|
14.22
|
|
|
|
1.07
|
|
M P Vijay Kumar
|
|
|
11.80
|
|
|
|
0.80
|
|
C R Rao
|
|
|
11.94
|
|
|
|
0.95
|
|
|
(1)
|
Includes provident fund contributions.
|
As per the service
contracts entered into with the employees (including executive officers), the Company provides the following retirement benefits:
(a) Provident fund contributions and (b) Gratuity.
Provident fund contribution
is a defined contribution plan governed by a statute in India. Under this, both employer and employee make monthly contributions
(determined in relation to the basic salary of the respective employees) to a fund administered by the Government of India.
Gratuity is a defined
benefit retirement plan covering all employees and provides for lump sum payment to employees at retirement or termination (computed
based on the respective employees last drawn basic salary and years of employment with the Company). Liability for gratuity is
accrued based on an actuarial valuation on an overall Company basis.
The Directors (who
are not executive officers) are not entitled for any remuneration including any pension, retirement or similar benefit schemes.
The details of our contribution to provident
fund in respect of the executive officers are set out below:
Name
|
|
₹ in million
|
|
Kamal Nath
|
|
|
0.68
|
|
M P Vijay Kumar
|
|
|
0.50
|
|
C R Rao
|
|
|
0.50
|
|
Gratuity expense is
determined at an overall Company level based on an actuarial valuation performed by an independent actuary. Thus, the cost for
the year ended March 31, 2018 in respect of gratuity and compensated absences towards executive officers of the Company was not
separately determined. Gratuity cost relating to such executive officers is not estimated to be material.
We make bonus payments
to employees including executive officers upon satisfactory achievement of the following two performance criteria.
(i) Performance of
the Company: Represents bonus payable on achievement of overall revenue and net profit targets for the Company.
(ii) Performance of
the individual: Represents bonus payable on achievement of the individual’s Key Responsibility Areas (KRA) and Key Performance
Indicators (KPI). These KRAs and KPIs vary in relation to each employee including executive officers and include both financial
and non-financial parameters.
We have provided for
₹ 106.73 million ($1.64 million) towards bonus payable for the year ended March 31, 2018 to employees including executive
officers who have achieved the KRAs and KPIs.
Total of 1.65 million
options were allotted to executive officers as part of ASOP 2014 plan during fiscal 2015. No such options were allotted to executive
officers during fiscal 2017 and 2018. Related charge for the fiscal 2018 amounted to ₹1.35 million ($0.02 million).
Board Composition
Our Articles of Association
sets the minimum number of directors at three and the maximum number of directors at twelve. We currently have seven directors
on the Board. The Indian Companies Act and our Articles of Association require the following:
|
•
|
at least two-thirds of our directors shall be subject to re-election by our shareholders; and
|
|
•
|
at least one-third of our directors who are subject to re-election shall be up for re-election
at each annual meeting of our shareholders.
|
However Independent
Directors are not liable to retire by rotation.
On July 15, 2005, we
appointed Messrs. S.K. Rao and C.B. Mouli as independent Directors of the Board to comply with the applicable NASDAQ rules. Dr.
S.K Rao resigned effective June 4, 2018. His position on the Board, Audit Committee, Compensation Committee and Nominating Committee
will remain vacant until the Company is able to find a suitable replacement.
Mr C E S Azariah was
appointed as an independent Director effective March 25, 2013.
Dr T H Chowdary is also an independent
Director of the Board.
Each of these Directors
(Messrs C B Mouli, C E S Azariah and, T H Chowdary) continue to remain independent in accordance with NASDAQ rules.
In addition, based on the recommendation
of the Board of Directors the above four Directors were appointed by the shareholders as the Independent Directors of the Board
for a term of five consecutive years from the conclusion of the Eighteenth Annual General Meeting held on July 28, 2014.
Term of Directors
Mr Raju Vegesna, CEO, Chairman & Managing Director
|
Appointed as Chairman & Managing Director for a period of five years effective July 18, 2009. Pursuant to the recommendation of the Nomination & Remuneration Committee and the Board, he was reappointed as the Chairman & Managing Director for a further period of five years effective July 18, 2014 and the same was approved by the shareholders of the Company at the Annual General Meeting held on July 28, 2014. The Ministry of Corporate Affairs, Government of India also approved the same. As per Articles of Association of the Company, he is not required to retire by rotation and hence shall hold office for the full term.
|
Mr Ananda Raju Vegesna, Executive Director
|
Appointed as Executive Director for a period of five years effective June 22,
2010. Pursuant to the recommendation of the Nomination & Remuneration Committee and the Board, Mr Ananda Raju Vegesna
was reappointed as the Executive Director for a further period of five years effective June 22, 2015 which was approved by
the shareholders at the Annual General Meeting held on June 18, 2015. Further, as per the Act, he retires by rotation at the
ensuing Annual General Meeting scheduled on July 6, 2018 and is eligible for re-election
|
Dr T H Chowdary, Chairman of Compensation and Nominating Committees
|
Appointed as a Director in February 1996. As per the Indian Companies Act, 2013,
he was appointed as an Independent Director for a term of five consecutive years from the conclusion of the Eighteenth Annual
General Meeting held on July 28, 2014.
|
Dr S K Rao
|
Appointed as a Director in July 2005. As per the Indian Companies Act, 2013, he
was appointed as an Independent Director for a term of five consecutive years from the conclusion of the Eighteenth Annual
General Meeting held on July 28, 2014. Dr. S.k.Rao resigned effective June, 4 2018.
|
Ms Vegesna Bala Saraswathi
|
Appointed as an Additional Director in July 2015. As per the Indian Companies Act,
2013, she was elected by the shareholders at the Annual General Meeting held on July 4, 2016. Further, as per the Act, she
retires by rotation and eligible for re-election. She got re-elected at the Annual General Meeting held on July 6, 2017.
|
Mr C B Mouli, Chairman and Financial Expert of Audit Committee
|
Appointed as a Director in July 2005. As per the Indian Companies Act, 2013, he
was appointed as an Independent Director for a term of five consecutive years from the conclusion of the Eighteenth Annual
General Meeting held on July 28, 2014.
|
Mr C E S Azariah
|
Appointed as a Director by the Board of Directors in March 2013. As per the Indian
Companies Act, 2013, he was appointed as an Independent Director for a term of five consecutive years from the conclusion
of the Eighteenth Annual General Meeting held on July 28, 2014.
|
The Company has service
contracts with Mr. Raju Vegesna, CEO, Chairman and Managing Director. The service contracts with Mr. Raju Vegesna do not provide
for any remuneration or benefits either during or upon termination of employment.
For other non-executive
Directors, the Company does not have any service contract and such directors’ term is governed by the Indian Companies Act,
2013.
The Company does not have
any service contract with the other Senior Executives of its administrative, supervisory or management bodies. Such senior executives’
appointment does not have any specific term and can be terminated by either party based on the terms of the appointment.
Board Committees
Details relating to Audit,
Compensation, Corporate Social Responsibility and Nominating Committees of our board are provided below:
Audit Committee
Our Audit Committee is
comprised of two independent directors, as determined under applicable NASDAQ rules. They are:
Mr C B Mouli;
and
Mr C E S Azariah
The primary objective
of the Audit Committee is to monitor and provide effective supervision of our financial reporting process with a view towards
ensuring accurate, timely and proper disclosures and the transparency, integrity and quality of financial reporting. Our Audit
Committee oversees the work carried out in the financial reporting process by our management, including the internal auditors
and the independent auditor and reviews the processes and safeguards employed by each. In addition, our Audit Committee has the
responsibility of oversight and supervision over our system of internal control over financial reporting, audit process, and process
for monitoring the compliance with related laws and regulations. The Audit Committee recommends to our Board the appointment of
our independent registered auditors and approves the scope of both audit and non-audit services. All members of the Audit Committee
meet the independence requirements and majority of them meet financial literacy requirements as defined by applicable NASDAQ and
SEC rules.
The Audit Committee held
five meetings in person during fiscal year 2017-18.
The Audit Committee has
adopted a Charter and it is reviewed annually.
Compensation Committee
Our Compensation Committee
consists of one executive and two independent directors as determined under applicable NASDAQ rules, and consists of:
|
(ii)
|
Mr C E S Azariah
and
|
|
(iii)
|
Mr Ananda Raju
Vegesna
|
The Compensation Committee
of the Board of Directors determines the salaries, benefits and stock option grants for our employees, consultants, directors
and other individuals compensated by our Company. The Compensation Committee also administers our compensation plans. The Compensation
Committee has adopted a Charter, which is reviewed annually.
The Compensation Committee
held four meetings in person during fiscal 2017-18.
Corporate Social Responsibility
Committee
As per Section 135 of
the Indian Companies Act, 2013, the Company is required to spend 2% of the average net profits from the three preceding financial
years to Corporate Social Responsibility (CSR) activities. For this purpose, the Board has constituted the Corporate Social Responsibility
Committee (CSR).
The CSR Committee of the
board consists of the following Directors:
Mr Raju Vegesna
Mr Ananda Raju Vegesna
Mr C E S Azariah
The purpose of the CSR
Committee is to monitor the implementation of the CSR projects or programs or activities undertaken by the Company. A responsibility
statement shall be signed by the CSR Committee confirming compliance with the CSR objectives and Policy of the Company. The Committee
shall submit its report to the Board and the Board shall report the same in its report to the shareholders annually.
The Corporate Social
Responsibility (CSR) is displayed on the Company’s website at
http://corporate.sify.com/csr-policy.html
http://sifytechnologies.com/investors/company-profile/csr-policy/
.
For the financial year
2017-18, the company has spent ₹ 9.54 million in pursuance of its Corporate Social Responsibility Policy in the following
manner:
|
1.
|
Contribution
to the Hospital for the Disabled
: the Company has contributed
₹
6.30 million to Sri Venkateswara Institute of Research and Rehabilitation for
the Disabled Trust, Dwarakha, Tirumala Hospital for the disabled which runs by the Trust.
|
|
2.
|
Contribution
towards promoting Education:
the Company has contributed
₹
3.24 million towards promotion of education.
|
Nominating Committee
The Nominating Committee
of the board consists exclusively of the following non-executive, independent directors as determined under applicable NASDAQ
rules:
Dr T H Chowdary
and
Mr C E S Azariah
The purpose of Nominating
Committee is to oversee nomination process for top level management and specifically to identify, screen and review individuals
qualified to serve as our Executive Directors, Non-Executive Directors and Independent Directors consistent with criteria approved
by our board and to recommend, for approval by our board, nominees for election at our annual general meeting of shareholders.
On July 22, 2015, the
Nominating Committee has reviewed and recommended the appointment of Ms Vegesna Bala Saraswathi as an additional Director of the
Company who holds office upto the Annual General Meeting. Further, she was elected by shareholders as a Director at the Annual
General Meeting held on July 4, 2016, Further, as per the Act, she retires by rotation and eligible for re-election. She was re-elected
at the Annual General Meeting held on July 6, 2017. The Nominations Committee has adopted a charter.
Employees
As of March 31, 2018,
we had 2,608 employees, compared with 2,318 as of March 31, 2017. Of our current employees, 127 are administrative, 473 form our
sales and marketing, 32 are in product and content development, 1,904 are dedicated to technology and technical support, and 72
are in business process and customer care. None of our employees are represented by a union. We believe that our relationship
with our employees is good.
Stock Ownership
The following table sets
forth information with respect to the beneficial ownership of our equity shares as of May 31, 2018 by each director and our senior
management executives. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment
power with respect to equity shares. Unless otherwise indicated, the persons named in the table have sole voting and sole investment
control with respect to all equity shares beneficially owned.
|
|
Equity
Shares
Beneficially
Owned
|
|
Beneficial Owner
|
|
Number
|
|
|
Percent
|
|
Raju Vegesna *
|
|
|
154,053,326
|
|
|
|
86.22
|
%
|
Ananda Raju Vegesna
|
|
|
-
|
|
|
|
-
|
|
Vegesna Bala Saraswathi
|
|
|
-
|
|
|
|
-
|
|
T. H. Chowdary
|
|
|
-
|
|
|
|
-
|
|
C B Mouli
|
|
|
-
|
|
|
|
-
|
|
S K Rao
|
|
|
-
|
|
|
|
-
|
|
C E S Azariah
|
|
|
-
|
|
|
|
-
|
|
Out of the above 125,000,000
shares allotted to Mr. Vegesna and his affiliated entities, as all shares are issued and outstanding. However, pursuant to Indian
law, Mr. Vegesna does not have full voting power for the shares until such shares have been fully paid. As of March 31, 2018,
the entities affiliated with Mr. Vegesna had paid for 77.5% of the shares sold pursuant to the subscription agreement described
elsewhere in this form, and his beneficial ownership is approximately 83.64%. As only 96,875,000 shares have the right to vote
at this time, he may only vote those 96,875,000 shares.
The balance amount of
22.5% on the 125,000,000 shares shall be paid by the affiliated entities of Mr Vegesna as and when the same is called by the Board
of Directors of the Company based on the fund requirements of the Company. When such shares are fully paid, Mr Vegesna shall have
full voting rights on the 125,000,000 shares.
* Other than the above,
none of the Directors or Executive Officers of the Company holds any shares in the Company.
Associate Stock Option
Plan
We have an Associate Stock
Option Plan, or ASOP, which provides for the grant of options to employees of our Company. The ASOP 2014 was approved by our Board
of Directors and our shareholders in July 2014 and 25,000,000 shares were reserved for issuance under the plan. This was in addition
to the earlier ASOP Plans of 2000, 2002, 2005 and 2007. A total of 25 million equity shares are currently reserved for issuance
under our ASOP Plans. As of March 31, 2018, we had outstanding an aggregate of 5.18 million options under our ASOP Plans with
a weighted average exercise price equal to approximately ₹ 78.79 ($1.21) per equity share.
The ASOP Plans are administered
by the Compensation Committee of our Board of Directors. On the recommendation of the Compensation Committee, we issue option
letters to identified employees, with the right to convert the issued options into our equity shares at the rates indicated in
the options.
An employee holding options
may apply for exercise of the options on a date specified therein which is referred to as the conversion date. The options are
not transferable by an employee. The options lapse in the event of cessation of employment due to reasons of non-performance or
otherwise. The equity shares transferred to the employee after conversion from options is the absolute property of the employee
and will be held by the employee.
Associate Stock Option
Plan 2014
The Company introduced
a new Stock Option Plan under Associate Stock Option Plan 2014 (ASOP 2014) for granting ESOPs as Equity Shares and/or ADSs linked
warrants to the eligible Associates of the Company and its Holding/Subsidiaries/Associates. For this purpose, the Company allocated
25 million Equity Shares of ₹ 10/- each under ASOP 2014. The proposal was approved by the shareholders of the Company at
the Eighteenth Annual General Meeting held on July 28, 2014.
Subsequently, the Board
at their meeting held on January 20, 2015 approved to grant of 5,870,800 options to 85 Associates and issued Grant Letters. Further
during fiscal 2016, 2017 and 2018, the Company granted 184,300, 525,000 and 1,50,000 options to eligible Associates.
The ASOP Plans are administered
by the Compensation Committee of our Board of Directors. On the recommendation of the Compensation Committee, we issue option
letters to identified employees, with the right to convert the issued options into our equity shares at the rates indicated in
the options.
An employee holding options
may apply for exercise of the options on a date specified therein which is referred to as the conversion date. The options are
not transferable by an employee. The options lapse in the event of cessation of employment due to reasons of non-performance or
otherwise. The equity shares transferred to the employee after conversion from options is the absolute property of the employee
and will be held by the employee.
We filed Form S-8
on December 21, 2015 with SEC for the options issued under the plan. The vesting of options commenced in January 2016. During
the year ended 2018, 9 associates have exercised 1,53,860 vested options.
Item 7.
Major
Shareholders and Related Party Transactions
Principal Shareholders
The following table sets
forth information with respect to the beneficial ownership of our equity shares as of March 31, 2018 by each person or group of
affiliated persons who is known by us based on our review of public filings to beneficially own 5% or more of our equity shares.
The table gives effect to equity shares issuable within sixty days upon the exercise of all options and other rights beneficially
owned by the indicated shareholders on that date. Beneficial ownership is determined in accordance with the rules of the SEC and
includes voting and investment power with respect to equity shares as well as the power to receive the economic benefits of ownership
of securities. Unless otherwise indicated, the persons named in the table have sole voting and sole investment control with respect
to all equity shares beneficially owned. The information below is based on a review of filings made by such persons with the SEC.
Mr Raju Vegesna, the Co-Trustee
of the Vegesna Family Trust, which is the owner of Infinity Capital Venture Management LLC, which is the general partner of Infinity
Capital Ventures, LP, exercise voting control and dispositive power over the equity shares owned by Infinity Capital Ventures,
LP. Mr Raju Vegesna, CEO, Chairman and Managing Director of our Company, is affiliated with Infinity Capital Ventures, LP.
Infinity Satcom Universal
Private Limited is owned and controlled by Mr Raju Vegesna, CEO, Chairman and Managing Director of the Company.
Ramanand Core Investment
Company Private Limited is a wholly owned subsidiary company of Raju Vegesna Infotech and Industries Private Limited which is
owned and controlled by Infinity Satcom Universal Private Limited, which in turn is owned and controlled by Mr Raju Vegesna, CEO,
Chairman and Managing Director of the Company.
As of March 31, 2018,
entities affiliated with our CEO, Chairman and Managing Director, Mr. Raju Vegesna, beneficially owned approximately 86.22% of
our outstanding equity shares, which includes the 125,000,000 shares (partly paid with proportionate voting rights) issued in
connection with the private placement described below.
|
|
Equity
Shares
Beneficially
owned
|
|
Shareholder
|
|
Number
|
|
|
Percent
|
|
Infinity Capital Ventures, LP, 11601
Wilshire Boulevard, Suite 1900, Los Angeles, CA 90025
|
|
|
13,902,860
|
|
|
|
7.78
|
|
Vegesna Family Trust, LP, 11601 Wilshire Boulevard, Suite 1900, Los Angeles, CA, 90025
|
|
|
620,466
|
|
|
|
0.35
|
|
|
|
|
|
|
|
|
|
|
Infinity Satcom Universal Private Limited, Visakhapatnam
|
|
|
14,530,000
|
|
|
|
8.13
|
|
Ramanand Core Investment Company Private Limited,
Visakhapatnam*
|
|
|
125,000,000
|
|
|
|
69.96
|
|
* Ramanand Core Investment
Company Private Limited is controlled by Raju Vegesna Infotech and Industries Private Limited, which is in turn, controlled by
Infinity Satcom Universal Private Limited and therefore Infinity Satcom Universal Private Limited holds the beneficial interest
in Ramanand Core Investment Company Private Limited.
Details of significant
change in the percentage ownership held by the major shareholders:
Name of the shareholder
|
|
2015-16
|
|
|
2016-17
|
|
|
2017-18
|
|
|
|
No. of shares
|
|
|
%
|
|
|
No. of shares
|
|
|
%
|
|
|
No. of shares
|
|
|
%
|
|
Infinity Capital Ventures, LP, USA
|
|
|
13,902,860
|
|
|
|
7.79
|
|
|
|
13,902,860
|
|
|
|
7.79
|
|
|
|
13,902,860
|
|
|
|
7.78
|
|
Vegesna Family Trust, USA
|
|
|
578,191
|
|
|
|
0.32
|
|
|
|
620,466
|
|
|
|
0.35
|
|
|
|
620,466
|
|
|
|
0.35
|
|
Infinity Satcom Universal Private Limited
|
|
|
14,530,000
|
|
|
|
8.14
|
|
|
|
14,530,000
|
|
|
|
8.14
|
|
|
|
14,530,000
|
|
|
|
8.13
|
|
* Raju Vegesna Infotech and Industries Private Limited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
** Ramanand Core Investment Company Private Ltd.
|
|
|
125,000,000
|
|
|
|
70.02
|
|
|
|
125,000,000
|
|
|
|
70.02
|
|
|
|
125,000,000
|
|
|
|
69.96
|
|
* 125,000,000 shares were
issued to Raju Vegesna Infotech and Industries Private Limited at a discount of 50% to the prevailing American Depositary Share
market price since the allotment of shares was for unlisted Indian equity shares. The shareholders of the Company approved the
unregistered offering through voting in a general meeting where the promoter group beneficially owned 86.22% of the equity shares
eligible to vote in the meeting.
** Raju Vegesna Infotech
and Industries Private Limited transferred its entire 125,000,000 shares to Ramanand Core Investment Company Private Ltd., its
wholly owned subsidiary company.
Reference is made to note
37 to the Consolidated Financial Statement as regards the shareholding of Ramanand Core Investment Company Private Limited. As
of such date, these shares are partly paid up to the extent of 77.50 % of the face value and hence carry voting rights proportionate
to the paid up value of these shares. The Company has lien on these shares till such shares are fully paid up.
The Company has not issued
any shares having differential voting rights and hence the Company’s major shareholders do not have differential voting
rights except for proportionate voting rights on the partly paid up shares.
United States Shareholders
As of March 31, 2018,
39,153,995 of our ADSs were held in the United States and we had approximately 11,278 shareholders in the United States. Each
ADS represents one equity share.
Host country Shareholders
As on March 31, 2018,
139,530,652 of our equity shares were held in India and we had 24 shareholders on record in India. Each equity share has a par
value of ₹ 10/- each. Of the above, 125,000,000 shares were partly paid up to the extent of ₹ 7.75 per share.
Control of Registrant
Based on our
review of filings made with the SEC, Infinity Capital Ventures, LP beneficially owned 7.78 % of our equity shares as of March
31, 2018. This shareholder is a party to the Subscription Agreement dated November 10, 2005 with our Company. The
Subscription Agreement provides that, among other things, the Company shall appoint Mr Raju Vegesna as the Chairman of the
Board of Directors, Infinity Capital shall also nominate another person to the Board of Directors and for so long as Infinity
Capital continues to own at least 10% of the Company’s outstanding Equity Shares, the Company shall not enter into
any agreement pursuant to which it would provide a third party with registration rights for Company securities, without
the consent of Infinity Capital. In November 2005, Mr Raju Vegesna, a nominee of Infinity Capital Ventures, LP, was appointed
as Chairman of our Board of Directors. In February 2006, the Company also appointed Mr. P S Raju as the second nominee
of Infinity Capital to the Board of Directors. Consequent to the resignation of Mr P S Raju, as a Director effective May
31, 2015, Ms Vegesna Bala Saraswathi was appointed as an additional Director of our Company effective July 22, 2015, as
a Nominee. Further, as per the Act, she retires by rotation and is eligible for re-election. She was re-elected at the
Annual General Meeting held on July 6, 2017.
Infinity Satcom Universal
Private Limited, India also beneficially owned 8.13% of our equity shares as of March 31, 2018.
As of March 31, 2018,
entities affiliated with our CEO, Chairman and Managing Director, Mr. Raju Vegesna, beneficially owned approximately 86.22% of
our outstanding equity shares, which includes the 125,000,000 shares issued in connection with the private placement described
below.
These shareholders are
presently able to exercise control over many matters requiring approval by our shareholders, including the election of directors
and approval of significant corporate transactions. Under Indian law, a simple majority is sufficient to control all shareholder
actions except for those items, which require approval by a special resolution. If a special resolution is required, the number
of votes cast in favor of the resolution must be not less than three times the number of votes cast against it. Examples of actions
that require a special resolution include:
|
•
|
altering
our Articles of Association;
|
|
•
|
issuing
additional shares of capital stock, except for
pro rata
issuances to existing
shareholders;
|
|
•
|
commencing
any new line of business; and
|
|
•
|
commencing
a liquidation.
|
Circumstances may arise
in which the interests of Infinity Capital Ventures, LP or Infinity Satcom Universal Private Limited or a subsequent purchaser
of their shares could conflict with the interest of our other shareholders or holders of our ADSs. These shareholders could prevent
or delay a change in control of our Company even if a transaction of that sort would be beneficial to our other shareholders,
including the holders of our ADSs.
On October 30, 2010, we
consummated the issuance and sale of 125,000,000 of our equity shares in a private placement with our promoter group, including
an entity affiliated with our CEO, Chairman and Managing Director, Mr Raju Vegesna. See note 37 in the notes to the financial
statements in this Annual Report.
Forfeiture of equity
shares issued in a private placement
During the year ended
March 31, 2008, Sify proposed a scheme of amalgamation to merge Sify Communications Limited (erstwhile subsidiary) with the Company
and made applications to the appropriate authorities in India for approval of the proposed scheme of amalgamation to take over
the IP-VPN services from Sify Communications Limited ( erstwhile subsidiary) upon the consummation of the merger. Under the provisions
of the local telecom regulations, a Company engaged in the business of providing IP-VPN services was required to maintain Indian
shareholding at least 26% of the total paid up share capital of the Company. In order to maintain the Indian shareholding at 26%
in Sify consequent to the approval of the proposed scheme of amalgamation, Sify and Infinity Satcom Universal, an Indian entity
(the Purchaser) entered into a Subscription Agreement (effective March 24, 2008), whereby the Company agreed to sell, and Infinity
agreed to purchase, 12,817,000 equity shares of the Company (herein after referred to as ‘the Share Purchase’), at
a per share purchase price of USD $4.46/ - per share (referred to as ‘the Purchased Shares’), equivalent to ₹
175/- per share in Indian Rupees.
In connection with the
private placement of shares to Infinity Satcom Universal, the independent directors of the Board of the Directors waived the provision
of the Standstill Agreement dated November 10, 2005 prohibiting Infinity Capital Ventures, Raju Vegesna and any Affiliate from
acquiring additional shares of the Company. Each of Messrs. Raju Vegesna and Ananda Raju Vegesna abstained from voting on
the waiver.
The Company received a
sum of ₹ 112,149 (comprising of ₹ 12,817 towards face value and ₹ 99,332 towards securities premium) and called
up a sum of ₹ 448,595 (comprising of ₹ 25,634 towards face value and ₹ 422,961 towards securities premium).
Subsequent to fiscal 2008, the Company withdrew its applications made to appropriate authorities for the approval of the proposed
scheme of amalgamation with Sify Communications Limited (erstwhile subsidiary). Consequent upon the withdrawal of the merger,
Infinity Satcom Universal communicated to Sify that they would not contribute to calls already made and any balance monies which
would become payable under the Subscription Agreement. Hence, the Board of Directors forfeited the shares allotted and the monies
collected (₹ 112,149 including sums towards capital and premium) at the meeting held on August 29, 2008.
Sale of shares in a
private transaction
Pursuant to a Share Purchase
Agreement dated May 31, 2009 between Infinity Capital Venture Management and Infinity Satcom Universal Private Limited, a Company
owned and controlled by Ananda Raju Vegesna, Executive Director of the Company and brother of Raju Vegesna, CEO, Chairman and
Managing Director of the Company, Raju Vegesna has sold 4,000,000 Equity Shares of ₹ 10/- each of the Company to Infinity
Satcom for a consideration of $ 3,000,000 in a private transaction.
Issuance of Equity
Shares in private placement to the promoter group:
On October 30, 2010, we
consummated the issuance and sale of 125,000,000 of our equity shares in a private placement with our promoter group, including
an entity affiliated with our CEO, Chairman and Managing Director, Mr Raju Vegesna. See note 37 in the notes to the consolidated
financial statements in this Annual Report.
The proceeds from the
said issue have been utilized towards capital expenditure and expansion plans of the Company. As of March 31, 2018, we had received
an aggregate of $ 47.66 million approximately of proceeds from the issuance.
Related Party Transactions
The related parties where
control / significant influence exist are subsidiaries and associates. Key management personnel are those persons having authority
and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any
director whether executive or otherwise.
In addition to the transactions
described above regarding Mr. Raju Vegesna and Mr. Ananda Raju Vegesna, we engaged in the following transaction with the following
entities affiliated with Mr. Raju Vegesna and Mr. Ananda Raju Vegesna.
VALS Developers Private
Limited (“VALS”) is owned and controlled by Raju Vegesna Infotech & Industries Private Limited, in which Mr. Raju
Vegesna, our principal shareholder and CEO, Chairman, Managing Director, was holding 94.66% equity in his personal capacity. VALS
executed a MoU on June 16, 2008 with Advance India Private Limited (“AIPL”) and HERMIT Projects Private Limited (“HERMIT”)
for the purchase of shares of HERMIT. HERMIT in turn held entire share capital of Pace Info Com Park Private Limited (“Pace”).
AIPL was the Holding Company of HERMIT. During the year ended March 31, 2009, Sify entered into a memorandum of understanding
with VALS Developers Private Limited to obtain land on which building was proposed to be constructed on a long term lease. The
lease agreement, when final and executed, is expected to have an initial non-cancellable term of 5 years, with a further option
for Sify to renew or cancel the lease for the incremental five year terms. In connection with this memorandum of understanding,
Sify has paid a security deposit of ₹ 125,700 and advance rental of ₹ 157,125 to VALS. The security deposit will be
refunded at the end of lease term and the advance rental would be adjusted over 15 months from the commencement of lease term.
It is customary in India that whenever a premises is taken up on lease for commercial purpose, a rental advance is paid in multiple
months of rent (e.g.) 10 months of rent, which shall be refunded at the time of vacating the premises without any interest.
On October 30, 2010, the
Board of Directors had approved to cancel the MoU for lease arrangement and had decided to acquire the property which is under
construction from the third party directly. On 12th January 2011, through a Memorandum of Amendment, the company with the intention
to acquire the said land, had substituted its name with that of VALS and through such amendment VALS had agreed to assign all
rights, responsibilities, obligations, title etc. in favour of the company, thus making the company eligible to acquire PACE through
HERMIT and subsequently the land and also making liable to pay the entire consideration of ₹ 1,140,000. Hence the Company
had paid VALS an amount of ₹ 2,175 i.e., difference between the amount paid by the Company to VALS and the amount paid by
VALS to AIPL. During the previous year, the Company acquired the leasehold rights along with the building under construction through
acquisition of entire shares HERMIT which in turn holds the entire shares of PACE, the original allottee of the land. As of March
31, 2014, the Company had paid a sum of ₹ 180,779 as an advance to AIPL towards construction of the building and any further
sum it has to advance as per the commitment shall be adjusted towards value of investment in PACE after settling further debts
and liabilities relating to construction of the said Data Center.
The Company had entered
into a lease agreement with Ms Radhika Vegesna, Daughter of Mr Anand Raju Vegesna, Executive Director of the company, to lease
the premises owned by her for a period of three years effective June 1, 2010 on a rent of ₹ 256 per month and payment of
refundable security deposit of ₹ 2,558. This arrangement will be automatically renewed for a further period of two blocks
of three years with all the terms remaining unchanged. Also refer note 34.
The Company had entered
into a lease agreement with Raju Vegesna Developers (P) Limited, in which Mr Ananda Raju Vegesna, the Executive Director of the
Company is a Director, to lease the premises owned by such Company for a period of three years effective February 1, 2012 for
₹ 30 per month. Subsequently, the Company entered into an amendment agreement on April 1, 2013, providing for the automatic
renewal for further period of two blocks of 3 years with an escalation of 15% on the last paid rent after the end of every three
years. See note 34 in the notes to the financial statements in this Annual Report.
The Company had entered
into a lease agreement with Raju Vegesna Infotech and Industries Private Limited, in which Mr Raju Vegesna, Managing Director
and Mr Ananda Raju Vegesna, the Executive Director of the Company are also Directors, to lease the premises owned by the above
Company for a period of three years effective February 1, 2012 for ₹ 75 per month. Subsequently, the Company entered into
an amendment agreement on April 1, 2013, providing for automatic renewal for a further period of two blocks of 3 years with an
escalation of 15% on the last paid rent after the end of every three years. See note 34 in the notes to the financial statements
in this Annual Report.
Loans to employees
We provide salary advances
to our employees in India who are not executive officers or directors. The annual rate of interest for these loans is 0 %. As
of March 31, 2018, the loan outstanding from employees is ₹ 15.17 million.
Item 8
.
Financial Information
Financial Statements
We have elected to provide
financial statements pursuant to Item 18 of Form 20-F. No significant change has occurred since the date of our annual financial
statements for fiscal year 2018.
Legal Proceedings
|
a)
|
Proceedings before
Department of Telecommunications
|
|
·
|
On
October 12, 2009 (as later clarified by the DoT), the Department of Telecommunications
(‘DOT’) raised a demand on Sify Technologies for ₹ 14 million after
correcting the arithmetical error in the assessment letter.
|
|
·
|
On
February 26, 2010 DOT raised a demand on Sify Communications (erstwhile subsidiary merged
with Sify Technologies Limited) for ₹ 26 million.
|
The above demands were made by the
DoT on the premise that all amounts of income (whether direct or indirect) including certain items like other income, interest
on deposits, gain on foreign exchange fluctuation, profit on sale of assets & provision written back, that have not got anything
to do with telecom operations of the Company or arise in connection with the Telecom business of the Company, are to be considered
as income for the purpose of calculation of the license fee. The Company has replied suitably on the above demand notice.
On a related matter, the service
providers had approached TDSAT (the ‘Tribunal’) on what items of income are liable for calculation of license fee
and what all items of income on which license fees are not liable to be paid. The Tribunal by its order dated April 23, 2015 held
that revenue from sale of scrap, treasury income etc are to be included as part of AGR. The Tribunal has also passed an order
asking DOT to levy at most nominal amount as token penalty with interest if permissible at the lower rates. The Company had approached
Honourable High Court of Madras (Court) in 2013 by filing a writ petition prohibiting Department of Telecommunications (DOT) from
levying license fee on non-licensed activities. An interim order was passed by the Court restraining DOT from recovering license
fee in respect of non- telecom activities for the writ petition filed in 2013.
Also, the Group has received notices
for earlier years from DoT claiming License fee on the total Income (including income from Non Licensed activities). The Group
has replied to these notices stating that license fees are not payable on income from non-licensed activities. The Group believes
that it has adequate legal defenses against these notices and that the ultimate outcome of these actions may not have a material
adverse effect on the Group's financial position and result of operations.
|
(ii)
|
The present license
for ISP under unified license issued by DOT on June 2, 2014 provides for payment of License
fee on pure Internet services. However, the company through Internet Service Providers
Association of India (ISPAI) challenged the said clause before TDSAT. TDSAT passed a
stay order on DOT from charging the license fee on pure Internet services. The group
has appropriately accounted for any adverse effect that may arise in this regard in the
books of account.
|
|
b)
|
The Company
is party to additional legal actions arising in the ordinary course of business. Based
on the available information as at March 31, 2018, the Company believes that it has adequate
legal defences for these actions and that the ultimate outcome of these actions will
not have a material adverse effect. However in the event of adverse judgment in all these
cases, the maximum financial exposure would be ₹ 91.1 million (March 31, 2017:
₹ 37.4 million)
|
Dividends
In view of the good performance
of the Company during the fiscal 2017-18 and availability of divisible profits, the Board of Directors recommended 12% cash dividend
to all the shareholders of the Company for the year ended March 31, 2018, which is placed in the Notice of Annual General Meeting
for Shareholders approval at the Annual General Meeting Scheduled to be held on July 6, 2018.
Under Indian law, a Company
may pay dividends upon recommendation by its Board of Directors and approval by a majority of its shareholders. Any future cash
dividends on our equity shares represented by ADSs will be paid to the depository in rupees and will generally be converted into
dollars by the depository and distributed to holders of ADSs, net of the depository’s fees and expenses.
However, the dividend
payment policy of the Company is not certain and is contingent upon the each year’s profits of the Company. Investors seeking
cash dividends should consider this at the time of purchase of our ADRs.
Item 9
.
The Offer and Listing
Trading Markets
There is no public market
for our equity shares in India, the United States or any other market. Our ADSs evidenced by American Depository Receipts, or
ADRs, are traded in the United States only on the NASDAQ Capital Market. Each ADS represents one equity share. The ADRs evidencing
ADSs were issued by our depository, Citibank, N.A., pursuant to a Deposit Agreement.
Price History
Our ADSs commenced trading
on the NASDAQ Market on October 19, 1999. The tables below set forth, for the periods indicated, high and low trading prices for
our ADSs in United States dollars:
Prior Fiscal Years
|
|
High
|
|
|
Low
|
|
Fiscal year ended
|
|
$
|
|
|
$
|
|
March 31, 2018
|
|
|
2.81
|
|
|
|
0.71
|
|
March 31, 2017
|
|
|
1.37
|
|
|
|
0.73
|
|
March 31, 2016
|
|
|
1.62
|
|
|
|
0.94
|
|
March 31, 2015
|
|
|
2.55
|
|
|
|
1.29
|
|
March 31, 2014
|
|
|
2.73
|
|
|
|
1.69
|
|
|
|
High
|
|
|
Low
|
|
Fiscal year ended March 31, 2018
|
|
$
|
|
|
$
|
|
First Quarter
|
|
|
0.96
|
|
|
|
0.71
|
|
Second Quarter
|
|
|
1.46
|
|
|
|
0.71
|
|
Third Quarter
|
|
|
1.99
|
|
|
|
1.40
|
|
Fourth Quarter
|
|
|
2.81
|
|
|
|
1.79
|
|
|
|
High
|
|
|
Low
|
|
Fiscal year ended March 31, 2017
|
|
$
|
|
|
$
|
|
First Quarter
|
|
|
1.37
|
|
|
|
0.99
|
|
Second Quarter
|
|
|
1.17
|
|
|
|
1.02
|
|
Third Quarter
|
|
|
1.10
|
|
|
|
0.73
|
|
Fourth Quarter
|
|
|
0.97
|
|
|
|
0.76
|
|
Most recent six months
|
|
High
|
|
|
Low
|
|
Month
|
|
$
|
|
|
$
|
|
May 2018
|
|
|
2.06
|
|
|
|
1.87
|
|
April 2018
|
|
|
2.28
|
|
|
|
1.89
|
|
March 2018
|
|
|
2.42
|
|
|
|
1.79
|
|
February 2018
|
|
|
2.13
|
|
|
|
1.79
|
|
January 2018
|
|
|
2.81
|
|
|
|
1.90
|
|
December 2017
|
|
|
1.84
|
|
|
|
1.50
|
|
Item 10.
Additional
Information
In fiscal 2015, the authorized
share capital of the Company was enhanced by an amount of ₹ 189,000,000. Consequently o
ur
authorized share capital was increased to ₹ 2,040,000,000, divided into 204,000,000 Equity Shares, having a par value ₹
10 per share.
As of March 31, 2018,
178,684,647 Equity Shares were issued, outstanding, of which 125,000,000 Equity Shares were partly paid and the balance fully
paid.
The equity shares are
our only class of share capital. Some of the share capital, 39,153,995 shares, is represented by American Depository Shares issued
by our Company in accordance with applicable laws and regulations. Our Articles of Association and the Indian Companies Act permit
us to issue classes of securities in addition to the equity shares. For the purposes of this annual report, “shareholder”
means a shareholder who is registered as a member in the register of members of our Company. The term shareholders and ADSs holders
have the same meaning in this annual report since the Indian Companies Act only defines a shareholder.
During the fiscal year
ended March 31, 2004, Venture Tech, who had subscribed for the shares of our Company in terms of an Investor Rights Agreement,
sold 2,017,641 shares reducing their holding from 15.9% to 10.1% and SAIF sold 4,750,000 shares reducing their holding from 21.6%
to 8%.
During the fiscal year
ended March 31, 2005, Venture Tech sold an additional 783,326 shares reducing their holding from 10.1% to 7.7% and SAIF sold an
additional 800,000 shares reducing their holding from 8% to 5.68%.
At the Extraordinary General
Meeting of our shareholders held on December 23, 2005, the shareholders had approved by a Special Resolution the issue and allotment
of 4.97 million equity shares of the par value of ₹10/- per share at such price as may be determined to the public in India
as the initial public offer to comply with the statutory requirement of domestic listing of the shares of our Company, as and
when announced by the Government of India.
During the fiscal year
ended March 31, 2006, Venture Tech sold the remaining 2,750,000 shares of our Company and SAIF sold the remaining 2,008,140 shares
of our Company. Satyam Computer Services had divested their entire holding of 11,182,600 shares in the Company to Infinity Capital
Ventures, LP through a sponsored ADS programme arranged by us. Further, Infinity Capital, pursuant to the Subscription Agreement
dated November 10, 2005 acquired another 6,720,260 shares of the Company in a private transaction. On conclusion of this transaction,
the issued and outstanding share capital of our Company was 42,389,514 equity shares, with a par value of ₹10/- per share.
During the fiscal year
ended March 31, 2008, Infinity Satcom Universal Private Limited has entered into a Subscription Agreement for the subscription
of 12,817,000 additional equity shares of the Company with par value of ₹10/- per share at a premium of ₹ 165/- per
share.
On March 24, 2008 , the
Company received a sum of ₹ 112.14 million (comprising of ₹ 12.81 towards face value and ₹ 99.33 million towards
securities premium / share premium) .Subsequently, Infinity Satcom Universal communicated to the Company vide their letter dated
August 27, 2008 that consequent to the merger petition of Sify Communications Limited amalgamating with Sify Technologies Limited
has been withdrawn from the High Court of Madras, that they would focus their attention on the business of Sify Communication
Limited and hence shall not contribute the balance money towards the subscription of 12,817,000 Equity Shares on call. On August
29, 2008, the Board of Directors, forfeited the shares allotted and the application monies collected (₹ 112.14 million including
sums towards capital and premium).
Pursuant to a Share Purchase
Agreement dated May 31, 2009 between Raju Vegesna and Infinity Satcom Universal Private Limited, a Company owned and controlled
by Ananda Raju Vegesna, Executive Director of the Company and brother of Raju Vegesna, CEO & MD of the Company, Raju Vegesna
has sold 4,000,000 Equity Shares of ₹10/- each of the Company to Infinity Satcom for a consideration of US $3,000,000 in
a private transaction.
In November 2008, the
Board of Directors of Sify Technologies Limited and Sify Communications limited decided to merge Sify Communications with Sify
Technologies. Based on a petition for the Scheme of Amalgamation filed with the High Court of Madras, India, the Court has approved
the Scheme vide its order dated June 26, 2009. Consequent upon the consummation of merger, the Company has taken over the assets
and liabilities of Sify Communications (erstwhile subsidiary) and has issued and allotted 10,530,000 Equity Shares of ₹10/-
each to Infinity Satcom, the only outside shareholder, towards the consideration for the assets and liabilities taken over by
the Company.
On October 30, 2010, we
consummated the issuance and sale of 125,000,000 of our equity shares in a private placement with our promoter group, including
an entity affiliated with our CEO, Chairman and Managing Director, Mr. Raju Vegesna. These shares carry voting rights proportionate
to the amount paid up on these shares. Further company has a lien on these shares till the shares are fully paid up. Also refer
to note 37 to the Consolidated Financial statements.
The ASOP 2014 gives the
Board and the Compensation Committee the absolute discretion and power in formulating the Rules, Regulations, Eligibility criteria,
Vesting Schedule, Expiry etc. of the Plan and also to amend the same in the Plan from time to time as they may deem fit and appropriate.
During the year, the Nomination
and Remuneration Committee has approved to grant the options and the details are given below:
Category
|
|
Total No of
Options
|
|
|
No. of
Associates
|
|
Associates who have completed more than 2 years of Service with Sify on the date of grant,
|
|
|
-
|
|
|
|
-
|
|
Associates who have completed between 1 and 2 years of Service with Sify on the date
of grant
|
|
|
-
|
|
|
|
-
|
|
Associates who have completed less than 1 year of service with Sify on
the date of grant
|
|
|
150,000
|
|
|
|
1
|
|
Total
|
|
|
150,000
|
|
|
|
1
|
|
The Nomination and Remuneration
Committee had approved to grant 5,870,800 options were granted to the employees on January 20, 2015. The Group has granted additional
150,000, 525,000 and 184,300 options to employees during the year 2017-18, 2016-17 and 2015-16 respectively.
Memorandum and Articles
of Association
Set forth below is the
material information concerning our share capital and a brief summary of the material provisions of our Articles of Association,
Memorandum of Association and the Indian Companies Act, all as currently in effect. The following description of our equity shares
and the material provisions of our Articles of Association and Memorandum of Association does not purport to be complete and is
qualified in its entirety by our Memorandum of Association and Articles of Association that are incorporated by reference to this
Annual Report on Form 20-F.
Objects of Memorandum
of Association
The following is a summary
of our Objects as set forth in Section 3 of our Memorandum of Association:
|
1.
|
To develop and provide
Internet service, Internet Telephony, Infrastructure based services, Virtual Private
Network and other related data, voice and video services, wide area communication network,
value added services on the network, lease or other transfers of network, software, peripherals
and related products, and to provide marketing services.
|
|
2.
|
To provide security
products for corporate, carry on the business of consulting, software and hardware, integrated
platform(s) for the e-commerce solutions, applications, information technology, security
and all other kinds of technology solutions or services, and to acquire, maintain, operate,
manage and undertake technology and infrastructure for this purpose.
|
|
3
|
To develop, service
& sell/lease data based through direct or electronic media, to develop a wide area
communication network of sell / lease the network or provide value added services on
the network to develop, service, buy / sell computers, software, peripherals and related
products to provide marketing services rising direct as well as electronic media;
|
|
4
|
To undertake the designing
and development of systems and applications software either for its own use or for sale
in India or for export outside India and to design and develop such systems and application
software for or on behalf of manufacturers, owners and users of computer systems and
digital / electronic equipment's in India or elsewhere in the world;
|
|
5
|
To set up and run electronic
data processing centers and to carry on the business of data processing, word processing,
software consultancy, system studies, management consultancy, techno-economic feasibility
studies of projects, design and development of management information systems, share
/ debenture issues management and / or registration and share/debenture transfer agency;
|
|
6.
|
To undertake and execute
feasibility studies for Computerization, setting up of all kind of computer systems and
digital/electronic equipment's and the selection, acquisition and installation thereof
whether for the Company or its customers or other users;
|
|
7
|
To conduct, sponsor
or otherwise participate in training programmes, courses, seminar conferences in respect
of any of the objects of the Company and for spreading or imparting the knowledge and
use of computers and computer programming languages including the publication of books,
journals, bulletins, study / course materials, circulars and news-letters; and to undertake
the business as agents, stockist, distributors, franchise holders or otherwise for trading
or dealing in computer systems, peripherals, accessories, parts and computer consumables,
continuous and non-continuous stationery, ribbons and other allied products and things
and standard software packages.
|
|
8
|
To conduct e-commerce
for sale of all kinds of products and services through direct or electronic media as
well as on and off line e-commerce including travel related services, buying and selling
of products and services / merchandise, software, data information etc., in India and
abroad.
|
Our Articles of Association
provide that the minimum number of directors shall be 3 and the maximum number of directors shall be 12. Presently, we have 7
directors. Our Articles of Association provide that at least two-thirds of our directors shall be subject to re-election by our
shareholders; and. at least one-third of our directors who are subject to re-election shall be up for re-election at each Annual
General Meeting of the shareholders.
Our Articles of Association
do not require that our directors have to hold shares of our Company in order to serve on our board of directors.
Our Articles of Association
provide that any director who has a personal interest in a transaction must disclose such interest, must abstain from voting on
such a transaction and may not be counted for the purposes of determining whether a quorum is present at the meeting. Such director's
interest in any such transaction shall be reported at the next meeting of shareholders. The remuneration payable to our directors
may be fixed by the board of directors in accordance with provisions prescribed by the Government of India. Our Articles of Association
provide that our board of directors may generally borrow or secure the payment of any sum of money for our business purposes,
provided, however, where any amounts are to be borrowed, that when combined with any already outstanding debt, exceed the aggregate
of our paid-up capital and free reserves, we cannot borrow such amounts without the consent of our shareholders.
Board of Directors
In terms of the provisions
of the Articles of Association of the Company and the Indian Companies Act 2013:
|
(a)
|
no director
of the Company can vote on a proposal, arrangement or contract in which he is materially
interested;
|
|
(b)
|
the directors
of the Company cannot vote on a proposal in the absence of an independent quorum for
compensation to themselves or their body;
|
|
(c)
|
each of our
directors is entitled to receive a sitting fee not exceeding ₹ 100,000 for every
meeting of the Board of Directors and each meeting of a Committee of the Board of Directors,
as well as all traveling and out-of-pocket expenses incurred in attending such meetings;
however, effective May 2014, the Company has been paying ₹ 50,000 to the directors
for each Board Meeting attended by them. However, there is no increase in the sitting
fee for the Committee meetings, which is Rs.20,000 for each Meeting.
|
|
(d)
|
the directors
are empowered to borrow moneys through board meetings up to the prescribed limit and
beyond that with the approval of the shareholders through a General Meeting;
|
|
(e)
|
retirement of
directors are determined by rotation and not based on age limit; and
|
|
(f)
|
no director
is required to hold any qualification shares.
|
For additional information,
please see “Item 6. Director, Senior Management and Employees – Board Composition,” “-Board Committees”
and “-Director Compensation,” and “-Officer Compensation” of this Annual Report on Form 20-F.
Dividends
Under the Indian Companies
Act, our Board of Directors recommends the payment of a dividend which is then declared by our shareholders in a general meeting.
However, the board is not obliged to recommend a dividend. Similarly, under our Articles of Association and the Indian Companies
Act, although the shareholders may, at the annual general meeting, approve a dividend by an amount less than that recommended
by the Board of Directors, they cannot increase the amount of the dividend. In India, dividends generally are declared as a percentage
of the par value of a Company’s equity shares. The dividend recommended by the Board of Directors, and thereafter declared
by the shareholders in the annual general meeting and subject to the limitations described above, is required to be distributed
and paid to shareholders in proportion to the paid up value of their shares within 30 days of the declaration by the shareholders
at the annual general meeting. Pursuant to our Articles, our Board of Directors has the discretion to declare and pay interim
dividends without shareholder approval. Under the Indian Companies Act, dividends can only be paid in cash to the registered shareholder,
the shareholder's order or the shareholder's banker's order, at a record date fixed on or prior to the date of the Annual General
Meeting. We must inform the stock exchanges on which our equity shares and ADSs are listed on the record date for determining
the shareholders who are entitled to receive dividends.
The Indian Companies Act
provides that any dividends that remain unpaid or unclaimed after the 30-day period from the date of declaration of a dividend
are to be transferred to a special bank account opened by the Company at an approved bank. We have to transfer any dividends that
remain unclaimed for seven years from the date of the transfer to an Investor Education and Protection Fund established by the
Government of India under the provisions of the Indian Companies Act. Under the Companies Act, 2013, after the transfer to this
fund, such unclaimed dividends may be claimed by the shareholders on submission of such documents and in accordance with the procedures
as may be prescribed by the Government.
With respect to equity
shares issued during a particular fiscal year (including any equity shares underlying ADSs issued to the depository), cash dividends
declared and paid for such fiscal year generally will be prorated from the date of issuance to the end of such fiscal year.
Under the Indian Companies
Act 1956, dividends may be paid out of profits of a Company in the year in which the dividend is declared or out of the undistributed
profits of previous fiscal years after providing for depreciation. Before declaring a dividend greater than 10% of the par value
of its equity shares, a Company is required under the Indian Companies Act, 1956 to transfer to its reserves a minimum percentage
of its profits for that year, ranging from 2.5% to 10% depending upon the dividend percentage to be declared in such year. However,
under the Companies Act, 2013, it is not mandatory for the Company to transfer such percentage of its profits to reserves and
it is left to the discretion of the Company which may transfer such percentage of its profits as it may consider appropriate.
The Indian Companies Act,
2013 further provides that, in the event of an inadequacy or absence of profits in any year, a dividend may be declared for such
year out of the Company’s accumulated profits subject to the fulfillment of the following conditions:
|
·
|
the
rate of dividend to be declared may not exceed the average of the rate at which dividends
were declared by it in the three years immediately preceding that year provided that
this sub-rule shall not apply to a company, which has not declared any dividend in each
of the three preceding financial years.
|
|
·
|
the
total amount to be drawn from the accumulated profits shall not exceed one-tenth of the
such sum of its paid up capital and free reserves as appearing in the last audited financial
statement,
|
|
·
|
the
amount so drawn shall first be utilised to set off the losses incurred in the financial
year in which a dividend is declared before any dividend in respect of equity shares
is declared.
|
|
·
|
the
balance of reserves after such withdrawal shall not fall below fifteen per cent of its
paid up share capital as appearing in the latest audited financial statement.
|
|
·
|
No
company shall declare dividends unless carried over previous losses and depreciation
not provided in previous year or years are set off against profit of the company of the
current year.
|
Voting Rights
At any general meeting,
voting is by show of hands unless a poll is demanded by a shareholder or shareholders present in person or by proxy holding (a)
not less than one-tenth of the total voting power entitled to vote on a resolution or (b) shares with an aggregate paid up capital
of at least ₹ 500,000. Upon a show of hands, every shareholder entitled to vote and present in person has one vote and,
on a poll, every shareholder entitled to vote and present in person or by proxy has voting rights in proportion to the paid up
capital held by such shareholders. The Chairperson has a casting vote in the case of any tie.
Any shareholder of the
Company entitled to attend and vote at a meeting of the Company may appoint a proxy. The instrument appointing a proxy must be
delivered to us at least 48 hours prior to the meeting. Unless the articles of association otherwise provide, a proxy may not
vote except on a poll. A corporate shareholder may appoint an authorized representative who can vote on behalf of the shareholder,
both upon a show of hands and upon a poll. An authorized representative is also entitled to appoint a proxy.
Ordinary resolutions may
be passed by simple majority of those present and voting at any general meeting for which the required period of notice has been
given. However, specified resolutions such as amendments to our Articles and the Memorandum of Association, commencement of a
new line of business, the waiver of pre-emptive rights for the issuance of any new shares and a reduction of share capital, require
that votes cast in favour of the resolution (whether by show of hands or on a poll) are not less than three times the number of
votes, if any, cast against the resolution by members so entitled and voting. As per the Indian Companies Act, unless the articles
of association of a Company provide for all directors to retire at every annual general meeting, not less than two-third of the
directors of a public Company must retire by rotation, while the remaining one-third may remain on the board until they resign
or are removed. Our Articles of Association require two thirds of our Directors to retire by rotation. One-third of the directors
who are subject to retirement by rotation must retire at each Annual General Meeting. Further, the Indian Companies Act requires
certain resolutions such as those listed below to be voted on only by a postal ballot:
(a) alteration of the objects clause
of the memorandum and in the case of the company in existence immediately before the commencement of the Act, alteration of the
main objects of the memorandum;
(b) alteration of articles of association
in relation to insertion or removal of provisions which, under sub-section (68) of section 2, are required to be included in the
articles of a company in order to constitute it a private company;
(c) change in place of registered
office outside the local limits of any city, town or village as specified in sub-section (5) of section 12;
(d) change in objects for which
a company has raised money from public through prospectus and still has any unutilized amount out of the money so raised under
sub-section (8) of section 13;
(e) issue of shares with differential
rights as to voting or dividend or otherwise under sub-clause (ii) of clause (a) of section 43;
(f) variation in the rights attached
to a class of shares or debentures or other securities as specified under section 48;
(g) buy-back of shares by a company
under sub-section (1) of section 68;
(h) election of a director under
section 151 of the Act;
(i) sale of the whole or substantially
the whole of an undertaking of a company as specified under sub-clause (a) of sub-section (1) of section 180;
(j) giving loans or extending guarantee
or providing security in excess of the limit specified under sub-section (3) of section 186.
Bonus Shares
In addition to permitting
dividends to be paid out of current or retained earnings as described above, the Indian Companies Act permits us to distribute
an amount transferred from the reserve or surplus in our profit and loss account to our shareholders in the form of bonus shares,
which are similar to a stock dividend. The Indian Companies Act also permits the issuance of bonus shares from a share premium
account. Bonus shares are distributed to shareholders in the proportion recommended by the Board. Shareholders of record on a
fixed record date are entitled to receive such bonus shares.
Consolidation and Subdivision
of Shares
The Indian Companies Act
permits a Company to split or combine the par value of its shares, provided such split or combination is not made in fractions.
Shareholders of record on a fixed record date are entitled to receive the split or combination.
Pre-emptive Rights and Issue of
Additional Shares
The Indian Companies Act
gives shareholders the right to subscribe for new shares in proportion to their respective existing shareholdings unless otherwise
determined by a special resolution passed by a General Meeting of the shareholders. Under the Indian Companies Act, in the event
of an issuance of securities, subject to the limitations set forth above, a Company must first offer the new shares to the shareholders
on a fixed record date. The offer must include: (i) the right, exercisable by the shareholders of record, to renounce the
shares offered in favour of any other person; and (ii) the number of shares offered and the period of the offer, which may
not be less than 15 days from the date of offer. If the offer is not accepted it is deemed to have been declined and thereafter
the board of directors is authorized under the Indian Companies Act to distribute any new shares not purchased by the pre-emptive
rights holders in the manner that it deems most beneficial to the Company.
Annual General Meetings of Shareholders
We must convene an annual
general meeting of shareholders each year within 15 months of the previous annual general meeting or within six months of the
end of previous fiscal year, whichever is earlier and may convene an extraordinary general meeting of shareholders when necessary
or at the request of a shareholder or shareholders holding not less than one-tenth of our paid up capital carrying voting rights.
In certain circumstances a three month extension may be granted by the Registrar of Companies to hold the Annual General Meeting.
The Annual General Meeting of the shareholders is generally convened by our Company Secretary pursuant to a resolution of the
board of directors. In addition, the Board may convene an Extraordinary General Meeting of shareholders when necessary or at the
request of a shareholder or shareholders holding not less than one-tenth of our paid up capital carrying voting rights. Written
notice setting out the agenda of any meeting must be given at least 21 days prior to the date of the General Meeting to the
shareholders of record, excluding the days of mailing and date of the meeting. Shareholders who are registered as shareholders
on the date of the General Meeting are entitled to attend or vote at such meeting. The Annual General Meeting of shareholders
must be held at our registered office or at such other place within the city in which the registered office is located, and meetings
other than the Annual General Meeting may be held at any other place if so determined by the board of directors.
Our Articles provide that
a quorum for a general meeting is the presence of at least five shareholders in person.
2017 Annual General Meeting
Our Annual General Meeting
for the fiscal year 2017 was held on July 6, 2017 as decided by the Board of Directors at the registered office of our Company,
2nd Floor, TIDEL Park, 4 Rajiv Gandhi Salai, Taramani, Chennai 600 113, India.
At the Annual General
Meeting, the shareholders approved the following items:
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Adoption
of audited financials for the fiscal year ended March 31, 2017 as per Indian GAAP.
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Declaration
of Dividend for the year ended March 31, 2017.
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Appoint
a Director in place of Ms Vegesna Bala Saraswathi (DIN 07237117), who retires by rotation
and being eligible, offers herself for reappointment.
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Reappointment
of ASA & Associates LLP as the statutory auditors.
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Ratification
of Remuneration payable to Mr S Ramachandran, Cost Auditor.
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Enhancement
of the borrowing powers of the Company
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Creation
of security on the assets of the Company
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Limitations on the Rights to Own
Securities
The limitations on the
rights to own securities of Indian companies, including the rights of non-resident or foreign shareholders to hold securities,
are discussed in the section entitled “Ownership Restrictions” below.
Register of Shareholders; Record
Dates; Transfer of Shares
We maintain a register
of shareholders as required under the Indian Companies Act, 2013. For the purpose of determining the shares entitled to annual
dividends, the register is closed for a specified period prior to the annual general meeting. The date on which this period begins
is the record date.
To determine which shareholders
are entitled to specified shareholder rights such as dividend, we may close the register of shareholders. The Indian Companies
Act requires us to give at least seven days’ prior notice to the public before such closure. We may not close the register
of shareholders for more than thirty consecutive days, and in no event for more than forty-five days in a year.
Following the introduction
of the Depositories Act, 1996, and the repeal of Section 22A of the Securities Contracts (Regulation) Act, 1956, which enabled
companies to refuse to register transfers of shares in some circumstances, the equity shares of a public Company are freely transferable,
subject only to the provisions of Section 58 of the Indian Companies Act, 2013 and the listing agreement entered into between
the Company and relevant stock exchange on which the shares of the Company are listed. Since we are a public Company under Indian
law, the provisions of Section 58 will apply to us. Our Articles currently contain provisions that give our directors discretion
to refuse to register a transfer of shares in some circumstances. According to our Articles, our directors are required to exercise
this right in the best interests of our Company. While our directors are not required to provide a reason for any such refusal
in writing, they must give notice of the refusal to the transferee within 30 days after receipt of the application for registration
of transfer by our Company. In accordance with the provisions of Section 58 of the Indian Companies Act, our directors may exercise
this discretion if they have sufficient cause to do so. If our directors refuse to register a transfer of shares, the shareholder
wishing to transfer his, her or its shares may file a civil suit or an appeal with the National Company Law Tribunal.
Pursuant to Section 58,
if a transfer of shares contravenes any of the provisions of the Indian Companies Act and Securities and Exchange Board of India
Act, 1992 or the regulations issued there under or the Sick Industrial Companies (Special Provisions) Act, 1985 or any other Indian
laws, the Tribunal may, on application made by the relevant Company, a depository incorporated in India, an investor, a participant,
or the Securities and Exchange Board of India or other parties, direct the rectification of the register, record of members and/or
beneficial owners. Pursuant to Section 58, the CLB/Tribunal may, in its discretion, issue an interim order suspending the voting
rights attached to the relevant shares before making or completing its investigation into the alleged contravention. Notwithstanding
such investigation, the rights of a shareholder to transfer the shares will not be restricted.
Under the Indian Companies
Act, unless the shares of a Company are held in a dematerialized form, a transfer of shares is effected by an instrument of transfer
in the form prescribed by the Indian Companies Act and the rules there under together with delivery of the share certificates.
Our transfer agent is GNSA Infotech Limited, Chennai.
Disclosure of Ownership Interest
Section 89 of the
Indian Companies Act 2013 requires holders on record who do not hold beneficial interests in shares of Indian companies to declare
to the Company certain details, including the nature of the holder's interest and details of the beneficial owner. Any person
who fails to make the required declaration within 30 days may be liable for a fine which may extend to ₹50 and where
the failure is a continuing one with a further fine which may extend to ₹ 1 for every day after the first during which
the failure continues.
Audit and Annual Report
Under the Indian Companies
Act, a Company must file its annual report with the Registrar of Companies within 7 months from the close of the accounting
year or within 30 days from the date of the Annual General Meeting, whichever is earlier. At least 21 days before the annual
general meeting of shareholders excluding the days of mailing and receipt, we must distribute to our shareholders a detailed version
of our audited balance sheet, profit and loss account and cash flow statement and the related reports of the Board and the auditors,
together with a notice convening the annual general meeting. These materials are also generally made available at our corporate
website,
www.sifycorp.com
Under the Indian Companies Act; we must file the audited financial statements presented to the
shareholders within 30 days of the conclusion of the annual general meeting with the Registrar of Companies in Tamil Nadu, India,
which is the state in which our registered office is located. We must also file an annual return containing a list of our shareholders
and other information within 60 days of the conclusion of the meeting.
As per the directive of
the Ministry of Corporate Affairs, Government of India, effective fiscal year ended March 31, 2011 onwards, the Company is required
to file the audited financials in Extensible Business Reporting Language (XBRL) mode by using XBRL taxonomy.
The Company has voluntarily
adopted the Indian Accounting Standards (Ind AS) and prepared the Financials under Ind AS for the year 2015-16 though it was mandatorily
required only from the year 2016-17 onwards. The Financial Statements were approved by the Board of Directors as well as the Shareholders
at the Twentieth Annual General Meeting held on July 4, 2016.
The Company has filed
the financial statements and other documents with Ministry of Corporate Affairs, Government of India (“MCA”) for the
financial year 2016-17. The Company is in the process of filing the financial statements for the FY 2015-16 with (“MCA”).
The Company has however
filed a printed annual report prepared as per Indian Companies Act with the Registrar of Companies, Chennai.
Company Acquisition of Equity Shares
A Company may, under some
circumstances, acquire its own equity shares without seeking the approval of the High Court. However, a Company would have to
extinguish the shares it has so acquired within the prescribed time period. Generally, a Company is not permitted to acquire its
own shares for treasury operations. An acquisition by a Company of its own shares (without having to obtain the approval of the
High Court) must comply with prescribed rules, regulations and conditions as laid down in the Indian Companies Act and the Securities
and Exchange Board of India (Buy-back of Securities) Regulations, 1998, or Buy-back Regulations.
Any ADS holder may participate
in a Company's purchase of its own shares by withdrawing his or her ADSs from the depository facility, acquiring equity shares
upon the withdrawal and then selling those shares back to the Company.
There can be no assurance
that equity shares offered by an ADS investor in any buyback of shares by us will be accepted by us. The regulatory approvals
required for ADS holders to participate in a buyback are not entirely clear. ADS investors are advised to consult their legal
advisors for advice prior to participating in any buyback by us, including advice related to any related regulatory approvals
and tax issues.
Liquidation Rights
Subject to the rights
of creditors, employees and the holders of any shares entitled by their terms to preferential repayment over the equity shares
and taxes, if any, as may be prescribed under the Indian Companies Act, in the event of our winding-up the holders of the equity
shares are entitled to be repaid the amounts of paid up capital or credited as paid up on those equity shares. All surplus assets
after payments due to the holders of any preference shares at the commencement of the winding-up shall be paid to holders of equity
shares in proportion to their shareholdings.
Redemption of Equity Shares
Under the Indian Companies
Act, equity shares are not redeemable.
Discriminatory Provisions in Articles
There are no provisions
in our Articles of Association discriminating against any existing or prospective holder of such securities as a result of such
shareholder owning a substantial number of shares.
Alteration of Shareholder Rights
Under the Indian Companies
Act, and subject to the provisions of the articles of association of a Company, the rights of any class of shareholders can be
altered or varied (i) with the consent in writing of the holders of not less than three-fourths of the issued shares of that
class; or (ii) by special resolution passed at a separate meeting of the holders of the issued shares of that class. In the
absence of any such provision in the articles, such alteration or variation is permitted as long as it is not prohibited by the
agreement governing the issuance of the shares of that class.
Under the Indian Companies
Act, the articles of association may be altered by a special resolution of the shareholders
Provisions on Changes in Capital
Our authorized capital
can be altered by an ordinary resolution of the shareholders in a General Meeting. The additional issue of shares is subject to
the pre-emptive rights of the shareholders. In addition, a Company may increase its share capital, consolidate its share capital
into shares of larger face value than its existing shares or sub-divide its shares by reducing their par value, subject to an
ordinary resolution of the shareholders in a General Meeting.
Material Contracts
See the agreements listed
in Item 7, “Major Shareholders and Related Party Transactions” regarding our material contracts involving certain
of our officers and directors.
Exchange Controls
General
The subscription, purchase
and sale of shares of an Indian Company by Person Resident outside India (non-residents) are governed by various Indian laws regulating
the transfer or issue of Securities by the Company to non-residents. These regulations have been progressively relaxed in recent
years. Set forth below is a summary of various forms of investment, and the regulations applicable to each, including the requirements
under Indian law applicable to the issuance of ADSs.
Foreign Direct Investment
Foreign Direct Investment
(FDI) in India is governed by the FDI Policy announced by the Government of India and the provisions of the Foreign Exchange Management
Act (FEMA), 1999. Reserve Bank has issued Notification No. FEMA 20 /2000-RB dated May 3, 2000 which contains the Regulations in
this regard. This Notification has been amended from time to time. The various amendments are compiled every year in Master Circulars.
In terms of Master Circular issued in July 1, 2009, FDI is freely permitted in almost all sectors. Under the FDI Scheme, investments
can be made by non-residents in the shares / convertible debentures / preference shares of an Indian Company, through two routes;
the Automatic Route and the Government Route. Under the Automatic Route, the foreign investor or the Indian Company does not require
any approval from the Reserve Bank or Government of India (RBI) for the investment. Under the Government Route, prior approval
of the Government of India, Ministry of Finance and Foreign Investment Promotion Board (FIPB) is required. The details of FDI
are contained in the policy and procedures in respect of FDI in India are available in "the Manual on Investing in India
- Foreign Direct Investment, Policy & Procedures".
In terms of Master Circular
issued in April 2014, in most manufacturing / service sectors do not require prior approval of the FIPB, or the RBI, if the activity
of the investee-Company fulfill the conditions prescribed for Automatic Route. These conditions include certain eligibility norms,
pricing requirements, subscription in foreign exchange, compliance with the Takeover Code (as described below), and ownership
restrictions based on the nature of the foreign investor (as described below). Purchases by foreign investors of ADSs are treated
as direct foreign investment in the equity issued by Indian companies for such offerings. Foreign investment up to 100 % of our
share capital is currently permitted in telecom industry.
Subsequent Transfers
Restrictions for subsequent
transfers of shares of Indian companies between residents and non-residents were relaxed significantly as of October 2004. As
a result, for a transfer between a resident and a non-resident of securities of an Indian Company in the Telecom sector, such
as ours, no prior approval of either the RBI or the Government of India is required, as long as the terms and conditions set out
in A.P. (DIR Series) Circular No. 16 of October 4, 2004 is complied with. These conditions / procedure include compliance with
pricing guidelines, Consent letters from the Transaction Parties, applicability of regulatory requirements such as FDI and the
Takeover Code, filing Form FC TRS with Authorized Dealers (authorized bankers) with relevant enclosures and so on.
Transfers of shares or
convertible debenture, by way of sale or gift, between two non-residents are not subject to RBI approvals or pricing restrictions,
provided the buying non-residents do not have investment in similar business / collaboration / commercial arrangements in India.
If the buying non-residents have similar investment / collaboration / commercial arrangements in India, prior Government Approval
is required for such transaction.
Takeover Code
Upon conversion of ADSs
into equity shares, a holder of ADSs will be subject to the Takeover Code as prescribed by the Securities and Exchange Board of
India.
Reduction of limit
for Overseas Direct Investment
In terms of the extant
provisions under the Foreign Exchange Management Act, 1999 (FEMA, 1999) on overseas direct investments, the total overseas direct
investment (ODI) of an Indian Party in all its Joint Ventures (JVs) and / or Wholly Owned Subsidiaries (WOSs) abroad engaged in
any bonafide business activity should not exceed 400 per cent of the net worth of the Indian Party as on the date of the last
audited balance sheet under the Automatic Route.
As of September 2013,
however, the Ministry of Finance has decided,
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a)
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To reduce the existing
limit of 400 per cent of the net worth of the Indian Party to 100 per cent of its net
worth under the Automatic Route (no pre-approval required). Accordingly, AD Category
- I banks may allow overseas direct investments under the Automatic Route up to 100 per
cent of the net worth of the Indian party, as on the date of the last audited balance
sheet;
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b)
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To reduce the existing
limit of 400 per cent of the net worth of the Indian company, investing in the overseas
unincorporated entities in the energy and natural resources sectors, under the automatic
route, to 100 per cent of the net worth of the Indian company investing in the overseas
unincorporated entities in the energy and natural resources sectors, as on the date of
last audited balance sheet; and
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c)
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Any ODI in excess
of 100% of the net worth shall be considered under the Approval Route by the Reserve
Bank of India.
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However, the above limits
have been reversed in the year 2014.
Fungibility of ADSs
A limited two-way fungibility
scheme has been put in place by the Government of India for ADRs / GDRs. Under this Scheme, a stock broker in India, registered
with SEBI, can purchase shares of an Indian Company from the market for conversion into ADRs/GDRs based on instructions received
from overseas investors. Re-issuance of ADRs / GDRs would be permitted to the extent of ADRs / GDRs which have been redeemed into
underlying shares and sold in the Indian market.
Currently, there is no
public trading market for our equity shares in India or elsewhere nor can we assure you that we will take steps to develop one.
Our equity securities are only traded on NASDAQ through the ADSs as described in this report. Under prior Indian laws and regulations,
our Depository could not accept deposits of outstanding equity shares and issue ADRs evidencing ADSs representing such equity
shares without prior approval of the Government of India. The Reserve Bank of India has announced fungibility regulations permitting,
under limited circumstances, the conversion of ADSs to equity shares and the reconversion of equity shares to ADSs provided that
the actual number of ADSs outstanding after such reconversion is not greater than the original number of ADSs outstanding. If
you elect to surrender your ADSs and receive equity shares, you will not be able to trade those equity shares on any securities
market and, under present law, likely will not be permitted to reconvert those equity shares to ADSs.
If in the future a market
for our equity shares is established in India or another market outside of the United States, those shares may trade at a discount
or premium to the ADSs. Under current Indian regulations and practice, the approval of the Reserve Bank of India is not required
for the sale of equity shares underlying ADSs by a non-resident Indian to a resident Indian as well as for renunciation of rights
to a resident of India, unless the sale of equity shares underlying the ADSs is through a recognized stock exchange or in connection
with the offer made under the regulations regarding takeovers. The shareholders who intend transferring their equity shares shall
comply with the procedural requirements set out under the head ‘subsequent transfers’ above.
The Government is yet
to notify the scheme.
Transfer of ADSs and Surrender
of ADSs
A person resident outside
India may transfer the ADSs held in Indian companies to another person resident outside India without any permission. An ADS holder
is permitted to surrender the ADSs held by him in an Indian Company and to receive the underlying equity shares under the terms
of the Deposit Agreement. Under Indian regulations, the re-deposit of these equity shares with the Depository for ADSs may not
be permitted.
Government of India Approvals
Pursuant to the RBI's
regulations relating to sponsored ADS offerings, an issuer in India can sponsor the issue of ADSs through an overseas depository
against underlying equity shares accepted from holders of its equity shares in India. The guidelines specify, among other conditions,
that:
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the
ADSs must be offered at a price determined by the lead manager of such offering;
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all
equity holders may participate;
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the
issuer must obtain special shareholder approval; and
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the
proceeds must be repatriated to India within one month of the closure of the issue.
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Ownership Restrictions
The Securities and Exchange
Board of India and Reserve Bank of India regulate Portfolio Investments in Indian Companies by Foreign Institutional Investors
and Non-Resident Indians, both of which we refer to as foreign portfolio investors. The Reserve Bank of India issued a circular
in August 1998 stating that foreign institutional investors in aggregate may hold no more than 30% of the equity shares of an
Indian Company and non-resident Indians and overseas corporate bodies in aggregate may hold no more than 10% of the shares of
an Indian Company through portfolio investments. Under current Indian Law, the aggregate of the investment by the Foreign Institutional
Investors can’t be more than 24% of the equity share capital of an Indian Company, and the aggregate of the investment by
the Non-Resident Indians can’t be more than 10% of the equity share capital of an Indian Company through Portfolio Investments.
The 24% and 10% limit referred above may be increased to 49% and 24% respectively on passing of a Special Resolution by the Shareholders
to that effect. Moreover, no single Foreign Institutional Investor may hold more than 10% of the shares of an Indian Company and
no single Non-Resident Indian may hold more than 5% of the shares of an Indian Company.
Foreign institutional
investors are urged to consult with their Indian legal and tax advisers about the relationship between the foreign institutional
investor regulations and the ADSs and any equity shares withdrawn upon surrender of ADSs.
Under the Securities and
Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, Every purchaser who acquires (directly
or indirectly) more than 5% of the equity share capital at any point of time (the aggregate of the existing shares and the newly
acquired shares) of a Listed Public Indian Company, is required to notify the Company within four days of such acquisition or
receipt of allotment information and the Company in turn is required to notify all the stock exchanges on which the shares of
the Company are listed with seven days.
Any purchaser whose proposed
acquisition entitled him to hold 15% (the aggregate of the existing shares and the newly acquired shares) or more of such shares
or a change in control of the Company, either by himself or with others acting in concert is required to make annual disclosures
of the purchaser’s holdings in the Company and to make an Open Offer to the other Shareholders offering to purchase at least
20% of all the outstanding shares of the Company at a minimum offer price as determined pursuant to the provisions of the regulations.
A purchaser who holds between 15 % and 75 % of a Company’s shares cannot acquire additional shares or voting rights that
would entitle the purchaser to exercise an additional 5.% of the voting rights in any 12 month period unless such purchaser makes
a public announcement offering to acquire an additional 20% of the Company’s shares. Upon conversion of ADSs into equity
shares, an ADS holder will be subject to the Takeover Code. The Takeover Code does not apply to purchases involving the acquisition
of shares (i) by allotment in a public and rights issue, (ii) pursuant to an underwriting agreement, (iii) by registered stockbrokers
in the ordinary course of business on behalf of customers, (iv) in unlisted companies, (v) pursuant to a scheme of reconstruction
or amalgamation or (vi) pursuant to a scheme under Section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985.
The Takeover Code does not apply to purchases in the ordinary course of business by public financial institutions either on their
own account or as a pledgee. In addition, the Takeover Code does not apply to the purchase of ADSs so long as they are not converted
into equity shares. However, since we are an unlisted Company, the provisions of the new regulations will not apply to us. If
our shares are listed on an Indian stock exchange in the future, the new regulations will apply to the holders of our ADSs.
Open market purchases
of securities of Indian companies in India by foreign direct investors or investments by non-resident Indians and foreign institutional
investors above the ownership levels set forth above require Government of India approval on a case-by-case basis.
Voting Rights of Deposited Equity
Shares Represented by ADSs
Holders of ADSs generally
have the right under the deposit agreement to instruct the depository bank to exercise the voting rights for the equity shares
represented by the related ADSs. At our request, the depository bank will mail to the holders of ADSs any notice of shareholders’
meeting received from us together with information explaining how to instruct the depository bank to exercise the voting rights
of the securities represented by ADSs.
If the depository bank
timely receives voting instructions from a holder of ADSs, it will endeavour to vote the securities represented by the holder’s
ADSs in accordance with such voting instructions. In the event that voting takes place by a show of hands, the depository bank
will cause the custodian to vote all deposited securities in accordance with the instructions received by holders of a majority
of the ADSs for which the depository bank receives voting instructions.
Please note that the ability
of the depository bank to carry out voting instructions may be limited by practical and legal limitations and the terms of the
securities on deposit. We cannot assure you that ADS holders will receive voting materials in time to enable them to return voting
instructions to the depository bank in a timely manner. Securities for which no voting instructions have been received will not
be voted except as discussed above.
As a foreign private issuer,
we are not subject to the SEC’s proxy rules, which regulate the form and content of solicitations by United States-based
issuers of proxies from their shareholders. To date, our practice has been to provide advance notice to our ADS holders of all
shareholder meetings and to solicit their vote on such matters, through the depository, and we expect to continue this practice.
The form of notice and proxy statement that we have been using does not include all of the information that would be provided
under the SEC’s proxy rules.
Under Indian law, the
ADS holders have the right to vote on any general meetings either by show of hands or by poll only on becoming the Shareholder
of the Company by converting the ADS into equity shares of the Company.
Taxation
Indian Taxation
General
. The following
relates to the principal Indian tax consequences for holders of ADSs and equity shares received upon withdrawal of such equity
shares who are not resident in India, whether of Indian origin or not. We refer to these persons as non-resident holders. The
following summary is based on the law and practices of the Income-tax Act,1961, or Income-tax Act including the special tax regime
contained in Sections 115AC and 115 ACA of the Income-tax Act read with the Issue of Foreign Currency Convertible Bonds and Ordinary
Shares (through Depository Receipt Mechanism) Scheme, 1993 or the Scheme, as amended. The Income-tax Act is amended every year
by the Finance Act of the relevant year. Some or all of the tax consequences of Sections 115AC and 115ACA may be amended
or changed by future amendments to the Income-tax Act
The Finance Act, 2012
included General Anti-Avoidance Rule (GAAR), wherein the tax authority may declare an arrangement as an impermissible avoidance
arrangement if an arrangement is not entered at arm’s length, results in misuse / abuse of provisions of Income Tax Act,
1961 lacks commercial substance or the purpose of arrangement is for obtaining a tax benefit. If any of our transactions are found
to be ‘impermissible avoidance arrangements’ under GAAR, our business may be adversely affected.
The GAAR was originally
proposed to become effective for transactions entered into on or after April 1, 2013. In September 2013, vide Notification No.
75, the Government of India had notified the applicability of the GAAR provisions along with certain threshold limits which will
become effective from April 1, 2015. However vide Finance Act, 2015 the implementation of GAAR has been deferred by 2 years so
as to implement it as part of a comprehensive regime to deal with OECD’s BEPS project of which India is an active participant.
Thus, GAAR provisions shall be applicable from fiscal 2018.
This section is not intended
to constitute a complete analysis of the individual tax consequences to non-resident holders under Indian law for the acquisition,
ownership and sale of ADSs and equity shares. Personal tax consequences of an investment may vary for non-resident holders in
various circumstances, and potential investors should therefore consult their own tax advisors on the tax consequences of such
acquisition, ownership and sale, including specifically the tax consequences under the law of the jurisdiction of their residence
and any tax treaty between India and their country of residence.
Provisions of the Income
Tax Act have been amended effective April 1, 2016 for determination of place of effective management (POEM) of a Company. Accordingly,
Section 6(3) was amended to provide that a Company is said to be resident in India in any financial year if it is an Indian Company
or its POEM in that year is in India. POEM has been defined to mean a place where key management and commercial decisions that
are necessary for the conduct of the business of an entity as a whole are, in substance, made.
EACH PROSPECTIVE INVESTOR
SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISORS WITH RESPECT TO INDIAN AND LOCAL TAX CONSEQUENCES OF ACQUIRING, OWNING OR DISPOSING
OF EQUITY SHARES OR ADSs
Residence
.
For purposes of the Income-tax
Act, an individual is considered to be a resident of India during any fiscal year if he or she is in India in that year for a
period or periods of at least 182 days; or at least 60 days and at least 365 days within the four preceding years.
The period of 60 days
referred to above shall be read as 182 days (i) in case of a citizen of India who leaves India in a previous year for
the purposes of employment outside of India or (ii) in the case of a citizen of India or a person of Indian origin living
abroad who visits India or (iii) a member of crew of Indian ship.
Taxation of Distributions.
Dividend income is currently exempt from tax for shareholders.
Up to fiscal 2013, the
domestic companies were liable to pay a dividend distribution tax at the rate of 16.22% inclusive of applicable surcharge and
education cess. The Finance Act, 2013 has increased the surcharge on dividend distribution tax from 5% to 10% which resulted in
increase in the effective rate of dividend distribution tax to 16.995% as against 16.22% effective April 1, 2013. Any distributions
of additional ADSs or equity shares to resident or non-resident holders will not be subject to Indian tax. The Finance Act, 2014
made an amendment in section 115-O, which requires grossing up of dividend amount distributed for computing DDT. As a result the
effective rate of DDT increased from 16.995% to 19.994% inclusive of surcharge and cess. This was effective from October 1, 2014.
Further as a result of increase in rate of surcharge in the Finance Act, 2015, the effective rate of DDT has increased to 20.3576%
from 19.994%. However for fiscal year 2019 the Government has proposed to replace existing 3 per cent education cess with a 4
per cent 'Health and Education Cess' resulting in effective tax rate of 20.5553%. Further, the Government of India, through Finance
Act, 2016, has introduced a tax on dividends accrued to non-corporate resident investors in excess of ₹1 million per annum
at the rate of 10% (plus applicable surcharge and education cess). This is in addition to a dividend distribution tax payable
by us. If the effective rate of a dividend distribution tax increases or new forms of taxes on distribution of profits is introduced,
the dividend amount receivable by our shareholders after taxes may decrease. Any distributions of additional ADSs or equity shares
to resident or non-resident holders will not be subject to Indian tax.
Minimum Alternate Tax.
The Indian Government had introduced Section 115JA to the Income Tax Act which came into effect in April 1, 1997, to bring
certain zero tax companies under the ambit of a Minimum Alternative Tax, or MAT. If the tax on taxable income of a Company computed
under this Act, in respect of a previous year is less than 18.5% of its book profits, the tax on total income of such Company
for the relevant previous year shall be deemed to be an amount equal to 18.5% of such book profits. The Income tax Act provides
that the MAT paid by the companies can be adjusted against its tax liability under the normal provisions of the Indian Income
tax laws but limited to the extent that is over and above the tax computed under MAT provisions The Finance Act, 2015 has increased
the surcharge to 12% from 10% which has resulted in the increase in the effective rate of MAT to 21.3416% from 20.9605% at present.
The Income Tax Act provides
that the MAT paid by companies can be adjusted against its tax liability over the next fifteen years
.
Taxation of Capital
Gains
. Any gain realized on the sale of ADSs by a non-resident holder to any non-resident outside India is not subject to
Indian capital gains tax as it is not regarded as transfer by virtue of section 47(viia) of Indian Income tax laws which is prerequisite
for taxing as capital gains.
Since our ADS offerings
were approved by the Government of India under the Issue of Foreign Currency Convertible Bonds and Ordinary Shares Scheme, non-resident
holders of the ADSs have the benefit of tax concessions available under Section 115AC. As a result, gains realized on the sale
of ADSs will not be subject to Indian taxation. The effect of the Scheme in the context of Section 115AC is unclear as to whether
such tax treatment is available to a non-resident who acquires equity shares outside India from a non-resident holder of equity
shares after receipt of the equity shares upon surrender of the ADSs. If concessional tax treatment is not available, gains realized
on the sale of such equity shares will be subject to customary Indian taxation on capital gains as discussed below. The Issue
of Foreign Currency Convertible Bonds and Ordinary Shares Scheme provides that if the equity shares are sold on a recognized stock
exchange in India against payment in Indian rupees, they will no longer be eligible for such concessional tax treatment.
Subject to any relief
provided pursuant to an applicable tax treaty, any gain realized on the sale of equity shares to an Indian resident or inside
India generally will be subject to Indian capital gains tax. However, the acquisition by non-resident holders of equity shares
in exchange for ADSs will not be subject to Indian capital gains tax. .When the sale of equity shares is liable to capital gain
tax the cost of acquisition for computing the tax is taken as the original cost of acquisition of the ADSs by virtue of the section
49(2A) of the Indian Income tax laws. Therefore, the original cost of acquisition of the ADSs may be treated as the cost of acquisition
for the purposes of determining the capital gains tax. According to the Issue of Foreign Currency Convertible Bonds and Ordinary
Shares Scheme, a non-resident holder’s holding period for purposes of determining the applicable Indian capital gains tax
rate in respect of equity shares received in exchange for ADSs commences on the date of the notice of the redemption by the depository
to the custodian. The India-U.S. Treaty does not provide an exemption from the imposition of Indian capital gains tax.
Under Section 115AC, taxable
gain realized in respect of equity shares held for more than 12 months, or long-term gain, is subject to tax at the rate of 10.30%
(excluding applicable surcharge). Taxable gain realized in respect of equity shares held for 12 months or less, or short-term
gain, is subject to tax at variable rates with a maximum rate of 41.20% (excluding applicable surcharge). The actual rate of tax
on short-term gain depends on a number of factors, including the country of residence of the non-resident holder and the type
of income chargeable in India.
Withholding Tax on
Capital Gains
. Any taxable gain realized by a non-resident on the sale of ADSs or equity shares is to be withheld at the source
by the buyer. However, as per the provisions of Section 196D(2) of the Income Tax Act, no withholding tax is required to
be deducted from any income by way of capital gains arising to Foreign Institutional Investors as defined in Section 115AD
of the Income Tax Act on the transfer of securities defined in Section 115AD of the Income Tax Act.
Buy-back of Securities
.
Finance Act (No.2) 2014, introduced Section 115QA to tax the distributed income of domestic company on buy back of securities
at an effective rate of 23.072%. Such tax will be paid by the company before distribution of buy back amount. Correspondingly
exemption to shareholder under section 10(34A) is provided
Stamp Duty and Transfer
Tax
. Upon issuance of the equity shares underlying our ADSs, we are required to pay a stamp duty of 0.1% of the aggregate
value of the shares issued, provided that the issue of dematerialized shares is not subject to Indian stamp duty. A transfer of
ADSs is not subject to Indian stamp duty. However, upon the acquisition of equity shares from the depository in exchange for ADSs,
the non-resident holder will be liable for Indian stamp duty at the rate of 0.25% of the market value of the equity shares on
the redemption date. Similarly upon a sale of shares in physical form, stamp duty at the rate of 0.25% of the market value of
the equity shares on the trade date is payable, although customarily such duty is borne by the purchaser. Our equity shares, if
and when issued and traded in dematerialized form, are not subject to Indian stamp duty.
Wealth Tax
. The
holding of the ADSs in the hands of non-resident holders and the holding of the underlying equity shares by the depository as
a fiduciary will be exempt from Indian wealth tax. Non-resident holders are advised to consult their own tax advisers in this
context. Finance Act (No.2) 2014, abolished Wealth tax.
Gift Tax and Estate
Duty
. Indian gift tax was abolished in October 1998. In India, there is no estate duty law. As a result, no estate duty would
be applicable in India. Non-resident holders are advised to consult their own tax advisors in this context. However, gift receipt
by non-relatives or firms or closely held companies would be taxed as income in the hands of the recipient under the Income tax
Act. Yet, gifts between non-residents (being transfers outside India) would not get taxed in India.
Service Tax
Brokerage
or commission paid to stock brokers in connection with the sale or purchase of shares is subject to a service tax of 14.5% till
May 31, 2016. The service tax has been increased to 15% effective June 1 2016. However this is effective till June 30, 2017 as
Service tax is replaced by Goods and Service tax with effect from July 1, 2017. The stock broker is responsible for collecting
the service tax from the shareholder and paying it to the relevant authority
Income Tax Matters
The statutory corporate
income tax rate and the surcharge thereon are subject to change in line with the changes announced in the Union Budget each year.
From fiscal year 2015, the corporate income tax rate is 30%, subject to a surcharge of 12% where the taxable total income exceeds
₹ 10 crores and education cess of 2 % and 1% secondary and higher education cess, resulting in an effective tax rate of
34.61%. However for fiscal year 2019 the Government has proposed to replace existing 3 per cent education cess with a 4 per cent
'Health and Education Cess' resulting in effective tax rate of 34.94%. We cannot assure you that the current income tax rate will
remain unchanged in the future. We also cannot assure you that the surcharge will be in effect for a limited period of time or
that additional surcharges will not be levied by the Government of India. Until April 1, 2002, dividends declared, distributed
or paid by an Indian corporation were subject to a dividend tax of 10.2%, including the applicable surcharge for fiscal 2002,
of the total amount of the dividend declared, distributed or paid. This tax is not paid by shareholders nor is it a withholding
requirement, but rather it is a direct tax payable by the corporation before distribution of a dividend. Effective April 1, 2002,
Indian companies were no longer to be taxed on declared dividends. The Finance Act, 2003 proposed that after April 1, 2003, dividend
income will be exempt from tax for shareholders and those domestic companies will be liable to pay a dividend distribution tax
at the rate of 12.5% plus a surcharge and education cess at the time of the distribution. The Finance Act 2014 has increased the
rate of dividend distribution tax to 15% plus applicable surcharge and education cess resulting in an effective rate of 20.358%.
However for fiscal year 2019 the Government has proposed to replace existing 3 per cent education cess with a 4 per cent 'Health
and Education Cess' resulting in effective tax rate of 20.555%.
Material United States Federal
Income Tax Consequences
The following is a summary
of certain material U.S. federal income tax consequences that may be relevant with respect to the acquisition, ownership and disposition
of equity shares or ADSs by U.S. holders (as defined below). This summary is based upon the U.S. Internal Revenue Code of 1986,
as amended (the “Code”), the regulations promulgated thereunder by the U.S. Department of the Treasury (the “Treasury
Regulations”), rulings and decisions made by the U.S. Internal Revenue Service (“IRS”) and judicial decisions
thereon and existing interpretations thereof currently in effect, all of which are subject to change, possibly with retroactive
effect, and any such change could affect the continued accuracy of this summary. Furthermore, this summary is based in part on
the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with its
terms.
This summary does not address
all aspects of U.S. federal income taxation that may be relevant to a particular holder of equity shares or ADSs in light of the
holder’s particular circumstances, or to certain types of holders subject to special treatment under the Code. Except where
otherwise noted, this summary addresses only equity shares or ADSs held as capital assets for U.S. federal income tax purposes
(generally, assets held for investment), and does not address holders subject to special U.S. federal income tax rules, such as
banks or other financial institutions, insurance companies, brokers and dealers in securities or currencies, regulated investment
companies, real estate investment trusts, tax-exempt entities, persons that will hold equity shares or ADSs as a position in a
straddle or as part of a hedging or conversion transaction for U.S. federal income tax purposes, persons that have a functional
currency other than the U.S. dollar, persons subject to special tax accounting rules under Section 451(b) of the Code, or holders
of 10% or more, by voting power or value, of our equity shares and ADSs, collectively. We have not requested and will not request
a ruling from the IRS with respect to any of the U.S. federal income tax consequences as described herein, and as a result there
can be no assurance that the IRS will not disagree with or challenge any conclusions we have reached and described herein.
This summary is not intended
as a substitute for professional tax planning, particularly because certain of the U.S. federal income tax consequences of an investment
in the Company may not be the same for all holders. In addition, this summary does not discuss any U.S. state, U.S. local or non-U.S.
tax consequences, or any estate tax, gift tax or other estate planning aspects of such an investment, nor does it discuss the Medicare
tax imposed on net investment income. Prospective investors are urged to consult with their own tax advisors with specific reference
to their own tax situations under U.S. federal income tax law and the provisions of applicable U.S. state, U.S. local and non-U.S.
tax laws, before investing in the Company.
Notably, in December 2017,
the U.S. President signed into law the “Tax Cuts and Jobs Act,” which significantly changes the U.S. federal income
tax system. Although this summary takes into account provisions enacted under the Tax Cuts and Jobs Act, given the complexity of
this new law and the lack of administrative guidance about its application, prospective investors should consult with their own
tax advisors regarding its potential impact on the U.S. federal income tax consequences to them in light of their particular circumstances.
For purposes of this summary,
“U.S. holders” are beneficial holders of equity shares or ADSs who or that are (i) individual citizens or residents
of the United States, (ii) corporations (or other entities treated as corporations for U.S. federal income tax purposes) organized
in or under the laws of the United States or any political subdivision thereof or therein, (iii) estates, the income of which is
subject to U.S. federal income taxation regardless of its source, or (iv) trusts (a) for which a U.S. court exercises primary supervision
and a U.S. person has the authority to control all substantial decisions or (b) that was in existence on August 20, 1996 and has
validly made an election under applicable Treasury Regulations to be treated as a U.S. person. This summary is limited to U.S.
holders who are not resident in India for purposes of the Convention between the Government of the United States of America and
the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect
to Taxes on Income (the “Treaty”).
If a partnership, including
any entity treated as a partnership for U.S. federal income tax purposes, holds equity shares or ADSs, the tax treatment of a partner
in such partnership generally will depend upon the status of the partner and upon the activities of the partnership. A partner
in a partnership holding equity shares or ADSs should consult his, her or its own tax advisor regarding the consequences of an
investment in the Company.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT HIS,
HER OR ITS OWN TAX ADVISOR WITH RESPECT TO THE U.S. FEDERAL, U.S. STATE, U.S. LOCAL AND NON-U.S. TAX CONSEQUENCES OF ACQUIRING,
OWNING OR DISPOSING OF EQUITY SHARES OR ADSs
Ownership of ADSs
.
For U.S. federal income tax purposes, a holder of an ADS will be treated as the owner of the underlying equity share represented
by such ADS. Accordingly, deposits or withdrawals of equity shares for ADSs will not be subject to U.S. federal income tax.
Dividends
. Subject
to the discussion of the “passive foreign investment company” rules below, the gross amount of any distributions of
cash or property with respect to ADSs or equity shares (before reduction for any Indian withholding taxes) generally will be taxable
as dividends to the extent paid out of our current or accumulated earnings and profits, as determined under U.S. federal income
tax principles. To the extent that the amount of any such distribution exceeds our current and accumulated earnings and profits
(as determined under U.S. federal income tax principles) such excess will be treated first as a tax-free return of capital to the
extent of the U.S. holder's U.S. federal income tax basis in the equity shares or ADSs, and thereafter as capital gain.
Any dividends that a U.S.
holder receives will be includable in such holder’s gross income as ordinary income on the day such holder actually or constructively
receives them, in the case of equity shares, or the date of receipt by the Depository, in the case of ADSs. Such dividends will
not be eligible for the dividends received deduction generally allowed to corporate U.S. holders. Dividends paid by us generally
will be non-U.S. source income for purposes of the U.S. “foreign tax credit” rules.
Subject to certain limitations,
including certain limitations based on taxable income and filing status, and subject to certain minimum holding period requirements,
dividends paid to non-corporate U.S. holders, including individuals, may be eligible for a reduced rate of taxation if we are deemed
to be a “qualified foreign corporation” for U.S. federal income tax purposes. A qualified foreign corporation includes
a non-U.S. corporation if (1) its shares (including equity shares or ADSs) are readily tradable on an established securities market
in the United States or (2) it is eligible for the benefits under a comprehensive income tax treaty with the United States. In
addition, a corporation is not a qualified foreign corporation if it is a “passive foreign investment company” (as
discussed below) for the taxable year in which the dividend is paid or the preceding taxable year. The ADSs are traded on the NASDAQ
Capital Market. Due to the absence of specific statutory provisions addressing ADSs, however, there can be no assurance that we
are a qualified foreign corporation solely as a result of our listing on the NASDAQ Capital Market. Nonetheless, we may be eligible
for benefits under the Treaty, thereby enabling us to be treated as a qualified foreign corporation under the second prong described
above. Each U.S. holder should consult his, her or its own tax advisor regarding the treatment of dividends and such holder's eligibility
for a reduced rate of taxation.
Subject to various limitations,
any Indian tax withheld from dividends in accordance with Indian law will be deductible or creditable against a U.S. holder’s
U.S. federal income tax liability. U.S. holders should not be entitled to a U.S. foreign tax credit for Indian withholding tax
for any portion of such tax that could have been avoided by claiming benefits under the Treaty. The rules governing U.S. foreign
tax credits are complex and involve the application of rules that depend on the particular circumstances of each U.S. holder. Therefore,
each U.S. holder should consult his, her or its own tax advisor with respect to the availability of U.S. foreign tax credits to
such U.S. holder’s particular circumstances.
If dividends are paid in
Indian rupees, the amount of the dividend distribution included in the income of a U.S. holder will be the U.S. dollar value of
the payments made in Indian rupees, determined at a spot exchange rate between Indian rupees and U.S. dollars applicable to the
date such dividend is included in the income of the U.S. holder, regardless of whether the payment is in fact converted into U.S.
dollars. Generally, gain or loss, if any, resulting from currency exchange fluctuations during the period from the date the dividend
is paid to the date such payment is actually converted into U.S. dollars will be treated as U.S. source ordinary income or loss
for purposes of the U.S. foreign tax credit rules.
Sale or Exchange of
Equity Shares or ADSs
. Subject to the discussion of the “passive foreign investment company” rules below, a U.S.
holder generally will recognize gain or loss on the sale or exchange of equity shares or ADSs equal to the difference between the
U.S. dollar value of the amount realized and the U.S. holder’s tax basis, determined in U.S. dollars, in the equity shares
or ADSs, as applicable. Such gain or loss will be capital gain or loss, and will be long-term capital gain or loss if the equity
shares or ADSs were held for more than one year. Gain or loss, if any, recognized by a U.S. holder generally will be treated as
U.S. source gain or loss for U.S. foreign tax credit limitation purposes. Therefore, U.S. holders may not be able to use any U.S.
foreign tax credit arising from any Indian tax imposed on the sale or exchange of equity shares or ADSs unless the credit can be
applied (subject to applicable limitations) against tax due on other non-U.S. source income. The deductibility of capital losses
is subject to limitations.
U.S. holders who receive
any non-U.S. currency on the sale or exchange of equity shares or ADSs may recognize ordinary income or loss as a result of currency
fluctuations between the date of the sale or exchange of the equity shares or ADSs and the date the sale proceeds are converted
into U.S. dollars.
Passive Foreign Investment
Company
. A non-U.S. corporation will be classified as a passive foreign investment company (“PFIC”) for U.S. federal
income tax purposes if either:
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•
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75% or more of its gross income for the taxable year is passive income; or
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•
|
on a quarterly average for the taxable year by value (or, if it is not a publicly traded corporation
and so elects, by adjusted basis) 50% or more of its assets produce or are held for the production of passive income.
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For the purposes of this
test, such non-U.S. corporation will be treated as owning its proportionate share of the assets and earning its proportionate share
of the income of any other corporation in which it owns, directly or indirectly, 25% or more (by value) of the stock.
We do not believe that
we satisfy either of the tests for PFIC status, and this summary assumes that we will not be so classified. However, because this
determination is made on an annual basis, no assurance can be given that we will not be classified as a PFIC in future taxable
years. If we were to be classified as a PFIC for any taxable year, the U.S. federal income tax consequences discussed herein could
be materially and adversely different for U.S. holders.
Backup Withholding
Tax and Information Reporting Requirements
. Dividends paid, if any, on equity shares or ADSs to a U.S. holder may be subject
to information reporting and, unless a U.S. holder either furnishes its taxpayer identification number or otherwise establishes
an exemption, may also be subject to U.S. backup withholding tax (currently at a rate of 24%). In addition, information reporting
generally will apply to payments of proceeds from the sale, exchange, redemption or other disposition of equity shares or ADSs
by a paying agent, including a broker, within the U.S. to a U.S. holder. A paying agent within the U.S. will be required to backup
withhold on any payments of the proceeds from the sale or redemption of equity shares or ADSs within the United States to a U.S.
holder if such U.S. holder fails to furnish its correct taxpayer identification number or otherwise fails to establish an exemption
or comply with such backup withholding requirements. Backup withholding is not an additional tax and may be refunded (or credited
against the U.S. holder’s U.S. federal income tax liability, if any), provided that certain required information is furnished
to the IRS. The information reporting requirements may apply regardless of whether withholding is required.
Certain U.S. holders who
are individuals may be required to report information relating to their ownership of an interest in certain “specified foreign
financial assets,” including stock of a non-U.S. entity, generally on IRS Form 8938 (Statement of Specified Foreign Financial
Assets), subject to exceptions (including an exception for stock held through a U.S. financial institution). U.S. holders should
consult their tax advisors regarding their reporting obligations with respect to our equity shares or ADSs.
The above summary is not
intended to constitute a complete analysis of all U.S. federal income tax consequences relating to ownership of equity shares or
ADSs. U.S. holders should consult their own tax advisor concerning the tax consequences to them under U.S. federal, U.S. state,
U.S. local and applicable non-U.S. tax laws of the acquisition, ownership and disposition of equity shares or ADSs.
Documents on Display
This report and other information
filed or to be filed by us can be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street,
N.E., Washington, D.C. 20549. Copies of these materials can also be obtained from the Public Reference Section of the SEC, 100
F Street, NE., Washington, DC 20549, at prescribed rates. Additionally, all of our publicly filed SEC reports are available at
the SEC’s website,
www.sec.gov,
which contains all the public filings and other information regarding registrants
that make electronic filings with the SEC using its EDGAR system.
Additionally,
documents referred to in this Annual Report may be inspected at our corporate offices which are located at TIDEL Park. No, 4, Rajiv
Gandhi Salai, Taramani, Chennai, 600 113 India.
Item
11. Quantitative and Qualitative Disclosures About Market Risk
General
Market risk is the risk
of loss of future earnings, to fair values or to future cash flows that may result from a change in the price of a financial instrument.
The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates,
commodity prices, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable
to all market risk sensitive financial instruments including investments, foreign currency receivables, payables and debt. Our
exposure to market risk is a function of our investment and borrowing activities and our revenue generating activities in foreign
currency. The objective of market risk management is to avoid excessive exposure of our earnings and equity to loss.
Risk Management Procedures
We manage market risk
through a corporate treasury department, which evaluates and exercises independent control over the entire process of market risk
management. Our corporate treasury department recommends risk management objectives and policies which are approved by senior
management and our Audit Committee. The activities of this department include management of cash resources, implementing hedging
strategies for foreign currency exposures, borrowing strategies, and ensuring compliance with market risk limits and policies
on a daily basis.
Refer to note 36 of the
notes to consolidated financial statements to this Annual Report for further analysis and exposure arising out of credit risk,
liquidity risk and currency risk
Item 12.
Description
of Securities Other Than Equity Securities
Item 12(d).
American Depositary Shares
Citibank,
N.A. (the “Depositary”) serves as the depositary for our ADSs, pursuant to that certain Deposit Agreement by and between
the Company and the Depositary, dated as October 18, 1999, as amended from time to time. ADS holders are required to pay various
fees to the Depositary and the Depositary may refuse to provide any service for which a fee is assessed until the applicable fee
has been paid. For purposes of this section, “Shares” means the Company’s equity shares.
The fees and charges payable
by holders of our ADSs include the following:
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(i)
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a fee not in
excess of US $5.00 per 100 ADSs is charged for each issuance of ADS upon deposit of Shares,
excluding certain issuances described below;
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(ii)
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a fee not in
excess of US $5.00 per 100 ADSs is charged for each surrender of ADSs, property and cash
in exchange for the underlying deposited securities;
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(iii)
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a fee not in
excess of US $2.00 per 100 ADSs for each distribution of cash dividend or other cash
distribution pursuant to the deposit agreement;
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(iv)
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a fee not in
excess of US $2.00 per 100 ADSs for the distribution of ADSs pursuant to stock dividends
or other free distributions or an exercise of rights; and
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(v)
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a fee not in
excess of $5.00 per 100 ADSs for depositary services.
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Additionally, under the
terms of our deposit agreement, the depositary is entitled to charge each registered holder, beneficial owner, persons depositing
Shares and person surrendering ADS for cancellation and for the purpose of withdrawing deposited securities the following:
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(i)
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taxes (including
applicable interest and penalties) and other governmental charges;
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(ii)
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such registration
fees as may from time to time be in effect for the registration of shares or other deposited
securities on the share register and applicable to transfers of shares or other deposited
securities to or from the name of the custodian, the Depositary or any nominees upon
the making of deposits and withdrawals, respectively;
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(iii)
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such cable,
telex and facsimile transmission and delivery expenses as are expressly provided in the
Deposit Agreement to be at the expense of the person depositing shares or holders and
beneficial owners of ADSs;
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(iv)
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the expenses
and charges incurred by the Depositary in the conversion of foreign currency;
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(v)
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such fees and
expenses as are incurred by the Depositary in connection with compliance with exchange
control regulations and other regulatory requirements applicable to shares, deposited
securities, ADSs and ADRs; and
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(vi)
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the fees and
expenses incurred by the Depositary in connection with the delivery of deposited securities.
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If any tax or other governmental
charge is payable by the holders and/or beneficial owners of ADSs to the depositary, the depositary, the custodian or the Company
may withhold or deduct from any distributions made in respect of deposited securities and may sell for the account of the holder
and/or beneficial owner any or all of the deposited securities and apply such distributions and sale proceeds in payment of such
taxes (including applicable interest and penalties) or charges, with the holder and the beneficial owner thereof remaining fully
liable for any deficiency.
Amendment to the Depositary
Agreement with Citibank NA. New York.
By Letter dated October
4, 2016, the Company has executed an amendment to the Letter Agreement dated February 17, 2009 with Citibank N.A., New York wherein
the Depository Service Fees was reduced from USD 0.025 to USD 0.015 per ADS per year. Further, the agreement with the Citibank
was also extended until March 31, 2020.
As per the amendment agreement,
Citibank will make available to the Company an Annual Financial Contribution for each Programme Year equal to 33% of the Depositary
Service Fee collected from the ADS holders and the Contribution will be used by the Company solely to defray Program Related Expenses.
Direct and Indirect
Payments by the Depositary to Sify
Pursuant to the Deposit
Agreement with Citibank N.A, we received the following payments from Citibank during the fiscal year ended March 31, 2018 in connection
with our ADS Program:
Fee
|
|
Amount
in US $
|
|
Financial Audit Fees
|
|
|
286,902
|
|
Legal Counsel Fees
|
|
|
78,590
|
|
Investor Relations
|
|
|
277,768
|
|
Printing/mailing/processing
|
|
|
18,417
|
|
Text Conversion charges & others
|
|
|
7,000
|
|
Annual Fee for ADRs
|
|
|
120,000
|
|
Total amount reimbursed
|
|
|
788,677
|
|
PART
III
Item
17.
Financial Statements
See Item No 18
Item
18.
Financial Statements
Consolidated Statements
and other Financial Information
Report of Independent Registered Public
Accounting Firm
The Board of Directors and
Shareholders
Sify Technologies Limited
Opinion on the Financial
Statements
We have audited the accompanying
consolidated statements of financial position of Sify Technologies Limited and its subsidiaries (‘the Company’) as
of March 31, 2018 and 2017 and the related consolidated statements of income, comprehensive income, changes in equity and
cash flows for each of the years in the three year period ended March 31, 2018 and the related notes (collectively referred
to as the ‘financial statements’).
In our opinion, the financial
statements referred to above present fairly, in all material respects, the financial position of Sify Technologies Limited and
its subsidiaries as of March 31, 2018 and 2017 and the results of their operations and their cash flows for each of the years
in the three year period ended March 31, 2018, in conformity with the International Financial Reporting Standards as issued
by the International Accounting Standards Board.
We also have audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United States) (‘PCAOB’), Sify Technologies Limited’s
internal control over financial reporting as of March 31, 2018, based on criteria established in
Internal Control —
Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our
report dated June 20, 2018 expressed an unqualified opinion on the effectiveness of the Company’s internal control over
financial reporting.
Basis for opinion
These financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements,
based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect
to the Company in accordance with the U.S. Federal Securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes evaluating
the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
ASA & Associates
LLP
Independent Registered
Public Accounting Firm
We have served as the Company’s
auditor since year ended March 31, 2011.
Chennai, India
June 20, 2018
Sify Technologies Limited
Consolidated Statement of Financial Position
(In thousands of Rupees, except share data and
as otherwise stated)
|
|
|
|
As at March 31,
|
|
|
As at March 31,
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
Convenience
translation into
US$ thousands
|
|
|
|
Note
|
|
₹
|
|
|
₹
|
|
|
Note 2(c)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
5
|
|
|
7,213,421
|
|
|
|
6,622,081
|
|
|
|
110,908
|
|
Intangible assets
|
|
6
|
|
|
582,512
|
|
|
|
559,102
|
|
|
|
8,956
|
|
Lease prepayments
|
|
8
|
|
|
1,344,845
|
|
|
|
1,017,623
|
|
|
|
20,677
|
|
Other assets
|
|
9
|
|
|
1,108,532
|
|
|
|
1,121,872
|
|
|
|
17,044
|
|
Other investments
|
|
14
|
|
|
145,718
|
|
|
|
74,653
|
|
|
|
2,240
|
|
Deferred tax assets
|
|
10
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total non-current assets
|
|
|
|
|
10,395,028
|
|
|
|
9,395,331
|
|
|
|
159,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
11
|
|
|
645,848
|
|
|
|
1,181,987
|
|
|
|
9,930
|
|
Trade and other receivables, net
|
|
12
|
|
|
10,713,886
|
|
|
|
8,781,692
|
|
|
|
164,728
|
|
Prepayments for current assets
|
|
13
|
|
|
419,221
|
|
|
|
290,779
|
|
|
|
6,446
|
|
Restricted cash
|
|
7
|
|
|
296,275
|
|
|
|
262,907
|
|
|
|
4,555
|
|
Cash and cash equivalents
|
|
7
|
|
|
1,991,846
|
|
|
|
1,621,358
|
|
|
|
30,625
|
|
Total current assets
|
|
|
|
|
14,067,076
|
|
|
|
12,138,723
|
|
|
|
216,284
|
|
Total assets
|
|
|
|
|
24,462,104
|
|
|
|
21,534,054
|
|
|
|
376,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
|
|
1,518,413
|
|
|
|
1,516,875
|
|
|
|
23,346
|
|
Share premium
|
|
|
|
|
18,694,030
|
|
|
|
18,680,731
|
|
|
|
287,424
|
|
Share based payment reserve
|
|
|
|
|
309,695
|
|
|
|
305,539
|
|
|
|
4,762
|
|
Other components of equity
|
|
|
|
|
33,635
|
|
|
|
26,798
|
|
|
|
517
|
|
Accumulated deficit
|
|
|
|
|
(11,550,820
|
)
|
|
|
(12,265,524
|
)
|
|
|
(177,596
|
)
|
Total equity attributable to equity holders of the Company
|
|
|
|
|
9,004,953
|
|
|
|
8,264,419
|
|
|
|
138,453
|
|
Sify Technologies Limited
Consolidated Statement of Financial Position
(In thousands of Rupees, except share data and
as otherwise stated)
|
|
|
|
As at March 31,
|
|
|
As at March 31,
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
Convenience
translation into
US$ thousands
|
|
|
|
Note
|
|
₹
|
|
|
₹
|
|
|
Note 2(c)
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease obligations, other than current installments
|
|
16
|
|
|
96,879
|
|
|
|
185,736
|
|
|
|
1,490
|
|
Borrowings
|
|
19
|
|
|
2,013,688
|
|
|
|
881,834
|
|
|
|
30,961
|
|
Employee benefits
|
|
17
|
|
|
147,480
|
|
|
|
127,298
|
|
|
|
2,268
|
|
Other liabilities
|
|
18
|
|
|
983,152
|
|
|
|
636,566
|
|
|
|
15,116
|
|
Total non-current liabilities
|
|
|
|
|
3,241,199
|
|
|
|
1,831,434
|
|
|
|
49,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease obligations, current installments
|
|
16
|
|
|
89,086
|
|
|
|
333,483
|
|
|
|
1,368
|
|
Borrowings
|
|
19
|
|
|
1,472,177
|
|
|
|
2,529,244
|
|
|
|
22,635
|
|
Bank overdraft
|
|
7
|
|
|
2,121,537
|
|
|
|
991,161
|
|
|
|
32,619
|
|
Trade and other payables
|
|
20
|
|
|
7,361,091
|
|
|
|
6,367,607
|
|
|
|
113,178
|
|
Deferred income
|
|
21
|
|
|
1,172,061
|
|
|
|
1,216,706
|
|
|
|
18,021
|
|
Total current liabilities
|
|
|
|
|
12,215,952
|
|
|
|
11,438,201
|
|
|
|
187,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
15,457,151
|
|
|
|
13,269,635
|
|
|
|
237,656
|
|
Total equity and liabilities
|
|
|
|
|
24,462,104
|
|
|
|
21,534,054
|
|
|
|
376,109
|
|
The accompanying notes
form an integral part of these consolidated financial statements
Sify Technologies Limited
Consolidated Statement of Income
(In thousands of Rupees, except share data and
as otherwise stated)
|
|
|
|
Year ended March 31,
|
|
|
Year ended
March
31,
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2018
Convenience
translation into
US$ thousands
|
|
|
|
Note
|
|
₹
|
|
|
₹
|
|
|
₹
|
|
|
Note2(c)
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Rendering of services
|
|
|
|
|
19,109,169
|
|
|
|
17,033,322
|
|
|
|
14,098,582
|
|
|
|
293,806
|
|
- Sale of products
|
|
|
|
|
1,576,444
|
|
|
|
1,398,698
|
|
|
|
936,314
|
|
|
|
24,238
|
|
Total
|
|
22
|
|
|
20,685,613
|
|
|
|
18,432,020
|
|
|
|
15,034,896
|
|
|
|
318,044
|
|
Cost of goods sold and services rendered
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Rendering of services
|
|
|
|
|
(12,103,596
|
)
|
|
|
(9,806,582
|
)
|
|
|
(8,288,714
|
)
|
|
|
(186,095
|
)
|
- Sale of products
|
|
|
|
|
(1,331,354
|
)
|
|
|
(2,063,639
|
)
|
|
|
(815,150
|
)
|
|
|
(20,470
|
)
|
Total
|
|
24
|
|
|
(13,434,950
|
)
|
|
|
(11,870,221
|
)
|
|
|
(9,103,864
|
)
|
|
|
(206,565
|
)
|
Other income
|
|
|
|
|
189,738
|
|
|
|
145,872
|
|
|
|
104,885
|
|
|
|
2,918
|
|
Selling, general and administrative expenses
|
|
25
|
|
|
(4,394,814
|
)
|
|
|
(3,991,273
|
)
|
|
|
(3,479,287
|
)
|
|
|
(67,571
|
)
|
Depreciation and amortization
|
|
5 & 6
|
|
|
(1,754,537
|
)
|
|
|
(1,758,776
|
)
|
|
|
(1,598,037
|
)
|
|
|
(26,976
|
)
|
Profit from operating activities
|
|
|
|
|
1,291,050
|
|
|
|
957,622
|
|
|
|
958,593
|
|
|
|
19,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income
|
|
28
|
|
|
129,325
|
|
|
|
122,584
|
|
|
|
45,437
|
|
|
|
1,988
|
|
Finance expenses
|
|
28
|
|
|
(496,780
|
)
|
|
|
(437,109
|
)
|
|
|
(565,712
|
)
|
|
|
(7,638
|
)
|
Net finance income / (expense)
|
|
|
|
|
(367,455
|
)
|
|
|
(314,525
|
)
|
|
|
(520,275
|
)
|
|
|
(5,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before tax
|
|
|
|
|
923,595
|
|
|
|
643,097
|
|
|
|
438,318
|
|
|
|
14,200
|
|
Income tax (expense) / benefit
|
|
10
|
|
|
(194
|
)
|
|
|
(698
|
)
|
|
|
135
|
|
|
|
(3
|
)
|
Profit for the year
|
|
|
|
|
923,401
|
|
|
|
642,399
|
|
|
|
438,453
|
|
|
|
14,197
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the Company
|
|
|
|
|
923,401
|
|
|
|
642,399
|
|
|
|
438,453
|
|
|
|
14,197
|
|
Non-controlling interest
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
923,401
|
|
|
|
642,399
|
|
|
|
438,453
|
|
|
|
14,197
|
|
Earnings per share
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
|
|
6.14
|
|
|
|
4.45
|
|
|
|
3.11
|
|
|
|
0.09
|
|
Diluted earnings per share
|
|
|
|
|
6.11
|
|
|
|
4.45
|
|
|
|
3.10
|
|
|
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes
form an integral part of these consolidated financial statements
Sify Technologies Limited
Consolidated Statement of Comprehensive Income
(In thousands of Rupees, except share data and
as otherwise stated)
|
|
Year ended March 31,
|
|
|
|
|
|
|
2018
₹
|
|
|
2017
₹
|
|
|
2016
₹
|
|
|
2018
Convenience
translation
into US$
thousands
Note 2(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
923,401
|
|
|
|
642,399
|
|
|
|
438,453
|
|
|
|
14,197
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that will not be reclassified to profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remeasurements of the net defined benefit liability/asset
|
|
|
5,379
|
|
|
|
(17,034
|
)
|
|
|
1,391
|
|
|
|
83
|
|
Items that may be reclassified to profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange differences on translation of foreign operations
|
|
|
1,458
|
|
|
|
(7,663
|
)
|
|
|
13,442
|
|
|
|
23
|
|
Total other comprehensive income, net of taxes
|
|
|
6,837
|
|
|
|
(24,697
|
)
|
|
|
14,833
|
|
|
|
106
|
|
Total comprehensive income
|
|
|
930,238
|
|
|
|
617,702
|
|
|
|
453,286
|
|
|
|
14,303
|
|
Total comprehensive income attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the Company
|
|
|
930,238
|
|
|
|
617,702
|
|
|
|
453,286
|
|
|
|
14,303
|
|
Non-controlling interest
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
930,238
|
|
|
|
617,702
|
|
|
|
453,286
|
|
|
|
14,303
|
|
Sify Technologies Limited
Consolidated Statement of Changes in Equity
(In thousands of Rupees, except share data and
as otherwise stated)
For year ended March
31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Particulars
|
|
Share
capital
|
|
|
Share
premium
|
|
|
Share
based
payment
reserve
|
|
|
Other
components
of equity
|
|
|
Retained
earnings /
(accumulated
deficit)
|
|
|
Total
|
|
|
Non-
controlling
interest
|
|
|
Total
equity
|
|
Balance at April 1, 2017
|
|
|
1,516,875
|
|
|
|
18,680,731
|
|
|
|
305,539
|
|
|
|
26,798
|
|
|
|
(12,265,524
|
)
|
|
|
8,264,419
|
|
|
|
-
|
|
|
|
8,264,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,837
|
|
|
|
923,401
|
|
|
|
930,238
|
|
|
|
-
|
|
|
|
930,238
|
|
Transactions with owners, recorded directly in
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Call money received
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Shares issued on exercise of ESOP
|
|
|
1,538
|
|
|
|
10,631
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,169
|
|
|
|
-
|
|
|
|
12,169
|
|
Dividends paid (incl dividend distribution tax)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(208,697
|
)
|
|
|
(208,697
|
)
|
|
|
-
|
|
|
|
(208,697
|
)
|
Transferred from share based payment reserve
|
|
|
-
|
|
|
|
2,668
|
|
|
|
(2,668
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Share-based payment transactions
|
|
|
-
|
|
|
|
-
|
|
|
|
6,824
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,824
|
|
|
|
-
|
|
|
|
6,824
|
|
Balance at March 31, 2018
|
|
|
1,518,413
|
|
|
|
18,694,030
|
|
|
|
309,695
|
|
|
|
33,635
|
|
|
|
(11,550,820
|
)
|
|
|
9,004,953
|
|
|
|
-
|
|
|
|
9,004,953
|
|
For year ended
March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Particulars
|
|
Share
capital
|
|
|
Share
premium
|
|
|
Share
based
payment
reserve
|
|
|
Other
components
of equity
|
|
|
Retained
earnings /
(accumulated
deficit)
|
|
|
Total
|
|
|
Non-
controlling
interest
|
|
|
Total
equity
|
|
Balance at April 1, 2016
|
|
|
1,423,125
|
|
|
|
18,474,481
|
|
|
|
287,901
|
|
|
|
51,495
|
|
|
|
(12,736,171
|
)
|
|
|
7,500,831
|
|
|
|
-
|
|
|
|
7,500,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(24,697
|
)
|
|
|
642,399
|
|
|
|
617,702
|
|
|
|
-
|
|
|
|
617,702
|
|
Transactions with owners, recorded directly in
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Call money received
|
|
|
93,750
|
|
|
|
206,250
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
300,000
|
|
|
|
-
|
|
|
|
300,000
|
|
Dividends paid (incl dividend distribution tax)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,69,742
|
)
|
|
|
(1,69,742
|
)
|
|
|
-
|
|
|
|
(1,69,742
|
)
|
Transaction costs related to equity
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,010
|
)
|
|
|
(2,010
|
)
|
|
|
-
|
|
|
|
(2,010
|
)
|
Share-based payment transactions
|
|
|
-
|
|
|
|
-
|
|
|
|
17,638
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,638
|
|
|
|
-
|
|
|
|
17,638
|
|
Balance at March 31, 2017
|
|
|
1,516,875
|
|
|
|
18,680,731
|
|
|
|
305,539
|
|
|
|
26,798
|
|
|
|
(12,265,524
|
)
|
|
|
8,264,419
|
|
|
|
-
|
|
|
|
8,264,419
|
|
For year ended March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Particulars
|
|
Share
capital
|
|
|
Share
premium
|
|
|
Share
based
payment
reserve
|
|
|
Other
components
of equity
|
|
|
Retained
earnings /
(accumulated
deficit)
|
|
|
Total
|
|
|
Non-
controlling
interest
|
|
|
Total
equity
|
|
Balance at April 1, 2015
|
|
|
1,423,125
|
|
|
|
18,474,481
|
|
|
|
235,915
|
|
|
|
36,662
|
|
|
|
(13,004,882
|
)
|
|
|
7,165,301
|
|
|
|
-
|
|
|
|
7,165,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,833
|
|
|
|
438,453
|
|
|
|
453,286
|
|
|
|
-
|
|
|
|
453,286
|
|
Transactions with owners, recorded directly in
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Call money received
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Dividends paid (incl dividend distribution tax)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,69,742
|
)
|
|
|
(1,69,742
|
)
|
|
|
-
|
|
|
|
(1,69,742
|
)
|
Share-based payment transactions
|
|
|
-
|
|
|
|
-
|
|
|
|
51,986
|
|
|
|
-
|
|
|
|
-
|
|
|
|
51,986
|
|
|
|
-
|
|
|
|
51,986
|
|
Balance at March 31, 2016
|
|
|
1,423,125
|
|
|
|
18,474,481
|
|
|
|
287,901
|
|
|
|
51,495
|
|
|
|
(12,736,171
|
)
|
|
|
7,500,831
|
|
|
|
-
|
|
|
|
7,500,831
|
|
The accompanying notes form an integral part
of these consolidated financial statements.
Sify Technologies Limited
Consolidated Statements of Cash Flows
For the fiscal years ended March 31,
(In thousands of Rupees, except share data and
as otherwise stated)
|
|
Year ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
Convenience
translation
into US$
thousands
|
|
|
|
2018
₹
|
|
|
2017
₹
|
|
|
2016
₹
|
|
|
(Unaudited)
Note 2(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
923,401
|
|
|
|
642,399
|
|
|
|
438,453
|
|
|
|
14,197
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,754,537
|
|
|
|
1,758,776
|
|
|
|
1,598,037
|
|
|
|
26,976
|
|
(Gain) / loss on sale of property, plant and equipment
|
|
|
(2,553
|
)
|
|
|
(1,081
|
)
|
|
|
(1,617
|
)
|
|
|
(39
|
)
|
Provision for doubtful receivables/ advances
|
|
|
370,000
|
|
|
|
383,534
|
|
|
|
182,161
|
|
|
|
5,689
|
|
Provision for expenses no longer required written back
|
|
|
-
|
|
|
|
-
|
|
|
|
(49,910
|
)
|
|
|
-
|
|
Stock compensation expense
|
|
|
6,824
|
|
|
|
17,638
|
|
|
|
51,986
|
|
|
|
105
|
|
Net finance (income) / expense
|
|
|
367,455
|
|
|
|
314,525
|
|
|
|
520,275
|
|
|
|
5,650
|
|
Unrealized (gain)/ loss on account of exchange differences
|
|
|
(1,863
|
)
|
|
|
(68,300
|
)
|
|
|
31,035
|
|
|
|
(29
|
)
|
Amortization of leasehold prepayments
|
|
|
21,728
|
|
|
|
15,939
|
|
|
|
14,649
|
|
|
|
334
|
|
Tax expense
|
|
|
194
|
|
|
|
698
|
|
|
|
(135
|
)
|
|
|
3
|
|
Cash flow from operating activities before working capital changes
|
|
|
3,439,723
|
|
|
|
3,064,128
|
|
|
|
2,784,934
|
|
|
|
52,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in trade and other receivables
|
|
|
(2,220,619
|
)
|
|
|
(1,843,683
|
)
|
|
|
(946,189
|
)
|
|
|
(34,142
|
)
|
Change in inventories
|
|
|
536,139
|
|
|
|
(440,555
|
)
|
|
|
(508,338
|
)
|
|
|
8,243
|
|
Change in other assets
|
|
|
(518,958
|
)
|
|
|
(618,297
|
)
|
|
|
19,211
|
|
|
|
(7,979
|
)
|
Change in trade and other payables
|
|
|
604,701
|
|
|
|
1,379,505
|
|
|
|
1,347,140
|
|
|
|
9,297
|
|
Change in employee benefits
|
|
|
29,060
|
|
|
|
26,500
|
|
|
|
16,796
|
|
|
|
447
|
|
Change in deferred income
|
|
|
296,574
|
|
|
|
172,920
|
|
|
|
220,551
|
|
|
|
4,560
|
|
Cash generated from operations
|
|
|
2,166,620
|
|
|
|
1,740,518
|
|
|
|
2,934,105
|
|
|
|
33,312
|
|
Income taxes (paid)/ refund received
|
|
|
(46,016
|
)
|
|
|
7,965
|
|
|
|
(491,443
|
)
|
|
|
(708
|
)
|
Net cash from / (used in) operating activities
|
|
|
2,120,604
|
|
|
|
1,748,483
|
|
|
|
2,442,662
|
|
|
|
32,604
|
|
Sify Technologies Limited
Consolidated Statements of Cash Flows
For the fiscal years ended March 31,
(In thousands of Rupees, except share and per
share data and as otherwise stated)
|
|
Year ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
Convenience
translation
into US$
thousands
|
|
|
|
2018
₹
|
|
|
2017
₹
|
|
|
2016
₹
|
|
|
(Unaudited)
Note 2(c)
|
|
Cash flows from / (used in) investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property, plant and equipment
|
|
|
(1,668,979
|
)
|
|
|
(1,596,694
|
)
|
|
|
(1,484,292
|
)
|
|
|
(25,660
|
)
|
Expenditure on intangible assets
|
|
|
(163,507
|
)
|
|
|
(72,050
|
)
|
|
|
(128,705
|
)
|
|
|
(2,514
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
2,425
|
|
|
|
2,281
|
|
|
|
1,695
|
|
|
|
37
|
|
Investments in corporate debt securities
|
|
|
(71,093
|
)
|
|
|
(72,943
|
)
|
|
|
-
|
|
|
|
(1,093
|
)
|
Finance income received
|
|
|
106,850
|
|
|
|
129,427
|
|
|
|
45,251
|
|
|
|
1,643
|
|
Net cash from / (used in) investing activities
|
|
|
(1,794,304
|
)
|
|
|
(1,609,979
|
)
|
|
|
(1,566,051
|
)
|
|
|
(27,587
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from / (used in) financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issue of share capital (including share premium)
|
|
|
12,169
|
|
|
|
300,000
|
|
|
|
-
|
|
|
|
187
|
|
Proceeds from / (repayment) of borrowings (net)
|
|
|
42,719
|
|
|
|
643,341
|
|
|
|
700,882
|
|
|
|
657
|
|
Transaction costs related to equity
|
|
|
|
|
|
|
(2,010
|
)
|
|
|
-
|
|
|
|
|
|
Finance expenses paid
|
|
|
(491,293
|
)
|
|
|
(426,696
|
)
|
|
|
(567,874
|
)
|
|
|
(7,554
|
)
|
Proceeds from / (repayment of) finance lease liabilities
|
|
|
(402,954
|
)
|
|
|
(602,806
|
)
|
|
|
(543,580
|
)
|
|
|
(6,195
|
)
|
Payment of dividend and dividend distribution tax
|
|
|
(208,697
|
)
|
|
|
(169,742
|
)
|
|
|
(169,741
|
)
|
|
|
(3,209
|
)
|
Net cash from / (used in) financing activities
|
|
|
(1,048,056
|
)
|
|
|
(257,913
|
)
|
|
|
(580,313
|
)
|
|
|
(16,114
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase / (decrease) in cash and cash equivalents
|
|
|
(721,756
|
)
|
|
|
(119,409
|
)
|
|
|
296,298
|
|
|
|
(11,097
|
)
|
Cash and cash equivalents at April 1
|
|
|
893,104
|
|
|
|
1,016,113
|
|
|
|
720,651
|
|
|
|
13,732
|
|
Effect of exchange fluctuations on cash held
|
|
|
(4,764
|
)
|
|
|
(3,600
|
)
|
|
|
(836
|
)
|
|
|
(73
|
)
|
Cash and cash equivalents at March 31
|
|
|
166,584
|
|
|
|
893,104
|
|
|
|
1,016,113
|
|
|
|
2,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refer note 3 (c) and note 7 for the composition of cash and cash equivalents.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment represented by finance lease obligations
|
|
|
69,700
|
|
|
|
168,715
|
|
|
|
510,783
|
|
|
|
1,072
|
|
The amendment to IAS
7 requires disclosure relating to changes in liabilities arising from financing activities – Refer note below
The
accompanying notes form an integral part of these consolidated financial statements
Note: Reconciliation of liabilities from financing
activities
|
|
|
|
|
|
|
|
Non cash movement
|
|
|
|
|
Particulars
|
|
As at
April 01,
2017
|
|
|
Cash flow
|
|
|
Assets
acquired on
lease
|
|
|
Foreign
exchange
movement
|
|
|
Fair
value
changes
|
|
|
As at
March
31, 2018
|
|
Borrowings
|
|
|
3,411,078
|
|
|
|
42,719
|
|
|
|
|
|
|
|
45,568
|
|
|
|
(13,500
|
)
|
|
|
3,485,865
|
|
Finance lease obligations
|
|
|
519,219
|
|
|
|
(402,954
|
)
|
|
|
69,700
|
|
|
|
-
|
|
|
|
-
|
|
|
|
185,965
|
|
Total
|
|
|
3,930,297
|
|
|
|
(360,235
|
)
|
|
|
69,700
|
|
|
|
45,568
|
|
|
|
(13,500
|
)
|
|
|
3,671,830
|
|
SIFY TECHNOLOGIES
LIMITED
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of
Rupees, except share data and as stated otherwise)
Sify Technologies Limited
(‘Sify’ or ‘the Company’) is a Company domiciled in India. The address of the Company’s registered
office is 2nd Floor, TIDEL Park, 4, Rajiv Gandhi Salai, Taramani, Chennai – 600113, India. The Company and its subsidiaries
Sify Technologies (Singapore) Pte. Limited, Sify Technologies North America Corporation, Sify Data and Managed Services Limited
and Sify Infinit Spaces Limited (are together referred to as the ‘Group’ and individually as ‘Group entities’).
The Group offers converged ICT solutions comprising telecom-centric services, Data Center-centric IT services which includes Data
Center services, cloud and managed services, applications integration services and technology integration services. The Company
was incorporated on December 12, 1995 and is listed on the NASDAQ Capital Market. The financial statements are for the Group consisting
of Sify Technologies Limited (the 'Company') and its subsidiaries.
|
a.
|
Statement of compliance
|
The accompanying Consolidated
Financial Statements of the Group have been prepared in accordance with the International Financial Reporting Standards (IFRS)
and its interpretations as issued by the International Accounting Standards Board (IASB).
These Consolidated Financial
Statements have been approved for issue by the Board of Directors on June 20, 2018
These Consolidated Financial Statements have
been prepared on the historical cost basis except for the following:
|
·
|
Financial
assets at fair value through other comprehensive income are measured at fair value
|
|
·
|
Non-current
asset held for sale measured at lower of carrying value and fair value less costs to
sell.
|
|
·
|
Derivative
financial instruments are measured at fair value
|
|
·
|
Financial
instruments at fair value through profit or loss are measured at fair value.
|
|
·
|
The
defined benefit asset is recognized as the net total of the plan assets, plus unrecognized
past service cost and unrecognized actuarial losses, less unrecognized actuarial gains
and the present value of the defined benefit obligation.
|
|
·
|
In
relation to lease prepayments, the initial fair value of the security deposit is estimated
as the present value of the refundable amount, discounted using the market interest rates
for similar instruments. The difference between the initial fair value and the refundable
amount of the deposit is recognized as a lease prepayment.
|
The above items have been
measured at fair value and the methods used to measure fair values are discussed further in Note 4.
|
c.
|
Functional
and presentation currency
|
Items included in the financial statements
of each Group entity are measured using the currency of the primary economic environment in which the entity operates (“the
functional currency”). Indian rupee is the functional currency of Sify, its domestic subsidiaries. The U.S. dollar is the
functional currency of Sify’s foreign subsidiaries located in Singapore and the US.
The Consolidated Financial
Statements are presented in Indian Rupees which is the Group’s presentation currency. All financial information presented
in Indian Rupees has been rounded up to the nearest thousand except where otherwise indicated.
Convenience translation
(unaudited):
Solely for the convenience of the reader, the financial statements as of and for the year ended March 31, 2018
have been translated into United States dollars (neither the presentation currency nor the functional currency of the Group) based
on the reference rate in the City of Mumbai on March 31, 2018, for cable transfers in Indian rupees as published by the Reserve
Bank of India which was ₹ 65.04 per $1.00. No representation is made that the Indian rupee amounts have been, could have
been or could be converted into United States dollar at such a rate or at any other rate on March 31, 2018 or at any other date.
|
d.
|
Use of
estimates and judgments
|
The preparation of Consolidated
Financial Statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets, liabilities, the disclosures of contingent assets and contingent
liabilities at the date of financial statements, income and expenses during the period. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the
period in which the estimates are revised and in future periods which are affected.
Application of accounting
policies that require critical accounting estimates, judgments and assumptions having the most significant effect on the amounts
recognized in the financial statements are
:
|
·
|
Useful
lives of property, plant and equipment (Note 3 e and Note 5)
|
|
·
|
Useful
lives of intangible assets (Note 3 g and Note 6)
|
|
·
|
Lease
classification (Note 3 h, 8, 16 and 30)
|
|
·
|
Determination
of percentage completion in construction contracts (Note 3 j)
|
|
·
|
Measurement
of the recoverable amounts of cash-generating units containing goodwill (Note 3 k and
Note 6)
|
|
·
|
Utilization
of tax losses (Note 10)
|
|
·
|
Measurement
of defined employee benefit obligations (Note 17)
|
|
·
|
Measurement
of share-based payments (Note 27)
|
|
·
|
Valuation
of financial instruments (Note 3 c, 4, 35 and 36)
|
|
·
|
Provisions
and contingencies (Note 3 n and 32)
|
|
3.
|
Significant
accounting policies
|
The accounting policies
set out below have been applied consistently to all periods presented in these Consolidated Financial Statements.
|
a.
|
Basis of consolidation
|
The financial statements
of the Group companies are consolidated on a line-by-line basis. Intra-group balances and transactions, and any unrealized income
and expenses arising from intra-group transactions, are eliminated. These financial statements are prepared by applying uniform
accounting policies in use at the Group.
Subsidiaries are entities
controlled by the Company. Control exists when the Company is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through its power over the investee. Thus, the Company controls
an investee if and only if the Company has all the following:
- power over 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 the amount of the Company’s returns.
Generally, there is a
presumption that majority of voting rights results in control. To support this presumption and when the Group has less than a
majority of voting of similar rights of an investee, the group considers all relevant facts and circumstances in assessing whether
it has power over an investee.
The financial statements
of subsidiaries are consolidated from the date that control commences until the date that control ceases. The accounting policies
of subsidiaries have been changed where necessary to align them with the policies adopted by the Group.
|
(i)
|
Foreign currency
transactions and balances
|
Transactions in foreign
currencies are initially recognized in the financial statements using exchange rates prevailing on the date of transaction. Monetary
assets and liabilities denominated in foreign currencies are translated to the relevant functional currency at the exchange rates
prevailing at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair
value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary
assets and liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent
at the date of transaction. Foreign currency differences arising on translation are recognized in the income statement for determination
of net profit or loss during the period.
The assets and liabilities
of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the functional
currency at exchange rates at the reporting date. The income and expenses of foreign operations and cash flows are translated
to Indian Rupees using average exchange rates during the period. Any differences arising on such translation are recognized in
other comprehensive income. Such differences are included in the foreign currency translation reserve “FCTR” within
other components of equity. When a foreign operation is disposed off, in part or in full, the relevant amount in the FCTR is transferred
to profit or loss.
Financial assets comprises
of investments in equity and debt securities, trade and other receivables, cash and cash equivalents and other financial assets.
Initial recognition:
All financial assets are
recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction
costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery
of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised
on the trade date, i.e., the date that the Group commits to purchase or sell the asset.
Subsequent measurement:
Financial assets measured
at amortized cost:
Financial assets held
within a business model whose objective is to hold financial assets in order to collect contractual cash flows and the contractual
terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on
the principal amount outstanding are measured at amortised cost using effective interest rate (EIR) method. The EIR amortisation
is recognised as finance income in the Statement of Income.
The Group while applying
above criteria has classified the following financial assets at amortised cost
- Trade receivables
- Other financial assets.
- Investment in debt securities
Financial assets at
fair value through other comprehensive income (FVTOCI):
Financial assets that
are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets
and the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding are subsequently measured at FVTOCI. Fair value movements in financial assets
at FVTOCI are recognised in other comprehensive income.
Equity instruments held
for trading are classified as at fair value through profit or loss (FVTPL). For other equity instruments the Group classifies
the same as at FVTOCI. The classification is made on initial recognition and is irrevocable. Fair value changes on equity investments
at FVTOCI, excluding dividends, are recognised in other comprehensive income (OCI).
Financial assets at
fair value through profit or loss (FVTPL):
Financial asset are measured
at fair value through profit or loss if it does not meet the criteria for classification as measured at amortised cost or at fair
value through other comprehensive income. All fair value changes are recognised in the Statement of Income.
Derecognition of financial
assets:
Financial assets are derecognised
when the contractual rights to the cash flows from the financial asset expire or the financial asset is transferred and the transfer
qualifies for derecognition. On derecognition of a financial asset in its entirety, the difference between the carrying amount
(measured at the date of derecognition) and the consideration received (including any new asset obtained less any new liability
assumed) shall be recognised in the Statement of Income.
Impairment of financial
assets:
Trade receivables, contract
assets, lease receivables under IFRS 9, investments in debt instruments that are carried at amortised cost, investments in debt
instruments that are carried at FVTOCI are tested for impairment based on the expected credit losses for the respective financial
asset.
Trade receivables
An impairment analysis
is performed at each reporting date. The expected credit losses over lifetime of the asset are estimated by adopting the simplified
approach using a provision matrix which is based on historical loss rates reflecting current condition and forecasts of future
economic conditions. In this approach assets are grouped on the basis of similar credit characteristics such as industry, customer
segment, past due status and other factors which are relevant to estimate the expected cash loss from these assets.
Other financial assets
Other financial assets
are tested for impairment based on significant change in credit risk since initial recognition and impairment is measured based
on probability of default over the lifetime when there is significant increase in credit risk.
|
(ii)
|
Financial
liabilities
|
Financial liabilities
are initially recognised at fair value and any transaction cost that are attributable to the acquisition of the financial liabilities
except financial liabilities at fair value through profit or loss which are initially measured at fair value.
Subsequent measurement:
The financial liabilities
are classified for subsequent measurement into following categories:
- at amortised cost
- at fair value through
profit or loss
Financial liabilities
at amortised cost
The Group is classifying
the following financial liabilities at amortised cost;
a) Borrowings
b) Finance lease obligations
c) Trade and other payables
d) Other financial liabilities
Amortised cost for financial
liabilities represents amount at which financial liability is measured at initial recognition minus the principal repayments,
plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and
the maturity amount.
Financial liabilities
at fair value through profit or loss
Financial liabilities
held for trading are measured at FVTPL.
Derecognition of financial
liabilities:
A financial liability
shall be derecognised when, and only when, it is extinguished i.e. when the obligation specified in the contract is discharged
or cancelled or expires.
|
(iii)
|
Derivative
financial instruments
|
Foreign exchange forward
contracts and options are entered into by the Group to mitigate the risk of changes in foreign exchange rates associated with
certain payables, receivables and forecasted transactions denominated in certain foreign currencies. The group also enters into
cross currency interest rate swaps for hedging the risk against variability in cash flows of its term loan.
These derivative contracts
do not qualify for hedge accounting under IFRS 9, and are initially recognized at fair value on the date the contract is entered
into and subsequently re-measured at their fair value. Gains or losses arising from changes in the fair value of the derivative
contracts are recognized immediately in profit or loss.
|
(iv)
|
Offsetting
of Financial Assets and Financial Liabilities
|
Financial assets and liabilities
are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right
to offset the amounts and intends either to settle on a net basis or to realize the assets and settle the liability simultaneously.
|
(v)
|
Reclassification
of financial assets
|
The Group determines classification
of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial
assets which are categorised as equity instruments at FVTOCI and financial assets or liabilities that are specifically designated
as FVTPL. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business
model for managing those assets. Changes to the business model are expected to be very infrequent. The management determines change
in the business model as a result of external or internal changes which are significant to the Group’s operations. A change
in the business model occurs when the Group either begins or ceases to perform an activity that is significant to its operations.
If the Group reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which
is the first day of the immediately next reporting period following the change in business model. The Group does not restate any
previously recognised gains, losses (including impairment gains or losses) or interest.
Ordinary
shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or share options
are recognized as a deduction from equity, net of any tax effects.
|
e.
|
Property, plant and
equipment
|
Property, plant and equipment
is stated at cost less accumulated depreciation and where applicable accumulated impairment losses. Cost of an item of property,
plant and equipment comprises its purchase price, including import duties and non-refundable purchases taxes, after deducting
trade discounts and rebates and includes expenditure directly attributable to the acquisition of the asset. The cost of self-constructed
assets includes the cost of materials, direct labour and any other costs directly attributable to bringing the asset to a working
condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located.
Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.
When parts of an item
of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property,
plant and equipment.
Interest cost incurred
for constructed assets is capitalized up to the date the asset is ready for its intended use, based on borrowings incurred specifically
for financing the asset or the weighted average rate of all other borrowings, if no specific borrowings have been incurred for
the asset.
Gains and losses on disposal
of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of
property, plant and equipment and are recognized net within “other income / other expenses” in statement of income.
The cost of assets not
put to use as on balance sheet date are disclosed under Construction-in-progress.
The cost of replacing
part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future
economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of
the replaced part is de-recognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in statement
of income during the period in which it is incurred.
Depreciation is recognized
in the consolidated statement of income on a straight-line basis over the estimated useful lives of each part of an item of property,
plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably
certain that the Group will obtain ownership by the end of the lease term. Management’s estimated useful lives for the years
ended March 31, 2018, 2017 and 2016 were as follows:
|
Estimate of useful life
in years
|
Buildings
|
28
|
Plant and machinery comprising computers, servers etc.
|
3 – 5
|
Plant and machinery comprising other items
|
8
|
Furniture and fittings
|
5
|
Office equipment
|
5
|
Motor vehicles
|
3 – 5
|
Depreciation is not recorded
on construction-in-progress until construction and installation are complete and the asset is ready for its intended use.
The
depreciation method, useful lives and residual value are reviewed at each of the reporting date
|
(i)
|
Business
combinations
|
Business combinations
are accounted for using IFRS 3 (Revised), Business Combinations. IFRS 3 requires the identifiable intangible assets and contingent
consideration to be fair valued in order to ascertain the net fair value of identifiable assets, liabilities and contingent liabilities
of the acquiree. Significant estimates are required to be made in determining the value of contingent consideration and intangible
assets. These valuations are conducted by independent valuation experts.
Business combinations
have been accounted for using the acquisition method under the provisions of IFRS 3(Revised). The cost of acquisition is measured
at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of acquisition.
The cost of acquisition also includes the fair value of any contingent consideration. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are measured initially at their fair value on the date of acquisition.
Transactions costs that
the group incurs in connection with a business combination such as finder’s fees, legal fees, due diligence fees, and other
professional and consulting fees are expensed as incurred.
The acquisition of an
asset or a group of assets that does not constitute a ‘business’ as per IFRS 3 is accounted for by identifying and
recognizing the individual identifiable assets acquired and liabilities assumed. The cost of the group is allocated to such individual
identifiable assets and liabilities on the basis of their relative fair values on the date of purchase.
Goodwill represents the
cost of a business acquisition in excess of the Group's interest in the net fair value of identifiable assets, liabilities and
contingent liabilities of the acquiree. When the excess is negative (negative goodwill), the Group reassesses the identification
and measurement of identifiable assets, liabilities and contingent liabilities, and the measurement of the cost of acquisition,
and recognizes any remaining excess in profit or loss immediately on acquisition.
Subsequent measurement
Goodwill is
measured at cost less accumulated impairment losses.
|
g.
|
Other intangible
assets
|
Other intangible assets
that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortization and accumulated
impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the intangible asset.
|
(i)
|
Subsequent expenditure
|
Subsequent expenditure
is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other
expenditure, including expenditure on internally generated goodwill and brands, are recognized in profit or loss as incurred.
|
(ii)
|
Amortization of
intangible assets with finite useful lives
|
Amortization is recognized
in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the
date that they are available for use. The estimated useful lives for the current and previous year are as follows:
|
Estimate of useful life
in years
|
Software
|
Not exceeding 3 years
|
Technical know-how
|
5 years
|
License fees
|
20 years
|
Bandwidth Capacity
|
12 years
|
Portals and web development cost
|
5 years
|
Customer related intangibles
|
5 years
|
Amortization methods,
useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
At the inception of a
lease, the lease arrangement is classified as either a finance lease or an operating lease, based on the substance of the lease
arrangement.
Assets taken on finance
lease:
A finance lease is recognized
as an asset and a liability at the commencement of lease, at lower of the fair value of leased asset or the present value of the
minimum lease payments. Initial direct costs, if any, are also capitalized and subsequent to initial recognition, the asset is
accounted for in accordance with the accounting policy applicable to that asset. Minimum lease payments made under finance leases
are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to
each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Assets taken on operating
lease:
Other leases are operating
leases and the leased assets are not recognized on the Group’s statement of financial position. Payments made under operating
leases are recognized in profit or loss on a straight-line basis over the term of the lease unless such payments are structure
in line with the expected general inflation to compensate for the lessors expected inflationary cost increases.
Assets given on finance
lease:
The Group is a dealer
lessor for leasing various types of products sold to its customers. Profit or loss on sale of such products is recognized in accordance
with the policy on outright sales. Finance income i.e., excess of gross minimum lease payments and normal selling price is recognized
over the lease period.
Assets given on operating
lease:
Assets given on operating
lease are depreciated over the useful life of the assets. Rental income is recognised in the statement of income on a straight
line basis over the lease term.
Deposits provided to
lessors:
The Group is generally
required to pay refundable security deposits in order to obtain property leases from various lessors. Such security deposits are
financial assets and are recorded at fair value on initial recognition. The difference between the initial fair value and the
refundable amount of the deposit is recognized as a lease prepayment. The initial fair value is estimated as the present value
of the refundable amount of security deposit, discounted using the market interest rates for similar instruments.
Subsequent to initial
recognition, the security deposit is measured at amortized cost using the effective interest method with the carrying amount increased
over the lease period up to the refundable amount. The amount of increase in the carrying amount of deposit is recognized as interest
income. The lease prepayment is amortized on a straight line basis over the lease term as a lease rental expense.
Indefeasible Right
of Use (IRU)
The Company has entered
into IRU arrangements which entitle the company to right of use of specified bandwidth capacity for a specified period of time.
Such right is being treated as operating lease since the risks and rewards are not transferred to the Company. Hence, the upfront
payments made towards right of use of bandwidth capacities under such agreements have been treated as prepayments and is amortized
over the term of the contract.
Inventories comprising
traded hardware and software are measured at the lower of cost (determined using first-in first-out method) and net realizable
value. Cost comprises cost of purchase and all directly attributable costs incurred in bringing the inventories to their present
location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated
costs of completion and selling expenses.
|
j.
|
Construction
contracts in progress
|
Construction contracts
in progress represent the gross unbilled amount expected to be billed to customers for contract work performed to date. It is
measured at cost plus profit recognized to date less progress billing and recognized losses. Cost includes all expenditure related
directly to specific projects and an allocation of fixed and variable overheads incurred in the Group’s contracts and activities
based on normal operating capacity. Percentage completion is measured based on the amount of time/effort spent on a project.
Construction contract
in progress is presented as part of trade and other receivable in statement of financial position for all contracts in which costs
incurred plus recognized profit exceed progress billings. If progress billing exceeds cost incurred plus recognized profits,
then the difference is presented as deferred income / revenue in the statement of financial position.
Non-financial assets
The carrying amounts of
the Group’s non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount
is estimated. For goodwill, the recoverable amount is estimated each year at December 31.
The recoverable amount
of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value
in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets
that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing
use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).
The goodwill acquired
in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit
from the synergies of the combination. Corporate assets for the purpose of impairment testing are allocated to the cash generating
units on a reasonable and consistent basis.
An impairment loss is
recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment
losses are recognized in profit or loss. Impairment losses recognized in respect of cash-generating units are allocated first
to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets
in the unit or group of units on a
pro rata basis.
Reversal of impairment
loss
An impairment loss in
respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at
each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there
has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation
or amortization, if no impairment loss had been recognized directly in other comprehensive income and presented within equity.
Employee benefits are
accrued in the period in which the associated services are rendered by employees of the Group, as detailed below:
|
(a)
|
Defined
contribution plan (Provident fund)
|
Defined contribution plans
are post-employment benefit plans under which an entity pays fixed contributions into a separate entity (a fund) and will have
no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee
benefits relating to employee service in the current and prior periods. The Group makes specified monthly contribution towards
Government administered provident fund scheme. The Group also contributes to 401(K) plan on behalf of eligible employees. Obligations
for contributions to defined contribution plans are recognised as an employee benefit expense in profit and loss in the periods
during which the related services are rendered by employees.
|
(b)
|
Defined
benefit plans (Gratuity)
|
In accordance with applicable
Indian laws, the Group provides for a lump sum payment to eligible employees, at retirement or termination of employment based
on the last drawn salary and years of employment with the Group. The gratuity fund is managed by the Life Insurance Corporation
of India (LIC). The Group's net obligation in respect of defined benefit plan is calculated by estimating the amount of future
benefit that employees have earned in the current and prior periods, discounting that amount and deducting any unrecognized past
service cost and the fair value of any plan assets.
The discount rate is the
yield at the reporting date on risk free government bonds that have maturity dates approximating the terms of the Group’s
obligations. The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation
results in a benefit to the Group, the recognized asset is limited to the total of any unrecognized past service costs and the
present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions
to the plan.
Remeasurements of the
net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest), are
recognised in other comprehensive income and presented within equity. Remeasurements are not reclassified to profit or loss in
subsequent periods. Service costs, net interest expenses and other expenses related to defined benefit plans are recognised in
profit or loss.
Short-term employee benefit
obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized
for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive
obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
|
(d)
|
Compensated
leave of absence
|
The employees of the Group
are entitled to compensated absence. The employees can carry forward a portion of the unutilized accrued absence and utilize it
in future periods or receive cash compensation at retirement or termination of employment for the unutilized accrued compensated
absence. The Group recognizes an obligation for compensated absences in the period in which the employee renders the services.
The Group provides for the expected cost of compensated absence in the Statement of Income as the additional amount that the Group
expects to pay as a result of the unused entitlement that has accumulated based on actuarial valuations carried out by an independent
actuary at the balance sheet date.
|
m.
|
Share-based payment
transactions
|
The fair value of options
on grant date, (equity-settled share based payments) granted to employees is recognized as an employee expense, with a corresponding
increase in equity, over the period in which the options are vested. The increase in equity recognized in connection with a share
based payment transaction is presented as a separate component in equity. The amount recognized as an expense is adjusted to reflect
the actual number of share options that vest. In respect of options whose terms and conditions are modified, the Group includes
the incremental fair value of the options in the measurement of the amounts recognized for services received from the employees.
The incremental fair value is the difference between the fair value of the modified option and that of the original option both
estimated as at the date of the modification. If the modification occurs during the vesting period, the incremental fair value
granted is included in the measurement of the amount recognized for services received over the period from the modification date
until the date when the modified equity instruments vest, in addition to the amount based on the grant date fair value of the
original equity instruments, which is recognized over the remainder of the original vesting period. If the modification occurs
after vesting date, the incremental fair value granted is recognized immediately, or over the vesting period if the employee is
required to complete an additional period of service before becoming unconditionally entitled to those modified equity instruments.
Provisions are recognized
if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and
it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of the time value
of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific
to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance
cost.
A provision for onerous
contracts is recognized when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost
of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost
of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the
Group recognizes any impairment loss on the assets associated with that contract.
Revenue from the sale
of goods is measured at the fair value of the consideration received or receivable, net of returns, trade discounts, volume rebates,
value added taxes, goods and service tax (GST) and amounts collected on behalf of third parties. Revenue is recognized when the
significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the
associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the
goods, and the amount of revenue can be measured reliably. Transfers of risks and rewards vary depending on the individual terms
of the contract of sale.
Revenue from services
rendered is recognized in the consolidated income statement in proportion to the stage of completion of the transaction at the
reporting date. Revenue is recognized when the following conditions are met:
|
o
|
the
amount of revenue can be measured reliably;
|
|
o
|
it
is probable that the economic benefits will flow to the group;
|
|
o
|
the
stage of completion at the balance sheet date can be measured reliably; and
|
|
o
|
the
costs incurred, or to be incurred, in respect of the transaction can be measured reliably.
|
The revenue recognition
in respect of the various streams of revenue is described below:
Revenue from Telecom services
include Data network services and Voice services. Telecom services primarily include revenue from connectivity services, NLD/ILD
services and to a lesser extent, revenues from the installation of connectivity links. The group provides connectivity for a fixed
period of time at a fixed rate regardless of usage. The revenue attributable to connectivity services is recognised rateably
over the period of the contract. The revenue attributable to the installation of the link is recognised on completion of the installation
work.
The Group provides NLD
(National Long Distance) and ILD (International Long Distance) services through Company’s network. The Group carries
voice traffic, both national and international, using the network back-bone and delivers voice traffic to Inter-connect Operators.
Revenue is recognised based upon metered call units of voice traffic terminated on the Company’s network
|
(ii)
|
Data
Center Services:
|
Revenue from DC services
consists co-location of racks and power charges. The contracts are mainly for a fixed rate for a period of time and are recognised
over the period during which the service is provided.
|
(iii)
|
Cloud
and Managed Services:
|
Revenue from Cloud and
managed services include revenue from Cloud and storage solutions, managed services, value added services and International managed
services. Revenues from Cloud and on demand compute and storage, are primarily fixed for a period of time. Revenues from domestic
and international managed services, comprise of value added services, operations and maintenance of projects and from remote infrastructure
management. Contracts from this segment are fixed and could also be based on time and material contracts where revenue is recognised
on percentage completion method. The stage of completion is measured by efforts spent to estimated total efforts on straight line
basis over the term of the contract.
|
(iv)
|
Technology
Integration Services:
|
Revenue from Technology
Integration Services include system integration Services, revenue from construction of Data Centers, network services, security
solutions and to a lesser extent, revenue from hardware and software.
Revenue from construction
contract represents revenue from construction of Data Centers to the specific needs and design of the customer. Such contract
revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments,
to the extent that it is probable that they will result in revenue and can be measured reliably. As soon as the outcome of a construction
contract can be estimated reliably, contract revenue is recognised in profit or loss in proportion to the stage of completion
of the contract. Contract expenses are recognised as incurred unless they create an asset related to future contract activity.
The stage of completion is assessed by reference to the cost incurred till date to the total estimated costs. When the outcome
of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred
that are likely to be recoverable. An expected loss on a contract is recognised immediately in the statement of Income.
|
(v)
|
Applications
Integration Services:
|
Revenue from Applications Integration
services include online assessment, document management services, web development, mailing solutions, digital certificate based
authentication services, supply chain software and eLearning software development services. eLearning software development
services consist of structuring of content, developing modules, delivery and training users in the modules developed. Revenue from
Applications Integration Services is recognised based on percentage of completion method. Percentage completion is measured based
on the amount of time/effort spent on a project. Revenue in relation to ‘time’ is measured as the agreed rate per unit
of time multiplied by the units of time expended. The element of revenue related to materials is measured in accordance with the
terms of the contract.
The Group enters into
contracts with customers to serve advertisements in the portal and the Group is paid on the basis of impressions, click-throughs
or leads and in each case the revenue is recognised rateably over the period of the contract based on actual impressions/click
throughs / leads delivered. Revenue from commissions earned on electronic commerce transactions are recognised when the
transactions are completed.
Digital Certification
revenues include income received on account of Web certification. Generally the Company does not hold after sale service commitments
after the activation of the Digital Certificates sold and accordingly, revenue is recognised fully on the date of activation of
the respective certificate. Billing towards one time installation / training is recognised upon completion thereof.
Multiple deliverable
arrangements
In certain cases, some
elements belonging to the services mentioned above are sold as a package consisting of all or some of the elements. In these cases
it is necessary to apply the recognition criteria to the separately identifiable components of a single transaction in order to
reflect the substance of the transaction with different revenue allocations for each component. These multiple element arrangements
are recognized as separable elements because each element constitutes a separate earning process, each element has a fair value
that is reliable, verifiable and objectively determinable, and the undelivered element is not essential to functionality of the
delivered elements.
Income from operating
leases:
Lease rentals arising
on assets given on operating leases are recognized over the period of the lease term on a straight line basis.
Indefeasible Right
of Use (IRU)
The Company has entered
into IRU arrangements through which it entitles its customers to right of use of specified bandwidth capacity for a specified
period of time. The upfront payment received towards right of use of bandwidth capacities under such agreements have been treated
as deferred revenue and is recognized on a straight line basis over the term of the arrangement.
Deferred income represents unserviced portion
of billed contracts.
Finance income comprises
interest income on funds invested, dividend income and gains on the disposal of financial assets at fair value through profit
or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest method. Dividend income is
recognized in profit or loss on the date when the Group’s right to receive payment is established, which in the case of
quoted securities is the ex-dividend date.
Finance expense comprises
borrowing costs, bank charges, unwinding of discount on provision, fair value losses on financial assets at fair value through
profit or loss that are recognized in Statement of Income. Fair value changes attributable to hedged risk are recognised in the
Statement of Income.
Borrowing costs
Borrowing costs are interest
and other costs (including exchange difference relating to foreign currency borrowings to the extent that they are regarded as
an adjustment to interest costs) incurred in connection with the borrowing of funds. Interest expense is recognised using effective
interest method.
Borrowing costs that are
directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost
of that asset. Other borrowing costs are recognized as expenses in the period in which they are incurred. To the extent the Group
borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowings
costs eligible for capitalization by applying a capitalization rate to the expenditure incurred on such asset. The capitalization
rate is determined based on the weighted average of borrowing costs applicable to the borrowings of the Group which are outstanding
during the period, other than borrowings made specifically towards purchase of the qualifying asset. The amount of borrowing costs
that the Group capitalizes during a period does not exceed the amount of borrowing costs incurred during that period.
Income
tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it
relates to items recognized directly in equity or in other comprehensive income. Current tax is the expected tax payable on the
taxable income for the year, using tax rates enacted or substantively enacted at the reporting date. Minimum Alternate Tax (MAT)
is accounted as current tax when the Company is subjected to such provisions of the Income Tax Act. However, credit of such MAT
paid is available when the Company is subjected to tax as per normal provisions in the future. Credit on account of MAT is recognized
as a deferred tax asset based on the management’s estimate of its recoverability in the future.
Deferred
tax is recognized using the balance sheet method, providing for temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the
following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination
and that affects neither accounting nor taxable profit or loss and differences relating to investments in subsidiaries and associates
to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized
for taxable temporary differences arising on the initial recognition of goodwill, as the same is not deductible for tax purposes.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on
the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset
if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by
the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities
and assets on a net basis or their tax assets and liabilities will be realized simultaneously.
A
deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which
the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent
that it is no longer probable that the related tax benefit will be realized.
Deferred taxation arising
on investments in subsidiaries and associates is recognized except where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred taxation arising
on the temporary differences arising out of undistributed earnings of the equity method accounted investee is recorded based on
the management's intention. If the intention is to realize the undistributed earnings through sale, deferred tax is measured at
the capital gains tax rates that are expected to be applied to temporary differences when they reverse. However, when the intention
is to realize the undistributed earnings through dividend, the Group’s share of the income and expenses of the equity method
accounted investee is recorded in the statement of income, after considering any taxes on dividend payable by the equity method
accounted investee and no deferred tax is set up in the Group's books as the tax liability is not with the group.
The Group presents basic
and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable
to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Where ordinary shares
are issued but not fully paid, they are treated in the calculation of basic earnings per share as a fraction of an ordinary share
to the extent that they were entitled to participate in dividends during the period relative to a fully paid ordinary share. Diluted
EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary
shares outstanding for the effects of all dilutive potential ordinary shares, which includes share options granted to employees.
To the extent that partly paid shares are not entitled to participate in dividends during the period they are treated as the equivalent
of warrants or options in the calculation of diluted earnings per share.
|
t.
|
Recent
accounting pronouncements
|
|
(i)
|
Standards
early adopted by the Group
|
IFRS 9 Financial instruments:
In
July 2014, the International Accounting Standards Board issued the final version of IFRS 9, Financial Instruments. The standard
reduces the complexity of the current rules on financial instruments as mandated in IAS 39. IFRS 9 has fewer classification and
measurement categories as compared to IAS 39 and has eliminated the categories of held to maturity, available for sale and loans
and receivables. Further it eliminates the rule-based requirement of segregating embedded derivatives and tainting rules pertaining
to held to maturity investments. For an investment in an equity instrument which is not held for trading, IFRS 9 permits an irrevocable
election, on initial recognition, on an individual share-by-share basis, to present all fair value changes from the investment
in other comprehensive income. No amount recognized in other comprehensive income would ever be reclassified to profit or loss.
It requires the entity, which chooses to measure a liability at fair value, to present the portion of the fair value change attributable
to the entity’s own credit risk in the other comprehensive income.
IFRS 9 replaces the
‘incurred loss model’ in IAS 39 with an ‘expected credit loss’ model. The measurement uses a dual
measurement approach, under which the loss allowance is measured as either 12 month expected credit losses or lifetime
expected credit losses. The standard also introduces new Presentation and disclosure requirements. The effective date for
adoption of IFRS 9 is annual periods beginning on or after January 1, 2018, though early adoption is permitted. Effective
April 1, 2015, the Group has elected to early adopt IFRS 9.
|
(ii)
|
New Standards
and interpretations not yet adopted
|
IFRS 15 Revenue from
Contracts with Customers:
In May 2014, the International Accounting Standards Board (IASB) issued IFRS 15, Revenue from
Contracts with Customers.
The core principle
of the new standard is that an entity recognizes revenue when its customer obtains control of promised goods or services, in
an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.
Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash
flows arising from the entity’s contracts with customers. The standard permits the use of either the retrospective or
cumulative effect transition method. The effective date for adoption of IFRS 15 is annual periods beginning on or after
January 1, 2018, the Group will adopt the standard with effect from April 1, 2018 by using the cumulative effect transition
method and accordingly comparatives will not be retrospectively adjusted. The effect on adoption of IFRS 15 on Statement of
Profit and Loss is not expected to be significant and the Group will recognise the effect of initial application in the
opening retained earnings as per the transitional provisions prescribed under this Standard.
IFRS 16 leases:
IFRS
16 on lease was issued on January 13, 2016 and is effective from the year January 1, 2019. The standard replaces all existing
lease accounting requirements and represents a significant change in accounting and reporting of leases, with more assets and
liabilities to be reported on the Statement of Financial Position and a different recognition of lease costs. The Group is currently
evaluating the effect of the standard on the consolidated financial statements.
IFRIC 22 Foreign currency
transactions and advance consideration:
IFRIC 22 was issued on December 8, 2016 which clarifies the date of the transaction
for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an
entity has received or paid advance consideration in a foreign currency. The effective date for adoption of IFRIC 22 is annual
reporting periods beginning on or after January 1, 2018. The Group will adopt the amendment with effect from April 1, 2018, the
Group has evaluated the requirements of amendment and the effect on the financial statement is expected to be insignificant.
IFRIC 23 Uncertainty
over Income Tax Treatments:
IFRIC 23 was issued on June 7, 2017 to clarify the accounting
for uncertainties in income taxes.
The effective date for adoption of IFRIC 23 is annual reporting periods beginning on
or after January 1, 2019, though early adoption is permitted. The Group is currently evaluating the effect of the same on the
consolidated financial statements.
Amendments
to IFRS 2, Share-based payment:
In June 2016, the International Accounting Standards Board issued the amendments to IFRS 2,
providing specific guidance for measurement of cash-settled awards, modification of cash-settled awards and awards that include
a net settlement feature in respect of withholding taxes. It clarifies that the fair value of cash-settled awards is determined
on a basis consistent with that used for equity-settled awards. Market-based performance conditions and non-vesting conditions
are reflected in the ‘fair values’, but non-market performance conditions and service vesting conditions are reflected
in the estimate of the number of awards expected to vest. Also, the amendment clarifies that if the terms and conditions of a
cash-settled share-based payment transaction are modified with the result that it becomes an equity-settled share-based payment
transaction, the transaction is accounted for as such from the date of the modification. Further, the amendment requires the award
that includes a net settlement feature in respect of withholding taxes to be treated as equity-settled in its entirety. The cash
payment to the tax authority is treated as if it was part of an equity settlement. The effective date for adoption of the amendments
to IFRS 2 is annual reporting periods beginning on or after January 1, 2018, though early adoption is permitted. The Group has
evaluated the requirements of amendment and the effect on the financial statement is expected to be insignificant.
Amendments
in IAS 19 – Employee Benefits:
In February 2018, the IASB issued amendments to IAS 19 – “Employee Benefits”
regarding plan amendments, curtailments and settlements. The amendments in Plan Amendment, Curtailment or Settlement are as follows;
a)If
a plan amendment, curtailment or settlement occurs, it is now mandatory that the current service cost and the net interest for
the period after the remeasurement are determined using the assumptions used for the remeasurement;
b)
In addition, amendments have been included to clarify the effect of a plan amendment, curtailment or settlement on the requirements
regarding asset ceiling.
The
above amendments are effective for annual periods beginning on or after January 1, 2019. Earlier application is permitted but
must be disclosed.
The
Company is currently evaluating the impact of these amendments on its consolidated financial statements
.
|
4.
|
Determination of
fair values
|
A number of the Group’s
accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer
the liability takes place either in the principal market for the asset or liability or in the absence of a principal market, in
the most advantageous market for the asset or liability. The principal market or the most advantageous market must be accessible
to the Group.
The fair value of an asset
or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming
that market participants act in their economic best interest.
A fair value measurement
of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in
its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation
techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, 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 financial statements are categorised within the fair value hierarchy based
on the lowest level input that is significant to the fair value measurement as a whole. The fair value hierarchy is described
as below:
Level 1 -
unadjusted quoted prices in active markets for identical assets and liabilities.
Level 2 - Inputs
other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 - unobservable
inputs for the asset or liability.
For assets and liabilities
that are recognised in the financial statements at fair value on a recurring basis, the Group determines whether transfers have
occurred between levels in the hierarchy by re-assessing categorisation at the end of each reporting period.
For the purpose of fair
value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and
risks of the asset or liability and the level of fair value hierarchy.
Fair values have been
determined for measurement and / or disclosure purposes based on the following methods. When applicable, further information about
the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
|
(i)
|
Property,
plant and equipment
|
The fair value of property,
plant and equipment recognized as a result of a business combination is an estimated amount for which a property could be exchanged
on the date of acquisition in an orderly transaction between market participants. The fair value of items of plant, equipment,
fixtures and fittings is based on the market approach and cost approach using quoted market prices for similar items when available
and replacements costs when appropriate.
The fair value of inventories
acquired in a business combination is determined based on the estimated selling price in the ordinary course of business less
the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the
inventories.
The fair value of intangible
assets acquired in the business combinations is based on discounted cash flows expected to be derived from the use and eventual
sale of assets (terminal value).
|
(iv)
|
Investments
in equity and debt securities
|
The fair value is determined
by reference to their quoted price at the reporting date. In the absence of quoted price, the fair value of the financial asset
is measured using valuation techniques.
|
(v)
|
Trade
and other receivables
|
The fair value of trade
and other receivables expected to be realised beyond twelve months, excluding construction contracts in progress, is estimated
as the present value of future cash flows, discounted at the market rate of interest at the reporting date. However in respect
of such financial instruments, fair value generally approximates the carrying amount due to the short term nature of such assets.
This fair value is determined for disclosure purposes or when acquired in a business combination.
The fair value of forward
exchange contracts is based on their quoted price, if available. If a quoted price is not available, the fair value is estimated
by discounting the difference between the contractual forward price and the current forward price for the residual maturity of
the contract using a risk free interest rate (based on government bonds). The fair value of foreign currency option contracts
is determined based on the appropriate valuation techniques, considering the terms of the contract. Fair values reflect the credit
risk of the instrument and include adjustments to take account of the credit risk of the Group entity and the counter party when
appropriate. The fair value of the cross currency swaps (principal only swaps) and interest rate swaps is determined based on
the discounting of the future cash flows at the market rates existing on the reporting date.
|
(vii)
|
Non
derivative financial liabilities
|
Fair value, which is determined
for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the
market rate of interest at the reporting date. For finance leases, the market rate of interest is determined by reference to similar
lease agreements.
(viii)
Share-based payment transactions
The fair value of employee
stock options is measured using the Black-Scholes method. Measurement inputs include share price on grant date, exercise price
of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly
available information), expected term of the instrument (based on historical experience and general option holder behavior), expected
dividends, and the risk free interest rate (based on government bonds).
|
5.
|
Property,
plant and equipment
|
The
following table presents the changes in property, plant and equipment during the year ended March 31, 2018
|
|
Cost
|
|
|
Accumulated
depreciation
|
|
|
Carrying
|
|
Particulars
|
|
As
at
April 1,
2017
|
|
|
Additions
|
|
|
Disposals
|
|
|
As
at
March 31,
2018
|
|
|
As
at
April 1,
2017
|
|
|
Depreciation
for the year
|
|
|
Deletions
|
|
|
As
at
March 31,
2018
|
|
|
amount
as
at March
31, 2018
|
|
Building
|
|
|
2,301,987
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,301,987
|
|
|
|
557,439
|
|
|
|
82,183
|
|
|
|
-
|
|
|
|
639,622
|
|
|
|
1,662,365
|
|
Plant and machinery
|
|
|
11,585,120
|
|
|
|
795,351
|
|
|
|
86,695
|
|
|
|
12,293,776
|
|
|
|
7,864,346
|
|
|
|
1,174,083
|
|
|
|
21,059
|
|
|
|
9,017,370
|
|
|
|
3,276,406
|
|
Computer equipment
|
|
|
1,162,259
|
|
|
|
251,022
|
|
|
|
5,465
|
|
|
|
1,407,816
|
|
|
|
834,398
|
|
|
|
177,345
|
|
|
|
5,373
|
|
|
|
1,006,370
|
|
|
|
401,446
|
|
Office equipment
|
|
|
496,015
|
|
|
|
106,953
|
|
|
|
1,175
|
|
|
|
601,793
|
|
|
|
281,432
|
|
|
|
65,808
|
|
|
|
1,216
|
|
|
|
346,024
|
|
|
|
255,769
|
|
Furniture and fittings
|
|
|
1,093,544
|
|
|
|
157,940
|
|
|
|
650
|
|
|
|
1,250,834
|
|
|
|
753,209
|
|
|
|
112,623
|
|
|
|
897
|
|
|
|
864,935
|
|
|
|
385,899
|
|
Vehicles
|
|
|
9,656
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,656
|
|
|
|
3,656
|
|
|
|
2,400
|
|
|
|
-
|
|
|
|
6,056
|
|
|
|
3,600
|
|
Total
|
|
|
16,648,581
|
|
|
|
1,311,266
|
|
|
|
93,985
|
|
|
|
17,865,862
|
|
|
|
10,294,480
|
|
|
|
1,614,442
|
|
|
|
28,545
|
|
|
|
11,880,377
|
|
|
|
5,985,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Construction in progress
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,227,936
|
|
Total
|
|
|
16,648,581
|
|
|
|
1,311,266
|
|
|
|
93,985
|
|
|
|
17,865,862
|
|
|
|
10,294,480
|
|
|
|
1,614,442
|
|
|
|
28,545
|
|
|
|
11,880,377
|
|
|
|
7,213,421
|
|
The
following table presents the changes in property, plant and equipment during the year ended March 31, 2017
|
|
Cost
|
|
|
Accumulated
depreciation
|
|
|
Carrying
|
|
Particulars
|
|
As
at
April 1,
2016
|
|
|
Additions
|
|
|
Disposals
|
|
|
As
at
March 31,
2017
|
|
|
As
at
April 1,
2016
|
|
|
Depreciation
for the year
|
|
|
Deletions
|
|
|
As
at
March 31,
2017
|
|
|
amount
as
at March
31, 2017
|
|
Building
|
|
|
2,301,987
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,301,987
|
|
|
|
475,256
|
|
|
|
82,183
|
|
|
|
-
|
|
|
|
557,439
|
|
|
|
1,744,548
|
|
Plant and machinery
|
|
|
10,137,059
|
|
|
|
1,464,523
|
|
|
|
16,462
|
|
|
|
11,585,120
|
|
|
|
6,610,485
|
|
|
|
1,269,064
|
|
|
|
15,203
|
|
|
|
7,864,346
|
|
|
|
3,720,774
|
|
Computer equipment
|
|
|
951,508
|
|
|
|
217,549
|
|
|
|
6,798
|
|
|
|
1,162,259
|
|
|
|
702,371
|
|
|
|
138,736
|
|
|
|
6,709
|
|
|
|
834,398
|
|
|
|
327,861
|
|
Office equipment
|
|
|
386,702
|
|
|
|
110,001
|
|
|
|
688
|
|
|
|
496,015
|
|
|
|
228,987
|
|
|
|
53,127
|
|
|
|
682
|
|
|
|
281,432
|
|
|
|
214,583
|
|
Furniture and fittings
|
|
|
1,028,880
|
|
|
|
68,328
|
|
|
|
3,664
|
|
|
|
1,093,544
|
|
|
|
661,001
|
|
|
|
95,872
|
|
|
|
3,664
|
|
|
|
753,209
|
|
|
|
340,335
|
|
Vehicles
|
|
|
2,456
|
|
|
|
7,200
|
|
|
|
-
|
|
|
|
9,656
|
|
|
|
2,456
|
|
|
|
1,200
|
|
|
|
-
|
|
|
|
3,656
|
|
|
|
6,000
|
|
Total
|
|
|
14,808,592
|
|
|
|
1,867,601
|
|
|
|
27,612
|
|
|
|
16,648,581
|
|
|
|
8,680,556
|
|
|
|
1,640,182
|
|
|
|
26,258
|
|
|
|
10,294,480
|
|
|
|
6,354,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Construction in progress
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
267,980
|
|
Total
|
|
|
14,808,592
|
|
|
|
1,867,601
|
|
|
|
27,612
|
|
|
|
16,648,581
|
|
|
|
8,680,556
|
|
|
|
1,640,182
|
|
|
|
26,258
|
|
|
|
10,294,480
|
|
|
|
6,622,081
|
|
The
following table presents the changes in property, plant and equipment during the year ended March 31, 2016
|
|
Cost
|
|
|
Accumulated
depreciation
|
|
|
Carrying
|
|
Particulars
|
|
As
at
April 1,
2015
|
|
|
Additions
|
|
|
Disposals
|
|
|
As
at
March 31,
2016
|
|
|
As
at
April 1,
2015
|
|
|
Depreciation
for the year
|
|
|
Deletions
|
|
|
As
at
March 31,
2016
|
|
|
amount
as
at March
31, 2016
|
|
Building
|
|
|
1,993,085
|
|
|
|
308,902
|
|
|
|
-
|
|
|
|
2,301,987
|
|
|
|
401,073
|
|
|
|
74,183
|
|
|
|
-
|
|
|
|
475,256
|
|
|
|
1,826,731
|
|
Plant and machinery
|
|
|
8,340,520
|
|
|
|
1,801,093
|
|
|
|
4,554
|
|
|
|
10,137,059
|
|
|
|
5,374,508
|
|
|
|
1,240,531
|
|
|
|
4,554
|
|
|
|
6,610,485
|
|
|
|
3,526,574
|
|
Computer equipment
|
|
|
790,631
|
|
|
|
198,488
|
|
|
|
37,611
|
|
|
|
951,508
|
|
|
|
649,977
|
|
|
|
89,929
|
|
|
|
37,535
|
|
|
|
702,371
|
|
|
|
249,137
|
|
Office equipment
|
|
|
286,141
|
|
|
|
101,010
|
|
|
|
449
|
|
|
|
386,702
|
|
|
|
203,319
|
|
|
|
26,117
|
|
|
|
449
|
|
|
|
228,987
|
|
|
|
157,715
|
|
Furniture and fittings
|
|
|
755,409
|
|
|
|
273,864
|
|
|
|
393
|
|
|
|
1,028,880
|
|
|
|
591,561
|
|
|
|
69,833
|
|
|
|
393
|
|
|
|
661,001
|
|
|
|
367,879
|
|
Vehicles
|
|
|
2,456
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,456
|
|
|
|
2,456
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,456
|
|
|
|
-
|
|
Total
|
|
|
12,168,242
|
|
|
|
2,683,357
|
|
|
|
43,007
|
|
|
|
14,808,592
|
|
|
|
7,222,894
|
|
|
|
1,500,593
|
|
|
|
42,931
|
|
|
|
8,680,556
|
|
|
|
6,128,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Construction in progress
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,99,854
|
|
Total
|
|
|
12,168,242
|
|
|
|
2,683,357
|
|
|
|
43,007
|
|
|
|
14,808,592
|
|
|
|
7,222,894
|
|
|
|
1,500,593
|
|
|
|
42,931
|
|
|
|
8,680,556
|
|
|
|
6,327,890
|
|
Leased assets
The Group’s leased
assets include certain buildings, plant and machinery acquired under finance leases. As at March 31, 2018 the net carrying amount
of buildings, plant and machinery and vehicles acquired under finance leases is ₹ 172,704 (March 31, 2017: ₹ 183,022),
₹ 375,884 (March 31, 2017: ₹ 718,162) and ₹ Nil (March 31, 2017: ₹ Nil) respectively. During the year,
the Group acquired leased assets of ₹ 69,700 (March 31, 2017: ₹ 168,715).
In case prepayments are
made towards buildings accounted for as finance leases, such prepayments are capitalized as ‘Leasehold Buildings’
(included in buildings) on the commencement of the lease term under the head ‘Property, plant and equipment’ and depreciated
in accordance with the depreciation policy for similar owned assets.
Capital Commitments
As of March 31, 2018 and
March 31, 2017, the Company had committed to spend approximately ₹ 1,032,695 and ₹ 1,044,509 respectively, under agreements
to purchase property, plant and equipment.
Construction in progress
Amounts paid towards acquisition
of property, plant and equipment outstanding at each balance sheet date and the cost of property, plant and equipment that are
not ready to be put into use are disclosed under construction-in-progress.
Capitalisation of expenses
The Company has capitalized
expenses amounting to ₹ Nil (March 31, 2017: ₹ Nil) which are directly attributable to the construction of building.
Security
As at March 31, 2018 property,
plant and equipment with a carrying amount of ₹ 5,428,499 (March 31, 2017: ₹5,444,659) are subject to a registered
charge to secure bank borrowings.
Intangible assets comprise
the following:
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
Goodwill
|
|
|
14,595
|
|
|
|
14,595
|
|
|
|
14,595
|
|
Other intangible assets
|
|
|
567,917
|
|
|
|
544,507
|
|
|
|
591,051
|
|
|
|
|
582,512
|
|
|
|
559,102
|
|
|
|
605,646
|
|
The following table presents
the changes in goodwill during the years ended March 31, 2018 and 2017
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Balance at the beginning of the year
|
|
|
14,595
|
|
|
|
14,595
|
|
Effect of movement in exchange rates
|
|
|
-
|
|
|
|
-
|
|
Impairment loss recognized during the year
|
|
|
-
|
|
|
|
-
|
|
Net carrying amount of goodwill
|
|
|
14,595
|
|
|
|
14,595
|
|
The amount of goodwill
as at March 31, 2018 and March 31, 2017 has been allocated to the Applications Integration Services segment.
The following table presents
the changes in intangible assets during the years ended March 31, 2018, 2017 and 2016.
|
|
Bandwidth
Capacity
|
|
|
Software
|
|
|
License fees
|
|
|
Total
|
|
(A) Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at March 31, 2015
|
|
|
576,508
|
|
|
|
557,026
|
|
|
|
73,000
|
|
|
|
1,206,534
|
|
Acquisitions during the year
|
|
|
65,883
|
|
|
|
62,822
|
|
|
|
-
|
|
|
|
1,28,705
|
|
Disposals during the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance as at March 31, 2016
|
|
|
642,391
|
|
|
|
619,848
|
|
|
|
73,000
|
|
|
|
1,335,239
|
|
Acquisitions during the year
|
|
|
-
|
|
|
|
72,050
|
|
|
|
-
|
|
|
|
72,050
|
|
Disposals during the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance as at March 31, 2017
|
|
|
642,391
|
|
|
|
691,898
|
|
|
|
73,000
|
|
|
|
1,407,289
|
|
Acquisitions during the year
|
|
|
-
|
|
|
|
163,505
|
|
|
|
-
|
|
|
|
163,505
|
|
Disposals during the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance as at March 31, 2018
|
|
|
6,42,391
|
|
|
|
855,403
|
|
|
|
73,000
|
|
|
|
1,570,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(B) Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at March 31,2015
|
|
|
140,591
|
|
|
|
483,097
|
|
|
|
23,056
|
|
|
|
646,744
|
|
Amortization for the year
|
|
|
50,407
|
|
|
|
44,387
|
|
|
|
2,650
|
|
|
|
97,444
|
|
Impairment loss on intangibles
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance as at March 31, 2016
|
|
|
190,998
|
|
|
|
527,484
|
|
|
|
25,706
|
|
|
|
744,188
|
|
Amortization for the year
|
|
|
56,396
|
|
|
|
59,548
|
|
|
|
2,650
|
|
|
|
118,594
|
|
Impairment loss on intangibles
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance as at March 31, 2017
|
|
|
247,394
|
|
|
|
587,032
|
|
|
|
28,356
|
|
|
|
862,782
|
|
Amortization for the year
|
|
|
56,895
|
|
|
|
80,550
|
|
|
|
2,650
|
|
|
|
140,095
|
|
Impairment loss on intangibles
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance as at March 31, 2018
|
|
|
304,289
|
|
|
|
667,582
|
|
|
|
31,006
|
|
|
|
1,002,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(C) Carrying amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at March 31, 2016
|
|
|
451,393
|
|
|
|
92,364
|
|
|
|
47,294
|
|
|
|
591,051
|
|
As at March 31, 2017
|
|
|
394,997
|
|
|
|
104,866
|
|
|
|
44,644
|
|
|
|
544,507
|
|
As at March 31, 2018
|
|
|
338,102
|
|
|
|
187,821
|
|
|
|
41,994
|
|
|
|
567,917
|
|
Intangible assets that
were fully impaired / amortised were removed from the block.
Capital commitments
The Company had not committed
to spend any amount under agreements to purchase intangible assets during the year ending March 31, 2018 and 2017.
Capitalized borrowing
costs
The Company had not capitalized
any interest cost during years ended March 31, 2018 and 2017.
|
7.
|
Cash and cash equivalents
|
Cash and cash equivalents
as per consolidated statement of financial position, as at March 31, 2018 amounted to ₹ 1,991,846 (March 31, 2017: ₹
1,621,358). This excludes cash-restricted of ₹ 296,275 (March 31, 2017: ₹ 262,907), representing deposits held under
lien against working capital facilities availed and bank guarantees given by the Group towards future performance obligations.
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank deposits held under lien against borrowings / guarantees
from banks / Government authorities
|
|
|
296,275
|
|
|
|
262,907
|
|
|
|
345,328
|
|
Total restricted cash
|
|
|
296,275
|
|
|
|
262,907
|
|
|
|
345,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) Non restricted cash
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and bank balances
|
|
|
1,991,846
|
|
|
|
1,621,358
|
|
|
|
1,390,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash (a+b)
|
|
|
2,288,121
|
|
|
|
1,884,265
|
|
|
|
1,735,880
|
|
Bank overdraft used for cash management purposes
|
|
|
(2,121,537
|
)
|
|
|
(991,161
|
)
|
|
|
(719,767
|
)
|
Cash and cash equivalents for the statement of cash
flows
|
|
|
166,584
|
|
|
|
893,104
|
|
|
|
1,016,113
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Towards land and buildings*
|
|
|
1,344,845
|
|
|
|
1,017,623
|
|
|
|
|
1,344,845
|
|
|
|
1,017,623
|
|
* Includes ₹ 1,321,247
(March 2017:₹ 988,599) paid for acquiring leasehold rights of land for construction of Data Centers.
The prepayment towards
land is amortized over the period of the lease on a straight line basis. In respect of buildings under operating lease, prepayments
are amortized over the lease term on a straight line basis.
Non current
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Other deposits and receivables
|
|
|
1,108,532
|
|
|
|
1,121,872
|
|
|
|
|
1,108,532
|
|
|
|
1,121,872
|
|
|
|
|
|
|
|
|
|
|
Financial assets included in other assets
|
|
|
360,378
|
|
|
|
213,424
|
|
|
10.
|
Deferred tax assets
and liabilities
|
The tax effects of significant
temporary differences that resulted in deferred tax assets and a description of the items that created these differences is given
below
Recognized deferred tax assets / (liabilities)
|
|
Assets / (liabilities)
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment
|
|
|
294,626
|
|
|
|
259,470
|
|
|
|
|
294,626
|
|
|
|
259,470
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
(148,106
|
)
|
|
|
(127,280
|
)
|
Finance Lease obligations
|
|
|
(146,520
|
)
|
|
|
(132,190
|
)
|
|
|
|
(294,626
|
)
|
|
|
(259,470
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset recognized in balance sheet
|
|
|
-
|
|
|
|
-
|
|
The Group has recognised
deferred tax assets only to the extent of deferred tax liabilities arising during the year. In assessing the realizability of
the deferred income tax assets, management considers whether some portion or all of the deferred income tax assets will not be
realized. The ultimate realization of the deferred income tax assets and tax loss carry forwards is dependent upon the generation
of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled
reversals of deferred tax liabilities, projected future taxable income and tax planning strategy in making this assessment. Based
on the level of historical taxable income and projections of future taxable income over the periods in which the deferred tax
assets are deductible, management believes that the Company will realize the benefits of those recognized deductible differences.
The amount of deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable
income are reduced.
Movement in temporary
differences during the year
|
|
Balance
as
at
April 1,
2016
|
|
|
Recognized
in
income
statement
|
|
|
Recognized
in
Equity
|
|
|
Balance
as at
March
31,
2017
|
|
|
Recognized
in
income
statement
|
|
|
Recognized
in
Equity
|
|
|
Balance
as at
March
31,
2018
|
|
Property, plant and equipment
|
|
|
243,502
|
|
|
|
15,968
|
|
|
|
-
|
|
|
|
259,470
|
|
|
|
35,156
|
|
|
|
-
|
|
|
|
294,626
|
|
Intangible assets
|
|
|
(121,317
|
)
|
|
|
(5,963
|
)
|
|
|
-
|
|
|
|
(127,280
|
)
|
|
|
(20,826
|
)
|
|
|
-
|
|
|
|
(148,106
|
)
|
Finance Lease obligations
|
|
|
(122,185
|
)
|
|
|
(10,005
|
)
|
|
|
-
|
|
|
|
(132,190
|
)
|
|
|
(14,330
|
)
|
|
|
-
|
|
|
|
(146,520
|
)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Unrecognized deferred
tax assets / (liabilities)
|
|
As at March 31, 2018
|
|
|
As at March 31, 2017
|
|
Deductible temporary
differences
|
|
|
251,989
|
|
|
|
233,501
|
|
Unrecognized
tax losses
|
|
|
536,815
|
|
|
|
876,297
|
|
|
|
|
788,804
|
|
|
|
1,109,798
|
|
Considering the probability
of availability of future taxable profits in the period in which tax losses expire, deferred tax assets have not been recognized
in respect of tax losses carried forward by the Group. The above tax losses expire at various years.
Sec.79 of the Indian Income
Tax Act denies carry forward of losses incurred in earlier years in case of change in the beneficial interest in the shares outstanding
by more than 51%. As a result of the private placement of shares during the year ended March 31, 2011, there was a change in the
registered shareholders by more than 51%. The above provision is not applicable to companies in which public are substantially
interested. Sec. 2(18) of the Indian Income Tax Act, among other things, defines a company listed in a recognized Stock Exchange
in India as a Company in which public are substantially Interested. Based on the non-discrimination clause available in the India
- United States of America tax treaty, when the capital of the company is wholly or partly owned or controlled, directly or indirectly,
by one or more residents of the other Country, the company shall not be subjected to more burdensome position than the similar
enterprises of the Contracting Country. Based on the above clause, the Company being listed in US Stock Exchange should not be
discriminated for being not listed in India and be treated on par with a Company listed in India. Hence, the Company believes
that it is out of the purview of Sec.79 of the Indian Income Tax Act. Further as disclosed in Item 7 of this Annual Report, there
has been no change in the beneficial ownership of Shares by more than 51% compared to earlier years and the Board of Directors
of the Company have continued to be the same. Hence based on the advice, the Company believes that it can carry forward and set-off
the above losses incurred by it in earlier years.
Income tax expense recognized in profit or
loss
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
Current tax expense / (benefit)
|
|
|
|
|
|
|
|
|
|
|
|
|
Current period
|
|
|
194
|
|
|
|
698
|
|
|
|
(135
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Origination and reversal of temporary differences
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Reversal of previously recognized tax losses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense / (benefit)
|
|
|
194
|
|
|
|
698
|
|
|
|
(135
|
)
|
There are no income taxes directly recognized
in other comprehensive income.
Reconciliation of effective tax rate
A reconciliation of the
income tax provision to the amount computed by applying the statutory income tax rate to the income before taxes is summarized
below:
|
|
Year ended
March
31, 2018
|
|
|
Year ended
March
31, 2017
|
|
|
Year ended
March
31, 2016
|
|
Profit before income taxes
|
|
|
923,595
|
|
|
|
643,097
|
|
|
|
438,318
|
|
Enacted tax rates in India
|
|
|
34.61
|
%
|
|
|
34.61
|
%
|
|
|
34.61
|
%
|
Computed expected tax expense / (benefit)
|
|
|
319,638
|
|
|
|
222,563
|
|
|
|
151,693
|
|
Effect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Share based payment expense not deductible for tax purposes
|
|
|
1,609
|
|
|
|
2,919
|
|
|
|
8,657
|
|
Unrecognised deferred tax assets on losses incurred during the year (net of temporary differences,
if any)
|
|
|
-
|
|
|
|
-
|
|
|
|
16,476
|
|
Unrecognized deferred tax asset on temporary differences
|
|
|
26,086
|
|
|
|
(20,812
|
)
|
|
|
(18,067
|
)
|
Difference on account differential tax rates in different jurisdictions
|
|
|
(201
|
)
|
|
|
(723
|
)
|
|
|
(212
|
)
|
Expenses/income not taxable
|
|
|
(860
|
)
|
|
|
(2,562
|
)
|
|
|
(2,751
|
)
|
Recognition of previously unrecognized tax losses
|
|
|
(346,078
|
)
|
|
|
(200,687
|
)
|
|
|
(155,931
|
)
|
|
|
|
194
|
|
|
|
698
|
|
|
|
(135
|
)
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Trade inventories
|
|
|
645,848
|
|
|
|
1,181,987
|
|
|
|
|
645,848
|
|
|
|
1,181,987
|
|
The
inventories amounting to ₹ 645,414 (March 31, 2017: ₹ 1,154,013) are secured in connection with bank borrowings and
overdraft.
|
12.
|
Trade and other
receivables
|
Trade and other receivables
comprise:
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
(i) Trade receivables, net
|
|
|
8,820,579
|
|
|
|
6,950,563
|
|
(ii) Other receivables including deposits
|
|
|
1,890,372
|
|
|
|
1,820,501
|
|
(iii) Construction contract related accruals
|
|
|
2,935
|
|
|
|
10,628
|
|
|
|
|
10,713,886
|
|
|
|
8,781,692
|
|
|
(i)
|
Trade receivables
as of March 31, 2018 and March 31, 2017 are stated net of allowance for doubtful receivables.
The Group maintains an allowance for doubtful receivables based on expected credit loss
model. Trade receivables are not collateralized except to the extent of refundable deposits
received from cybercafé franchisees and from cable television operators. The Group’s
exposure to credit and currency risks and impairment losses related to trade and other
receivables, excluding construction work in progress is disclosed in note 36. Trade receivables
consist of:
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Trade receivables from related parties
|
|
|
-
|
|
|
|
-
|
|
Other trade receivables
|
|
|
9,029,796
|
|
|
|
7,184,753
|
|
|
|
|
9,029,796
|
|
|
|
7,184,753
|
|
Less: Allowance for doubtful receivables
|
|
|
(209,217
|
)
|
|
|
(234,190
|
)
|
Balance at the end of the year
|
|
|
8,820,579
|
|
|
|
6,950,563
|
|
The activity in the allowance
for doubtful accounts receivable is given below:
|
|
For the year ended
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Balance at the beginning of the year
|
|
|
234,190
|
|
|
|
209,065
|
|
Add : Additional provision, net
|
|
|
370,000
|
|
|
|
383,534
|
|
Less : Bad debts written off
|
|
|
(394,973
|
)
|
|
|
(358,409
|
)
|
Balance at the end of the year
|
|
|
209,217
|
|
|
|
234,190
|
|
|
(ii)
|
Other receivables
comprises of the following items:
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Advances and other deposits (Refer Note (a) below)
|
|
|
544,171
|
|
|
|
540,233
|
|
Withholding taxes (Refer Note (b) below)
|
|
|
1,346,201
|
|
|
|
1,280,268
|
|
|
|
|
1,890,372
|
|
|
|
1,820,501
|
|
Financial assets included in other receivables
|
|
|
48,141
|
|
|
|
101,098
|
|
Notes:
|
a)
|
Advances and
other deposits primarily comprises of receivables in the form of deposits, sales tax/VAT,
GST, service tax and other advances given in the ordinary course of business.
|
|
b)
|
Includes withholding
taxes recoverable from the Department of Income-tax for which the Company has filed tax
returns for refund. The Company expects to realize such refund of withholding taxes within
the next 12 months.
|
|
13.
|
Prepayments for
current assets
|
Prepayments for current
assets comprise of the following:
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Prepayments for purchase of bandwidth
|
|
|
179,035
|
|
|
|
86,862
|
|
Prepayments related to insurance
|
|
|
1,064
|
|
|
|
8,123
|
|
Prepayments-others
|
|
|
217,035
|
|
|
|
178,531
|
|
Lease prepayments
|
|
|
22,087
|
|
|
|
17,263
|
|
|
|
|
419,221
|
|
|
|
290,779
|
|
Other Investments comprise
investment in unquoted equity instruments classified as financial assets at FVTOCI and investment in unquoted debt securities
classified as financial assets at amortised cost. The details of such investments are given below:
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Investment in equity instruments – unquoted
|
|
|
|
|
|
|
|
|
Investment in equity shares of Vashi Railway Station Commercial Complex Limited
|
|
|
150
|
|
|
|
150
|
|
Investment in equity shares of Sarayu Clean Gen Private Limited
|
|
|
1,560
|
|
|
|
1,560
|
|
Investment in debt securities – unquoted
|
|
|
|
|
|
|
|
|
Investment in Attala Systems Corporation #
|
|
|
144,008
|
|
|
|
72,943
|
|
|
|
|
145,718
|
|
|
|
74,653
|
|
# Unsecured convertible
promissory note of $2214 with Attala Systems Corporation, of which $ 750 (₹ 47,945), $ 375(₹ 23,973), $375 (₹
23,973), $ 500 (₹ 31,964) and $ 214 (₹ 16,153) matures on 17th October 2019, 4th January 2020, 4th April 2020, 30th
October 2020 and 1st January 2021 respectively. The note bears interest at a rate of five percent (5%). The promissory note is
convertible to equity securities under specific terms based on triggering events as defined in the agreement.
No of shares
|
|
Year ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
Issued as at April 01
|
|
|
178,530,787
|
|
|
|
178,530,787
|
|
|
|
178,530,787
|
|
Issued for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Issued for consideration other than cash
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercise of share options
|
|
|
153,860
|
|
|
|
-
|
|
|
|
-
|
|
Issued as at March 31
|
|
|
178,684,647
|
|
|
|
178,530,787
|
|
|
|
178,530,787
|
|
In fiscal 2015, the authorized
share capital of the Company was enhanced by an amount of ₹ 189,000. Consequently the
authorized
share capital is increased to ₹ 2,040,000 divided into 204,000,000 Equity Shares, having a par value ₹ 10 per share.
The holders of ordinary shares are entitled to receive dividends from time to time and are entitled to vote at meetings
of the Group.
All shares rank equally
with regard to Group’s residual assets. 125,000,000 Equity shares are
₹ 7.75
(March 31, 2017: ₹ 7.75) paid up per share.
The directors recommended
a dividend of
₹ 1.2 per paid up Equity Share of ₹ 10 each for the year 2017-18
(2016-17: ₹ 1.2 per paid up Equity share of ₹ 10 each) and
is subject to approval by the shareholders at the
Annual General Meeting to be held on July 6, 2018.
This will involve a cash outflow of ₹
180,672 towards dividend and ₹ 37,138 towards dividend distribution tax aggregating a total outflow of ₹ 217,809 (Previous
year: ₹ 173,398 towards dividend and ₹ 35,300 towards dividend distribution tax aggregating a total outflow of ₹
208,698).
Also
refer note 37 – Issue of share on private basis to existing promoter group and Note 27 – Share-based payment
Share based payment
reserve
Share based payment reserve
represents the stock compensation expense recognized in the statement of changes in equity.
Other components of
equity:
The translation reserve
comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.
The fair value reserve
comprises the cumulative net change in the fair value of investments classified as at FVTOCI until the investments are derecognized
or impaired.
|
c)
|
Recognized
actuarial gain / loss
|
Recognized actuarial gain
/ loss represent the cumulative actuarial gain / loss recognized in other comprehensive income and presented within equity.
|
16.
|
Finance lease obligations
|
The Group leases routers
and other equipment under finance lease arrangements. The following is a schedule of future minimum finance lease commitments
as at March 31, 2018:
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
|
|
Future
minimum lease
payments
|
|
|
Interest
|
|
|
Present
value
minimum
lease
payments
|
|
|
Future
minimum
lease
payments
|
|
|
Interest
|
|
|
Present
value
minimum
lease
payments
|
|
Less than one year
|
|
|
104,916
|
|
|
|
15,830
|
|
|
|
89,086
|
|
|
|
367,620
|
|
|
|
34,137
|
|
|
|
333,483
|
|
Between one and five years
|
|
|
105,386
|
|
|
|
8,507
|
|
|
|
96,879
|
|
|
|
210,026
|
|
|
|
24,290
|
|
|
|
185,736
|
|
Total
|
|
|
210,302
|
|
|
|
24,337
|
|
|
|
185,965
|
|
|
|
577,646
|
|
|
|
58,427
|
|
|
|
519,219
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Gratuity payable
|
|
|
99,120
|
|
|
|
89,114
|
|
Compensated absences
|
|
|
48,360
|
|
|
|
38,184
|
|
|
|
|
147,480
|
|
|
|
127,298
|
|
Gratuity cost
The components of gratuity
costs recognized in the consolidated income statement for the years ending March 31, 2018, March 31, 2017 and March 31, 2016 consist
of the following:
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
Service cost
|
|
|
29,577
|
|
|
|
19,154
|
|
|
|
16,215
|
|
Interest cost
|
|
|
7,518
|
|
|
|
6,880
|
|
|
|
6,178
|
|
Interest income
|
|
|
(1,418
|
)
|
|
|
(2,667
|
)
|
|
|
(2,590
|
)
|
|
|
|
35,677
|
|
|
|
23,367
|
|
|
|
19,803
|
|
Details of employee benefit
obligation and plan asset are as follows:
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Present value of projected benefit obligation at the end of the year
|
|
|
131,687
|
|
|
|
109,826
|
|
Funded status of the plans
|
|
|
(32,567
|
)
|
|
|
(20,712
|
)
|
Recognized (asset) / liability
|
|
|
99,120
|
|
|
|
89,114
|
|
The following table set
out the status of the gratuity plan:
Change in defined benefit obligation
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
Projected benefit obligation at the beginning of the year
|
|
|
109,826
|
|
|
|
91,801
|
|
|
|
79,038
|
|
Service cost
|
|
|
29,577
|
|
|
|
19,154
|
|
|
|
16,215
|
|
Interest cost
|
|
|
7,518
|
|
|
|
6,880
|
|
|
|
6,178
|
|
Remeasurements - Actuarial (gain) / loss
|
|
|
(6,872
|
)
|
|
|
2,250
|
|
|
|
(1,325
|
)
|
Benefits paid
|
|
|
(8,362
|
)
|
|
|
(10,259
|
)
|
|
|
(8,305
|
)
|
Projected benefit obligation at the end of the year
|
|
|
131,687
|
|
|
|
109,826
|
|
|
|
91,801
|
|
Change in plan assets
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
Fair value of plan assets at the beginning of the year
|
|
|
20,712
|
|
|
|
35,589
|
|
|
|
33,135
|
|
Interest income
|
|
|
1,418
|
|
|
|
2,667
|
|
|
|
2,590
|
|
Remeasurements – return on plan assets excluding amounts included in interest income
|
|
|
(1,493
|
)
|
|
|
(14,785
|
)
|
|
|
66
|
|
Employer contributions
|
|
|
20,292
|
|
|
|
7,500
|
|
|
|
8,103
|
|
Benefits paid
|
|
|
(8,362
|
)
|
|
|
(10,259
|
)
|
|
|
(8,305
|
)
|
Fair value of plan assets at the end of the year
|
|
|
32,567
|
|
|
|
20,712
|
|
|
|
35,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual return on plan assets
|
|
|
(75
|
)
|
|
|
(12,118
|
)
|
|
|
2,656
|
|
Actuarial assumptions at end of the year
:
The principal actuarial assumptions
as on March 31, 2018, 2017 and 2016 were as follows:
|
|
|
March
31, 2018
|
|
|
|
March
31, 2017
|
|
|
|
March
31, 2016
|
|
Discount rate
|
|
|
7.30
|
%
P.a
|
|
|
6.85
|
%
P.a
|
|
|
7.50
|
%
P.a
|
Long-term rate of compensation increase
|
|
|
7.00
|
% P.a
|
|
|
7.00
|
% P.a
|
|
|
7.00
|
% P.a
|
Expected long term rate of return on plan assets
|
|
|
7.00
|
% P.a
|
|
|
7.00
|
% P.a
|
|
|
8.00
|
% P.a
|
Average future working life time
|
|
|
4.38
years
|
|
|
|
4.39
years
|
|
|
|
4.40
years
|
|
Discount rate:
The discount rate is based on prevailing market yields of Indian Government securities as at the end of the year for the estimated
term of the obligations
.
Long term rate
of compensation increase:
The estimates of future salary increases considered take into account inflation, seniority, promotion
and other factors.
Expected long
term rate of return on plan assets:
This is based on the average long term rate of return expected on investments of the fund
during the estimated term of the obligations.
Assumptions regarding
future mortality are based on published statistics and mortality tables.
The Group assesses these
assumptions with the projected long-term plans of growth and prevalent industry standards.
Contributions
:
The Group expects to contribute ₹ 124,991 (March 31, 2017: ₹ 20,000) to its gratuity fund during the year ending March
31, 2018.
The expected benefit payments to be made
in the next few years are as under:
Year
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
1 Year
|
|
|
24,983
|
|
|
|
19,534
|
|
2 to 5 years
|
|
|
79,348
|
|
|
|
66,704
|
|
6 to 10 years
|
|
|
56,595
|
|
|
|
45,103
|
|
More than 10 years
|
|
|
34,386
|
|
|
|
28,171
|
|
Plan assets:
The Gratuity plan’s weighted-average asset allocation at March 31, 2018 and March 31, 2017, by asset category is as
follows:
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Funds managed by insurers
|
|
|
100
|
%
|
|
|
100
|
%
|
Remeasurements of the net defined
benefit liability recognized in other comprehensive income
Amount recognized in other comprehensive
income for the years ending March 31, 2018, 2017 and 2016 are as follows:
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
Remeasurements of the net defined benefit liability
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial (gain)/loss
|
|
|
|
|
|
|
|
|
|
|
|
|
- Change in demographic assumptions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
- change in financial
assumptions
|
|
|
(2,806
|
)
|
|
|
3,271
|
|
|
|
1,250
|
|
- experience variance
|
|
|
(4,066
|
)
|
|
|
(1,021
|
)
|
|
|
(2,575
|
)
|
- return on
plan assets, excluding amounts recognized in net interest expense/ income
|
|
|
1,493
|
|
|
|
14,784
|
|
|
|
(66
|
)
|
|
|
|
(5,379
|
)
|
|
|
17,034
|
|
|
|
(1,391
|
)
|
Sensitivity Analysis of significant actuarial
assumption
Sensitivity
analysis for the defined benefit obligations will increase/ decrease by the amounts mentioned below if there is a variation of
100 basis points in the discount rate and salary escalation rate.
|
|
Discount rate
|
|
|
Salary escalation rate
|
|
|
|
Increase by
100 bps
(₹ ‘000s)
|
|
|
Decrease by
100 bps
(₹ ‘000s)
|
|
|
Increase by
100 bps
(₹ ‘000s)
|
|
|
Decrease by
100 bps
(₹ ‘000s)
|
|
Present Value of Defined Benefit Obligation
|
|
|
125,822
|
|
|
|
138,070
|
|
|
|
137,805
|
|
|
|
125,915
|
|
The
present value of defined benefit obligation has been arrived at using the same method as is used for valuing the defined benefit
obligation as per the current assumptions. The increase/decrease in defined benefit obligation has been arrived assuming the other
assumptions are constant though such increase/decrease do not happen in isolation in real scenarios.
Contributions to defined contribution
plans
In
accordance with Indian law, all employees receive benefits from a provident fund, which is a defined contribution plan. Both the
employee and employer make monthly contributions to the plan, each equal to a specified percentage of employee’s basic salary.
The Group has no further obligations under the plan beyond its monthly contributions. The Group contributed ₹ 102,340, ₹
85,006 and ₹73,902 for the years ended March 31, 2018, 2017 and 2016. The Group has contributed to 401(K) plan on behalf
of eligible employees amounting to ₹ 8,692 (March 31, 2017: ₹ 9,728) during the year ended March 31, 2018.
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Deferred income and other liabilities
|
|
|
983,152
|
|
|
|
636,566
|
|
|
|
|
983,152
|
|
|
|
636,566
|
|
Financial liabilities included in other liabilities
|
|
|
207,046
|
|
|
|
201,679
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Current
|
|
|
|
|
|
|
|
|
Term bank loans (Refer note 1 below)
|
|
|
387,810
|
|
|
|
260,632
|
|
Other working capital facilities (Refer note 2 below)
|
|
|
476,245
|
|
|
|
1,645,971
|
|
Borrowings from others (Refer note 3 below)
|
|
|
608,122
|
|
|
|
622,641
|
|
|
|
|
1,472,177
|
|
|
|
2,529,244
|
|
Non current
|
|
|
|
|
|
|
|
|
Term bank loans (Refer note 1 below)
|
|
|
1,157,173
|
|
|
|
660,473
|
|
Borrowings from others (Refer note 3 below)
|
|
|
856,515
|
|
|
|
221,361
|
|
|
|
|
2,013,688
|
|
|
|
881,834
|
|
The Group has borrowings
which include:
|
1.
|
The term loans
bear interest rate ranging from 3.50% to 4.50% plus 6 months LIBOR in the case of Foreign
currency term loans and 8.65 % to 9.50% for others (March 31, 2017 - 9.30 % to 12.00%)
and repayable in equal quarterly installments within a tenor of 3 to 5 years after moratorium
periods ranging from 6 months to one year in certain cases.
|
This also includes Buyers’
credit of ₹ 479,201 which are repayable over a period of 1 to 3 years. The loans bear interest rate ranging from 2.8% to
3.2%
Of total balance, an amount of
₹ 87,500 is primarily secured by charge on movable fixed assets funded by term loan and also collaterally secured by extension
of EM of title deeds of property at Noida in the name of M/s Pace Info Com Park Pvt Ltd (Merged with the Sify from 1st April 2014).
An amount of ₹ 592,940 is primarily secured by EM of title deeds of property of the company at Rabale at Mumbai and
plant and machinery at Rabale Data Center 4th floor and the balance ₹ 55,417 is secured by property at Vashi in Mumbai.
|
2.
|
Working capital
facilities:
|
|
(a)
|
Cash credit
facilities amounting to ₹ 2,597,825 bank guarantees and all non fund facilities
availed by the Group are primarily secured by way of pari-passu first charge on the entire
current assets of the Group to all working capital bankers under consortium.
|
|
(b)
|
In addition
to the above, out of these Cash Credit facilities,
|
(i) exposure amounting to ₹
1,697,575 is collaterally secured by way of pari-passu charge on the unencumbered movable fixed assets of the Group, both present
and future.
(ii) exposure amounting to ₹
1,223,195 is collaterally secured by way of equitable mortgage over the properties at TIDEL Park, Chennai and Vashi, Vile Parle
at Mumbai
(iii) exposure amounting to ₹
900,250 is collaterally secured by equitable mortgage over the land and building at Noida, Uttar Pradesh and
(iv) the exposure amounting to ₹
388,493 is collaterally secured by equitable mortgage over the Vashi property at Mumbai.
|
(c)
|
These working
capital facilities bear interest ranging from 4.15% to 9.25% p.a. [March 31, 2017 –
4.15% to 11.50% p.a.] and these facilities are subject to renewal annually.
|
|
3.
|
Borrowings from
others include secured borrowings, that are secured against relevant assets and unsecured
borrowings. These loans carry an interest rate ranging from 9% p.a to 12.50% p.a. (March
31, 2017 - 9.00% p.a to 12.50% p.a.)
|
|
20.
|
Trade and other
payables
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Trade payables
|
|
|
2,865,626
|
|
|
|
2,740,550
|
|
Advance from customers
|
|
|
285,611
|
|
|
|
375,810
|
|
Accrued expenses
|
|
|
3,644,004
|
|
|
|
2,707,123
|
|
Other payables
|
|
|
565,850
|
|
|
|
544,124
|
|
|
|
|
7,361,091
|
|
|
|
6,367,607
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities included in trade and other payables
|
|
|
6,780,747
|
|
|
|
5,684,900
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Deferred income
|
|
|
1,172,061
|
|
|
|
1,216,706
|
|
|
|
|
1,172,061
|
|
|
|
1,216,706
|
|
|
|
Year ended
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
Rendering of services
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenue*
|
|
|
13,703,004
|
|
|
|
13,284,271
|
|
|
|
12,393,645
|
|
Installation service revenue
|
|
|
5,406,165
|
|
|
|
3,749,051
|
|
|
|
1,704,937
|
|
|
|
|
19,109,169
|
|
|
|
17,033,322
|
|
|
|
14,098,582
|
|
Sale of products
|
|
|
1,576,444
|
|
|
|
1,398,698
|
|
|
|
936,314
|
|
|
|
|
20,685,613
|
|
|
|
18,432,020
|
|
|
|
1,50,34,896
|
|
* Including revenue arising
from construction contracts (refer to note 23) and revenue from operating leases amount to ₹ 211,990 (March 31, 2018), ₹394,100
(March 31, 2017) and ₹391,500 (March 31, 2016) (refer to note 30)
|
23.
|
Construction contracts
in progress
|
|
|
Year ended
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
Contract revenue recognized for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
21,852
|
|
Aggregate amounts of costs incurred and recognized profits (less recognized losses) upto the
reporting date for contracts in progress
|
|
|
-
|
|
|
|
-
|
|
|
|
48,315
|
|
Amount of retentions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Gross amount due from customers for contract work presented as an asset
|
|
|
-
|
|
|
|
-
|
|
|
|
48,315
|
|
|
24.
|
Cost of goods sold
and services rendered
|
Cost of goods sold and
services rendered information is presented before any depreciation or amortization that is direct and attributable to revenue
sources. The Group’s asset base deployed in the business is not easily split into a component that is directly attributable
to a business and a component that is common / indirect to all the businesses. Since a gross profit number without depreciation
and amortization does not necessarily meet the objective of such a disclosure, the Group has not disclosed gross profit numbers
but disclosed all expenses, direct and indirect, in a homogenous group leading directly from revenue to operating income.
|
25.
|
Selling, general
and administrative expenses
|
|
|
Year ended
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
Personnel expenses
|
|
|
1,441,496
|
|
|
|
1,236,206
|
|
|
|
1,057,439
|
|
Marketing and promotion expenses
|
|
|
301,072
|
|
|
|
278,638
|
|
|
|
288,164
|
|
Administrative and other expenses*
|
|
|
2,652,246
|
|
|
|
2,476,429
|
|
|
|
2,133,684
|
|
|
|
|
4,394,814
|
|
|
|
3,991,273
|
|
|
|
3,479,287
|
|
* Includes net foreign
exchange loss of Nil, Nil and ₹ 6,218 for the years ended March 31, 2018, 2017 and 2016 respectively
|
|
Year ended
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
Salaries and wages
|
|
|
2,391,957
|
|
|
|
1,995,635
|
|
|
|
1,756,945
|
|
Contribution to provident fund and other funds
|
|
|
146,709
|
|
|
|
118,101
|
|
|
|
93,706
|
|
Staff welfare expenses
|
|
|
22,006
|
|
|
|
28,236
|
|
|
|
16,698
|
|
Employee stock compensation expense
|
|
|
6,824
|
|
|
|
17,638
|
|
|
|
51,986
|
|
|
|
|
2,567,496
|
|
|
|
2,159,610
|
|
|
|
1,919,335
|
|
Attributable to cost of goods sold and services rendered
|
|
|
1,126,000
|
|
|
|
923,404
|
|
|
|
861,896
|
|
Attributable to selling, general and administrative expenses
|
|
|
1,441,496
|
|
|
|
1,236,206
|
|
|
|
1,057,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share based payments are
designed as equity-settled plans. Under the equity settled plans, the Group had issued stock options under Associate Stock Option
Plan (ASOP) 1999, ASOP 2000, ASOP 2002, ASOP 2005, ASOP 2007 and ASOP 2014. Each option entitles the holder to purchase one American
Depository Share (ADS) at an exercise price determined by the Compensation committee on the date of the grant. There are no options
outstanding in respect of ASOP 1999, ASOP 2000, ASOP 2002, ASOP 2005 and ASOP 2007 plans as at March 31, 2018. Our stock option
plans are detailed as under:
Associate Stock Option
Plan 2014
In July 2014, the Shareholders
of the Group approved a new scheme for allotment of stock options to employees, the Associate Stock Option Plan 2014. 25,000,000
shares are reserved for this plan. Consequently 5,870,800 options were granted to the employees on January 20, 2015. The Group
has granted additional 150,000 , 525,000 and 184,300 options to employees during the year 2017-18, 2016-17 and 2015-16 respectively.
The options vest in the
following manner:
4,304,600
Options (Option Plan I): 3/5th of the options vest
at the end of one year from the date of grant. The remaining 2/5th vests at the end of every half year during second and third
years from the date of grant in four equal instalments
487,700
Options (Option Plan II): 2/5th of the options vest
at the end of one year from the date of grant. The remaining 3/5th vests at the end of every half year during second, third and
fourth years in six equal instalments
1,937,800
Options (Option Plan III): 2/5th of the options vest
at the end of two years from the date of grant. The remaining 3/5th vests at the end of every half year during third, fourth and
fifth years in six equal instalments.
The stock options can
be exercised within a period of twelve months from the date of last vesting.
As the number of stock
options and the price of those options were made known to each allottee, the Plan has been considered as a fixed price grant.
Stock option activity under the ASOP 2014 and ASOP 2007 Plan is as follows:
No. of options granted,
exercised and forfeited
|
|
Number
of options
|
|
|
Weighted
average
exercise
price in ₹
|
|
|
Number of
options
|
|
|
Weighted
average
exercise
price in ₹
|
|
|
Number of
options
|
|
|
Weighted
average
exercise
price in ₹
|
|
|
|
2018
|
|
|
2018
|
|
|
2017
|
|
|
2017
|
|
|
2016
|
|
|
2016
|
|
Outstanding at the beginning of the year
|
|
|
5,837,400
|
|
|
|
73.55
|
|
|
|
5,665,800
|
|
|
|
79.10
|
|
|
|
5,870,800
|
|
|
|
79.10
|
|
Granted during the year
|
|
|
150,000
|
|
|
|
146.23
|
|
|
|
525,000
|
|
|
|
58.69
|
|
|
|
184,300
|
|
|
|
79.10
|
|
Forfeited during the year
|
|
|
(653,100
|
)
|
|
|
79.10
|
|
|
|
(353,400
|
)
|
|
|
79.10
|
|
|
|
(389,300
|
)
|
|
|
79.10
|
|
Expired during the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised during the year
|
|
|
(153,860
|
)
|
|
|
79.10
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at the end of the year
|
|
|
5,180,440
|
|
|
|
78.79
|
|
|
|
5,837,400
|
|
|
|
73.55
|
|
|
|
5,665,800
|
|
|
|
79.10
|
|
Exercisable at the end of the year
|
|
|
4,340,070
|
|
|
|
79.00
|
|
|
|
3,711,130
|
|
|
|
79.14
|
|
|
|
2,544,180
|
|
|
|
79.10
|
|
The fair value of stock
options granted has been measured using the Black Scholes model at the date of the grant. The Black Scholes model includes assumptions
regarding dividend yields, expected volatility, expected term (or “option life”) and risk free interest rates. In
respect of the options granted, the expected term is estimated based on the vesting term, contractual term as well as expected
exercise behavior of the employees receiving the option. Expected volatility of the option is based on historical volatility,
during a period equivalent to the option life, of the observed market prices of the Company’s publicly traded equity shares.
Share prices for the year 2011-12 have been eliminated in determining volatility as there had been extra ordinary price movements
during the said period on account of capital infusion by promoters. Dividend yield of the options is based on the recent dividend
activity. Risk-free interest rates are based on the Government securities yield in effect at the time of the grant. These assumptions
reflect management’s best estimates, but these assumptions involve inherent market uncertainties based on market conditions
generally outside the Company’s control. As a result, if other assumptions had been used in the current period, stock-based
compensation expense could have been materially impacted. Further, if management uses different assumptions in the future periods,
stock compensation expense could be materially impacted in future years.
The estimated fair value
of stock options is charged to income on a straight-line basis over the requisite service period for each separately vesting portion
of the award as if the award was, in substance, multiple awards.
A summary of information
about fixed price stock options outstanding with respect to ASOP 2014 is furnished below:
As at
|
|
Range of
exercise price
in
₹
|
|
Number
outstanding at
March 31
|
|
|
Weighted
average
exercise price
in
₹
|
|
Weighted average
remaining
contractual life
|
|
Number
exercisable
at
March 31
|
|
|
Weighted
average
exercise price
In
₹
|
|
March 31, 2018
|
|
57.66 - 146.23
|
|
|
5,180,440
|
|
|
57.66 - 146.23
|
|
0.06 - 4.81 years
|
|
|
4,340,070
|
|
|
|
78.79
|
|
March 31, 2017
|
|
60.60 – 82.00
|
|
|
5,837,400
|
|
|
60.60 – 82.00
|
|
1.80 – 5.79 years
|
|
|
3,711,130
|
|
|
|
79.14
|
|
The assumptions used in
Black Scholes model to arrive at the fair value on grant date for the options granted during the year are summarised below:
Grant date
|
|
Jan 18, 2018
|
Category
|
|
Category III
|
Current market price
|
|
₹
162.51
|
Exercise price
|
|
₹
146.23
|
Expected term
|
|
2-5 years
|
Volatility
|
|
53.15% to 97.76%
|
Dividend yield
|
|
12%
|
Discount rate
|
|
3%
|
|
28.
|
Financial income
and expense
|
|
|
Year ended
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
Interest income on bank deposits
|
|
|
25,168
|
|
|
|
26,463
|
|
|
|
28,015
|
|
Others
|
|
|
104,157
|
|
|
|
96,121
|
|
|
|
17,422
|
|
Finance income
|
|
|
129,325
|
|
|
|
122,584
|
|
|
|
45,437
|
|
Interest expense on lease obligations
|
|
|
31,169
|
|
|
|
88,138
|
|
|
|
126,434
|
|
Bank charges (including letter of credit,
bill discounting and buyer’s credit charges)
|
|
|
92,332
|
|
|
|
93,698
|
|
|
|
126,339
|
|
Interest expense on borrowings
|
|
|
373,279
|
|
|
|
255,273
|
|
|
|
312,939
|
|
Finance expense
|
|
|
(496,780
|
)
|
|
|
(437,109
|
)
|
|
|
(565,712
|
)
|
Net finance income / (expense) recognized in profit
or loss
|
|
|
(367,455
|
)
|
|
|
(314,525
|
)
|
|
|
(520,275
|
)
|
The calculation of basic
earnings per share for the years ended March 31, 2018, 2017 and 2016 is based on the profit / (loss) attributable to ordinary
shareholders of ₹ 923,401, ₹ 642,399 and ₹ 438,453 respectively and a weighted average number of shares outstanding
of 150,417,470, 144,498,253 and 141,030,787 respectively, calculated as follows:
|
|
Year ended
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
Net profit – as reported
|
|
|
923,401
|
|
|
|
642,399
|
|
|
|
438,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares – basic
|
|
|
150,417,470
|
|
|
|
144,498,253
|
|
|
|
141,030,787
|
|
Basic earnings per share
|
|
|
6.14
|
|
|
|
4.45
|
|
|
|
3.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares – diluted
|
|
|
151,064,039
|
|
|
|
144,498,253
|
|
|
|
141,395,346
|
|
Diluted earnings per share
|
|
|
6.11
|
|
|
|
4.45
|
|
|
|
3.10
|
|
Weighted average number
of ordinary shares basic
|
|
Year ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
Issued fully paid ordinary shares at April 01
|
|
|
53,530,787
|
|
|
|
53,530,787
|
|
|
|
53,530,787
|
|
Effect of shares issued on exercise of stock options
|
|
|
11,683
|
|
|
|
|
|
|
|
|
|
Effect of partly paid shares (Note 1)
|
|
|
9,687,5000
|
|
|
|
90,967,466
|
|
|
|
87,500,000
|
|
Weighted average number of equity shares and equivalent shares outstanding
|
|
|
150,417,470
|
|
|
|
144,498,253
|
|
|
|
141,030,787
|
|
Weighted average number
of ordinary shares diluted
|
|
Year ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
Weighted average number of ordinary shares (basic)
|
|
|
150,417,470
|
|
|
|
144,498,253
|
|
|
|
141,030,787
|
|
Effect of stock options (Note 2)
|
|
|
646,569
|
|
|
|
-
|
|
|
|
364,559
|
|
Weighted average number of equity shares outstanding (diluted)
|
|
|
151,064,039
|
|
|
|
144,498,253
|
|
|
|
141,395,346
|
|
Note 1:
|
During the year ended March 31, 2011, 125,000,000 ordinary shares were issued to the existing
promoter group on a private placement basis. As of March 31, 2018, these shares were partly paid up to the extent of
₹
7.75 (March 31, 2017 :
₹
7.75) per share. Refer
note 15.
|
Note 2:
|
The Group has issued Associated Stock Options (ASOP 2014 - Refer Note 27) of which 51,80,440
options are outstanding as at March 31, 2018. These could potentially dilute basic earnings per share in the future but are
not included in calculation of diluted earnings per share during the financial year March 31, 2017 as they are anti-dilutive.
|
The
Group leases office buildings and other equipment under operating lease arrangements that are renewable on a periodic basis at
the option of both the lessor and the lessee. Some of the leases include rent escalation clauses. Rental expenses under these
leases were ₹ 463,283, ₹ 424,829 and ₹ 400,026 for the years ended March 31, 2018, 2017 and 2016 respectively.
The schedule of future minimum rental payments in respect of operating leases is set out below:
As at March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease obligations
|
|
Total
|
|
|
Less
than 1 year
|
|
|
1-5 years
|
|
|
More than 5
years
|
|
Non-cancellable operating lease obligations
|
|
|
990,859
|
|
|
|
112,358
|
|
|
|
491,948
|
|
|
|
386,553
|
|
As at March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease obligations
|
|
Total
|
|
|
Less
than 1 year
|
|
|
1-5 years
|
|
|
More than 5
years
|
|
Non-cancellable operating lease obligations
|
|
|
1,102,328
|
|
|
|
111,469
|
|
|
|
477,441
|
|
|
|
513,418
|
|
Operating lease income:
The company has given
plant and machinery under operating lease arrangements to its customers the period of which are generally up to 5 years. The schedule
of minimum lease rental incomes in respect of these operating lease arrangements are given below:
|
|
As
at
March
31, 2018
|
|
|
As
at
March
31, 2017
|
|
Receivables not later than one year
|
|
|
17,472
|
|
|
|
207,266
|
|
Receivables later than one year and not later than five years
|
|
|
27,853
|
|
|
|
23,746
|
|
|
|
|
45,325
|
|
|
|
231,012
|
|
The
operating segments of the Group are as under:
Telecom-centric
services -
Domestic data, international data wholesale voice and network managed services
Data Center-centric
IT Services
Data Center services
:
Co-location
services
Cloud and managed
services
:
IT infra services, IT transformation services, remote and onsite infrastructure managed services and
delivery platforms
Technology
integration services
:
Data Center build, network integration, information security, end user computing and collaborative
tools and solutions
Applications integration
services:
Application development and maintenance, application testing, mobility solutions, eLearning, portals, online
assessment tools, process and automation.
The
Chief Operating Decision Maker (“CODM”), i.e, The Board of Directors and the senior management, evaluate the Group’s
performance and allocate resources to various strategic business units that are identified based on the products and services
that they offer and on the basis of the market served. The measure of profit / loss reviewed by the CODM is “Earnings/loss
before interest, taxes, depreciation and amortization” also referred to as “segment operating income / loss”.
Revenue in relation to segments is categorized based on items that are individually identifiable to that segment.
Bandwidth costs, which
form a significant part of the total expenses, is allocated to Network Services. Manpower costs of Technology resources rendering
services to support Infrastructure operations, Managed services and Application services, are identified to respective operating
segments specifically. The Group believes that the resulting allocations are reasonable.
Certain expenses, such
as depreciation, technology infrastructure and administrative overheads, which form a significant component of total expenses,
are not allocable to specific segments as the underlying services are used interchangeably. Management believes that it is not
practical to provide segment disclosure of these expenses and, accordingly, they are separately disclosed as “unallocated”
and adjusted only against the total income of the Group.
A significant part of
the fixed assets used in the Group’s business are not identifiable to any of the reportable segments and can be used interchangeably
between segments. Management believes that it is not feasible to provide segment disclosures relating to total assets and liabilities
since meaningful segregation of available data is onerous.
The Group’s operating
segment information for the years ended March 31, 2018, 2017 and 2016, are presented below:
Year ended March 31,
2018
|
|
|
|
|
Data
Center-centric IT services
|
|
|
|
|
|
|
Telecom-
centric
Services
(A)
|
|
|
Data Center
Services
(i)
|
|
|
Cloud and
Managed
Services
(ii)
|
|
|
Technology
Integration
Services
(iii)
|
|
|
Applications
Integration
Services
(iv)
|
|
|
Total
(B)=
(i)+(ii)+(iii)+(iv)
|
|
|
Total
(C)
=
(A)+(B)
|
|
Segment revenue
|
|
|
9,981,730
|
|
|
|
2,434,561
|
|
|
|
956,672
|
|
|
|
3,444,642
|
|
|
|
3,868,008
|
|
|
|
10,703,883
|
|
|
|
20,685,613
|
|
Allocated segment expenses
|
|
|
(7,653,359
|
)
|
|
|
(1,753,440
|
)
|
|
|
(1,052,720
|
)
|
|
|
(2,933,507
|
)
|
|
|
(3,288,028
|
)
|
|
|
(9,027,695
|
)
|
|
|
(16,681,054
|
)
|
Segment operating income / (loss)
|
|
|
2,328,371
|
|
|
|
681,121
|
|
|
|
(96,048
|
)
|
|
|
511,135
|
|
|
|
579,980
|
|
|
|
1,676,188
|
|
|
|
4,004,559
|
|
Unallocated expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,148,710
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,754,537
|
)
|
Other income / (expense), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
189,738
|
|
Finance income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129,325
|
|
Finance expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(496,780
|
)
|
Profit / (loss) before tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
923,595
|
|
Income tax (expense) / benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(194
|
)
|
Profit / (loss) for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
923,401
|
|
Year ended March 31,
2017
|
|
|
|
|
Data
Center-centric IT services *
|
|
|
|
|
|
|
Telecom-
centric
Services
(A)
|
|
|
Data Center
Services
(i)
|
|
|
Cloud and
Managed
Services
(ii)
|
|
|
Technology
Integration
Services
(iii)
|
|
|
Applications
Integration
Services
(iv)
|
|
|
Total
(B)=
(i)+(ii)+(iii)+(iv)
|
|
|
Total
(C)
=
(A)+(B)
|
|
Segment revenue
|
|
|
10,173,014
|
|
|
|
1,975,076
|
|
|
|
919,960
|
|
|
|
2,687,852
|
|
|
|
2,676,118
|
|
|
|
8,259,006
|
|
|
|
18,432,020
|
|
Allocated segment expenses
|
|
|
(8,050,025
|
)
|
|
|
(1,489,135
|
)
|
|
|
(824,979
|
)
|
|
|
(2,306,170
|
)
|
|
|
(2,186,512
|
)
|
|
|
(6,806,796
|
)
|
|
|
(14,856,821
|
)
|
Segment operating income / (loss)
|
|
|
2,122,989
|
|
|
|
485,941
|
|
|
|
94,981
|
|
|
|
381,682
|
|
|
|
489,606
|
|
|
|
1,452,210
|
|
|
|
3,575,199
|
|
Unallocated expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,004,673
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,758,776
|
)
|
Other income / (expense), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145,872
|
|
Finance income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
122,584
|
|
Finance expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(437,109
|
)
|
Profit / (loss) before tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
643,097
|
|
Income tax (expense) / benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(698
|
)
|
Profit / (loss) for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
642,399
|
|
*The Chief Operating Decision
Maker (CODM) has evaluated and grouped Data Center services, cloud and managed services, technology integration services and applications
integration services into Data Center and IT services. There are no changes in the components of Telecom service segment. Accordingly,
the segment information has been presented.
Year ended March 31,
2016
|
|
|
|
|
Data
Center-centric IT services
|
|
|
|
|
|
|
Telecom
Centric
Services
(A)
|
|
|
Data Center
Services
(i)
|
|
|
Cloud and
Managed
Services
(ii)
|
|
|
Technology
Integration
Services*
(iii)
|
|
|
Applications
Integration
Services*
(iv)
|
|
|
Total
(B)=
(i)+(ii)+(iii)+(iv)
|
|
|
Total
(C)
=
(A)+(B)
|
|
Segment revenue
|
|
|
9,549,289
|
|
|
|
1,522,944
|
|
|
|
941,204
|
|
|
|
1,705,702
|
|
|
|
1,315,757
|
|
|
|
5,485,607
|
|
|
|
15,034,896
|
|
Allocated segment expenses
|
|
|
(7,342,032
|
)
|
|
|
(1,165,293
|
)
|
|
|
(767,109
|
)
|
|
|
(1,419,287
|
)
|
|
|
(999,765
|
)
|
|
|
(4,351,454
|
)
|
|
|
(11,693,486
|
)
|
Segment operating income / (loss)
|
|
|
2,207,257
|
|
|
|
357,651
|
|
|
|
174,095
|
|
|
|
286,415
|
|
|
|
315,992
|
|
|
|
1,134,153
|
|
|
|
3,341,410
|
|
Unallocated expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(889,665
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,598,037
|
)
|
Other income / (expense), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,885
|
|
Finance income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,437
|
|
Finance expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(565,712
|
)
|
Profit / (loss) before tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
438,318
|
|
Income tax (expense) / benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135
|
|
Profit / (loss) for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
438,453
|
|
Geographic segments
The Group has two geographic
segments India and rest of the world. Revenues from the geographic segments based on domicile of the customer are as follows:
Description
|
|
India
|
|
|
Rest of the
world
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2018
|
|
|
16,649,473
|
|
|
|
4,036,140
|
|
|
|
20,685,613
|
|
Year ended March 31, 2017
|
|
|
13,441,211
|
|
|
|
4,990,809
|
|
|
|
18,432,020
|
|
Year ended March 31, 2016
|
|
|
9,860,427
|
|
|
|
5,174,469
|
|
|
|
15,034,896
|
|
The
Group does not disclose information relating to non-current assets located in India and rest of the world as the necessary information
is not available and the cost to develop it would be excessive.
Revenue
from one customer of the Group’s Data center-centric IT services is
₹
2,261,482
(2016-17
₹
1,267,499)
which is more than 10% of the Group’s total revenue.
|
a)
|
During the previous
years, the Group had received assessment orders from the Income-tax Department of India
for various financial years disallowing certain expenditure like bandwidth charges and
foreign currency payments for non-deduction of withholding taxes. The Company appealed
against those order before Commissioner of Income Tax (Appeals) (CIT(A)) and received
favourable orders. The department has filed appeals before Income Tax Appellate Tribunal
(ITAT) disputing CIT(A) orders. The Group believes that the appeal by the department
is not sustainable and consequently no loss contingency is necessary as at March 31,
2018. Income tax claims against the company as at March 31, 2018 amounted to ₹
8,028 (March 31, 2017: ₹ 113,608).
|
|
b)
|
Contingencies due
to certain service tax claims as at March 31, 2018 amounted to ₹ 468,878 (March
31, 2017: ₹ 516,736) and sales tax claims amounted to ₹ 1,080 (March 31,
2017: ₹13,845).
|
|
c)
|
The Group during
the year ended March 31, 2009 entered into a contract with Emirates Integrated Telecom
for the construction and supply of capacity from the Europe India Gateway. As per the
contract with Emirates, the Group is required to pay its share of decommissioning costs
if any that may arise in the future. No provision has been made by the Group for such
decommissioning costs as the amount of provision cannot be measured reliably as at March
31, 2018.
|
|
d)
|
Effective 2012-13,
the Company has participated in the Export Promotion Capital Goods Scheme (“the
scheme”) under which capital equipment is permitted to be imported against a specific
licence at a substantially reduced customs duty, subject to fulfilment of obligation
to export services rendered by use of capital equipment imported under the scheme to
the extent of over 6 times (March 31,2017: 6 times) the value of duty saved over a period
of 6 years (March 31,2017: 6 years) from the date of obtaining the licence. In case of
failure to meet the export obligation, the company would be liable to pay the differential
between the normal duty and the duty saved under the scheme along with interest.
|
As of March 31,
2018, the company is holding 48 (March 31, 2017: 30) licenses with a corresponding export obligation of
₹
3,926,074 (March 31, 2017:
₹
2,391,737). Considering
the track record of the exports, the Company believes it would be able to meet the export obligation within the time frame and
would not be exposed to any liability on account of the above scheme.
|
e)
|
In respect of contingencies
arising on legal proceedings, refer to Note 33.
|
|
a)
|
Proceedings before
Department of Telecommunications
|
|
·
|
On
October 12, 2009 (as later clarified by the DoT), the Department of Telecommunications
(‘DOT’) raised a demand on Sify Technologies for ₹ 14,000 after correcting
the arithmetical error in the assessment letter.
|
|
·
|
On
February 26, 2010 DOT raised a demand on Sify Communications (erstwhile subsidiary merged
with Sify Technologies Limited) for ₹ 26,000.
|
The above demands were made by the
DoT on the premise that all amounts of income (whether direct or indirect) including certain items like other income, interest
on deposits, gain on foreign exchange fluctuation, profit on sale of assets & provision written back, that have not got anything
to do with telecom operations of the Company or arise in connection with the Telecom business of the Company, are to be considered
as income for the purpose of calculation of the license fee. The Company has replied suitably on the above demand notice.
On a related matter, the
service providers had approached TDSAT (the ‘Tribunal’) on what items of income are liable for calculation of
license fee and what all items of income on which license fees are not liable to be paid. The Tribunal by its order dated
April 23, 2015 held that revenue from sale of scrap, treasury income etc are to be included as part of AGR. The Tribunal has
also passed an order asking DOT to levy at most nominal amount as token penalty with interest if permissible at the lower
rates. The Company had approached Honourable High Court of Madras (Court) in 2013 by filing a writ petition prohibiting
Department of Telecommunications (DOT) from levying license fee on non-licensed activities. An interim order was passed by
the Court restraining DOT from recovering license fee in respect of non- telecom activities for the writ petition filed in
2013. Also, the Group has received notices for earlier years from DoT claiming Licence fee on the total Income (including
income from Non Licensed activities). The Group has replied to these notices stating that licence fees are not payable on
income from non-licensed activities. The Group believes that it has adequate legal defenses against these notices and that
the ultimate outcome of these actions may not have a material adverse effect on the Group's financial position and result of
operations.
|
(ii)
|
The present
license for ISP under unified license issued by DOT on June 2, 2014 provides for payment
of License fee on pure Internet services. However, the company through Internet Service
Providers Association of India (ISPAI) challenged the said clause before TDSAT. TDSAT
passed a stay order on DOT from charging the licence fee on pure Internet services. The
group has appropriately accounted for any adverse effect that may arise in this regard
in the books of account.
|
|
b)
|
The Company is party
to additional legal actions arising in the ordinary course of business. Based on the
available information as at March 31, 2018, the Company believes that it has adequate
legal defenses for these actions and that the ultimate outcome of these actions will
not have a material adverse effect. However in the event of adverse judgment in all these
cases, the maximum financial exposure would be ₹ 91,128 (March 31, 2017: ₹
37,429)
|
The related parties where
control / significant influence exists are subsidiaries and associates. Key management personnel are those persons having authority
and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any
director whether executive or otherwise. Key management personnel includes the board of directors and other senior management
executives. The other related parties are those with whom the Group has had transaction during the years ended March 31, 2018,
2017 and 2016 are as follows:
Particulars
|
|
Country
of incorporation
|
|
% of Ownership interest
|
|
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Holding Company
|
|
|
|
|
|
|
|
|
|
|
Infinity Satcom Universal Private Limited
|
|
India
|
|
|
-
|
|
|
|
-
|
|
Raju Vegesna Infotech & Industries Private Limited (Subsidiary of Infinity Satcom Universal
Private Limited)
|
|
India
|
|
|
-
|
|
|
|
-
|
|
Ramanand Core Investment Company Private Limited (Subsidiary of Raju Vegesna Infotech & Industries
Private Limited)
|
|
India
|
|
|
-
|
|
|
|
-
|
|
Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
Sify Technologies (Singapore) Pte. Limited
|
|
Singapore
|
|
|
100
|
|
|
|
100
|
|
Sify Technologies North America Corporation
|
|
USA
|
|
|
100
|
|
|
|
100
|
|
Sify Data and Managed Services Limited
|
|
India
|
|
|
100
|
|
|
|
100
|
|
Sify Infinit Spaces Limited
|
|
India
|
|
|
100
|
|
|
|
-
|
|
The following is a summary
of the related party transactions for the year ended March 31, 2018:
Transactions
|
|
Holding
Company
|
|
|
Associates
|
|
|
Others
|
|
|
Key
Management
Personnel
|
|
Consultancy services received
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
200
|
|
Sitting fees paid
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,330
|
|
Salaries and other short term benefits
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
39,105
|
|
Contributions to defined contribution plans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,675
|
|
Share based payment transactions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,347
|
|
Lease rentals paid**
|
|
|
1,061
|
|
|
|
-
|
|
|
|
4,483
|
|
|
|
-
|
|
Dividend paid
|
|
|
126,600
|
|
|
|
-
|
|
|
|
16,700
|
|
|
|
-
|
|
Call money received
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Amount of outstanding balances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advance lease rentals and refundable deposits made**
|
|
|
-
|
|
|
|
-
|
|
|
|
2,600
|
|
|
|
-
|
|
Lease rentals payable**
|
|
|
-
|
|
|
|
-
|
|
|
|
125
|
|
|
|
-
|
|
The following is a summary
of the related party transactions for the year ended March 31, 2017:
Transactions
|
|
Holding
Company
|
|
|
Associates
|
|
|
Others
|
|
|
Key
Management
Personnel
|
|
Consultancy services received
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
240
|
|
Sitting fees paid
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,410
|
|
Salaries and other short term benefits
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
40,053
|
|
Contributions to defined contribution plans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,642
|
|
Share based payment transactions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,752
|
|
Lease rentals paid**
|
|
|
1,035
|
|
|
|
-
|
|
|
|
4,385
|
|
|
|
-
|
|
Dividend paid
|
|
|
102,030
|
|
|
|
-
|
|
|
|
13,903
|
|
|
|
-
|
|
Call money received
|
|
|
300,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Amount of outstanding balances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advance lease rentals and refundable deposits made**
|
|
|
-
|
|
|
|
-
|
|
|
|
2,558
|
|
|
|
-
|
|
Lease rentals payable**
|
|
|
-
|
|
|
|
-
|
|
|
|
413
|
|
|
|
-
|
|
The following is a summary
of the related party transactions for the year ended March 31, 2016:
Transactions
|
|
Holding
Company
|
|
|
Associates
|
|
|
Others
|
|
|
Key
Management
Personnel
|
|
Consultancy services received
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
240
|
|
Sitting fees paid
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,050
|
|
Salaries and other short term benefits
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
52,576
|
|
Contributions to defined contribution plans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,481
|
|
Share based payment transactions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,170
|
|
Lease rentals paid**
|
|
|
923
|
|
|
|
-
|
|
|
|
3,898
|
|
|
|
-
|
|
Dividend paid
|
|
|
102,030
|
|
|
|
-
|
|
|
|
14,481
|
|
|
|
-
|
|
Amount of outstanding balances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advance lease rentals and refundable deposits made**
|
|
|
-
|
|
|
|
-
|
|
|
|
2,558
|
|
|
|
-
|
|
Lease rentals payable**
|
|
|
-
|
|
|
|
-
|
|
|
|
258
|
|
|
|
-
|
|
**During the year 2011
-12, the Company had entered into a lease agreement with M/s Raju Vegesna Infotech and Industries Private Limited, the holding
Company, to lease the premises owned by it for a period of three years effective February 1, 2012 on a rent of ₹ 75 (Rupees
Seventy Five Thousand Only) per month. Subsequently, the Company entered into an amendment agreement with effect from April 1,
2013, providing for automatic renewal for a further period of two blocks of 3 years with an escalation of 15% on the last paid
rent after the end of every three years.
During the year 2011 -
12, the Company had also entered into a lease agreement with M/s Raju Vegesna Developers Private Limited, a Company in which Mr
Ananda Raju Vegesna, Executive Director of the Company and Mr Raju Vegesna, Chairman and Managing director of the Company exercise
significant influence, to lease the premises owned by it for a period of three years effective February 1, 2012 on a rent of ₹
30 (Rupees Thirty Thousand Only) per month. The agreement provides for the automatic renewal for further period of two blocks
of 3 years with an escalation of 15% on the last paid rent after the end of every three years.
During the year 2010-11,
the Company had entered into a lease agreement with Ms Radhika Vegesna, daughter of Mr Ananda Raju Vegesna, Executive Director
of the company, to lease the premises owned by her for a period of three years effective June 1, 2010 on a rent of ₹294
(Rupees Two Ninety Four Thousand Only) per month and payment of refundable security deposit of ₹2,558. This arrangement
will automatically be renewed for a further period of two blocks of three years with all the terms remaining unchanged.
|
35.
|
Financial instruments
|
Financial instruments
by category
The carrying value and
fair value of financial instruments by each category as at March 31, 2018 were as follows:
Particulars
|
|
Note
|
|
Financial
assets/
liabilities
at
amortised
costs
|
|
|
Financial
assets
/
liabilities at
FVTPL
|
|
|
Financial
assets
/
liabilities
at
FVTOCI
|
|
|
Total
carrying
value
|
|
|
Total fair
value
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
7
|
|
|
2,288,121
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,288,121
|
|
|
|
2,288,121
|
|
Other assets
|
|
9
|
|
|
360,378
|
|
|
|
-
|
|
|
|
-
|
|
|
|
360,378
|
|
|
|
360,378
|
|
Trade receivables
|
|
12
|
|
|
8,820,579
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,820,579
|
|
|
|
8,820,579
|
|
Other receivables
|
|
12
|
|
|
48,141
|
|
|
|
-
|
|
|
|
-
|
|
|
|
48,141
|
|
|
|
48,141
|
|
Other investments
|
|
14
|
|
|
144,008
|
|
|
|
-
|
|
|
|
1,710
|
|
|
|
145,718
|
|
|
|
145,718
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank overdraft
|
|
7
|
|
|
2,121,537
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,121,537
|
|
|
|
2,121,537
|
|
Finance lease liabilities
|
|
16
|
|
|
185,965
|
|
|
|
-
|
|
|
|
-
|
|
|
|
185,965
|
|
|
|
185,965
|
|
Other liabilities
|
|
18
|
|
|
207,046
|
|
|
|
-
|
|
|
|
-
|
|
|
|
207,046
|
|
|
|
207,046
|
|
Borrowings from banks
|
|
19
|
|
|
2,021,228
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,021,228
|
|
|
|
2,021,228
|
|
Borrowings from others
|
|
19
|
|
|
1,464,637
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,464,637
|
|
|
|
1,464,637
|
|
Trade and other payables
|
|
20
|
|
|
6,779,018
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,779,018
|
|
|
|
6,779,018
|
|
Derivative financial liabilities
|
|
20
|
|
|
-
|
|
|
|
1,729
|
|
|
|
-
|
|
|
|
1,729
|
|
|
|
1,729
|
|
The carrying value and
fair value of financial instruments by each category as at March 31, 2017 were as follows:
Particulars
|
|
Note
|
|
Financial
assets/
liabilities
at
amortised
costs
|
|
|
Financial
assets
/
liabilities at
FVTPL
|
|
|
Financial
assets
/
liabilities
at
FVTOCI
|
|
|
Total
carrying
value
|
|
|
Total fair
value
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
7
|
|
|
1,884,265
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,884,265
|
|
|
|
1,884,265
|
|
Other assets
|
|
9
|
|
|
213,424
|
|
|
|
-
|
|
|
|
-
|
|
|
|
213,424
|
|
|
|
213,424
|
|
Trade receivables
|
|
12
|
|
|
6,950,563
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,950,563
|
|
|
|
6,950,563
|
|
Other receivables
|
|
12
|
|
|
101,098
|
|
|
|
-
|
|
|
|
-
|
|
|
|
101,098
|
|
|
|
101,098
|
|
Other investments
|
|
14
|
|
|
72,943
|
|
|
|
-
|
|
|
|
1,710
|
|
|
|
74,653
|
|
|
|
74,653
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank overdraft
|
|
7
|
|
|
991,161
|
|
|
|
-
|
|
|
|
-
|
|
|
|
991,161
|
|
|
|
991,161
|
|
Finance lease liabilities
|
|
16
|
|
|
519,219
|
|
|
|
-
|
|
|
|
-
|
|
|
|
519,219
|
|
|
|
519,219
|
|
Other liabilities
|
|
18
|
|
|
201,679
|
|
|
|
-
|
|
|
|
-
|
|
|
|
201,679
|
|
|
|
201,679
|
|
Borrowings from banks
|
|
19
|
|
|
2,567,076
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,567,076
|
|
|
|
2,567,076
|
|
Borrowings from others
|
|
19
|
|
|
844,002
|
|
|
|
-
|
|
|
|
-
|
|
|
|
844,002
|
|
|
|
844,002
|
|
Trade and other payables
|
|
20
|
|
|
5,648,740
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,648,740
|
|
|
|
5,648,740
|
|
Derivative financial liabilities
|
|
20
|
|
|
-
|
|
|
|
36,160
|
|
|
|
-
|
|
|
|
36,160
|
|
|
|
36,160
|
|
Details of financial
assets hypothecated as collateral
The carrying amount of
financial assets as at March 31, 2018 and 2017 that the Group has provided as collateral for obtaining borrowings and other facilities
from its bankers are as follows:
|
|
As of
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Cash and cash equivalents
|
|
|
2,067,397
|
|
|
|
1,654,634
|
|
Other assets
|
|
|
358,106
|
|
|
|
209,742
|
|
Trade receivables
|
|
|
8,713,161
|
|
|
|
6,856,976
|
|
Other receivables
|
|
|
41,007
|
|
|
|
100,457
|
|
|
|
|
11,179,671
|
|
|
|
8,821,809
|
|
Derivative financial
instruments
Foreign exchange forward contracts
and options are purchased to mitigate the risk of changes in foreign exchange rates associated with certain payables, receivables
and forecasted transactions denominated in certain foreign currencies. These derivative contracts do not qualify for hedge accounting
under IFRS 9, and are initially recognized at fair value on the date the contract is entered into and subsequently re-measured
at their fair value. Gains or losses arising from changes in the fair value of the derivative contracts are recognized immediately
in profit or loss. The counterparties for these contracts are generally banks or financial institutions. The following table gives
details in respect of the notional amount of outstanding foreign exchange contracts as at March 31, 2018 and 2017.
|
|
As of
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Forward contracts
|
|
|
|
|
|
|
|
|
In U.S. Dollars (Sell)
|
|
|
-
|
|
|
|
3,000
|
|
In U.S. Dollars (Buy)
|
|
|
-
|
|
|
|
9,800
|
|
The Company recognized
a net loss on the forward contracts of ₹ 7,479 (March 31, 2017: ₹ 14,338 – Net Loss) for the year ended March
31, 2018.
The forward exchange contracts
and option contracts mature between one and twelve months. The table below summarizes the notional amounts of derivative financial
instruments into relevant maturity groupings based on the remaining period as at the end of the year:
|
|
As of
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Sell:
|
|
(US $)
|
|
|
(US $)
|
|
Not later than one month
|
|
|
-
|
|
|
|
500
|
|
Later than one month and not later than three months
|
|
|
-
|
|
|
|
1,000
|
|
Later than three months and not later than six months
|
|
|
-
|
|
|
|
1,500
|
|
Later than six months and not later than one year
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Buy:
|
|
|
(US $)
|
|
|
|
(US $)
|
|
Not later than one month
|
|
|
-
|
|
|
|
3,500
|
|
Later than one month and not later than three months
|
|
|
-
|
|
|
|
700
|
|
Later than three months and not later than six months
|
|
|
-
|
|
|
|
5,600
|
|
Later than six months and not later than one year
|
|
|
-
|
|
|
|
-
|
|
In
order to hedge against the variability in foreign currency cash flows, the company has entered into Cross Currency Swap (Principle
Only Swap) arrangement with the bank where in, the Company pays fixed US $ and receives Fixed
₹
principal and interest cash flows. The period of the
swap contract is co-terminus with the period of the underlying term loan. The Company has designated such derivative at Fair Value
through profit or loss and the gains or loss arising on the fair valuation of the said derivative is recognized in the Statement
of income.
The details of outstanding cross currency
swap contracts as of March 31, 2018 are as under:
|
|
As of
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
|
|
Payable (US $)
|
|
|
Receivable (
₹
)
|
|
|
Payable (US $)
|
|
|
Receivable (
₹
)
|
|
Cross Currency Swap (US$)
|
|
|
-
|
|
|
|
-
|
|
|
|
2,213
|
|
|
|
137,500
|
|
The maturity of these
contracts extends till five years. The table below summarizes the cash flows (principal and interest) of these derivative financial
instruments into relevant maturity groupings based on the remaining period as at the end of the year:
|
|
As of
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
|
|
Payable
(US $)
|
|
|
Receivable
(
₹
)
|
|
|
Payable
(US $)
|
|
|
Receivable
(
₹
)
|
|
|
|
|
|
|
|
|
|
|
|
Less than 1 year
|
|
|
-
|
|
|
|
-
|
|
|
|
946
|
|
|
|
65,101
|
|
One to two years
|
|
|
-
|
|
|
|
-
|
|
|
|
887
|
|
|
|
58,743
|
|
Two to three years
|
|
|
-
|
|
|
|
-
|
|
|
|
626
|
|
|
|
39,884
|
|
Three to four years
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Four to five years
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total cash flows
|
|
|
-
|
|
|
|
-
|
|
|
|
2,459
|
|
|
|
163,728
|
|
The
Group recognized a net loss on the cross currency swaps of ₹ 7,987 [March 31, 2017: ₹ 27,690 (Gain)] for the year
ended March 31, 2018.
During
the current year, the Group has entered into Interest Rate Swaps in order to hedge the cash flows arising out of the Interest
payments of the underlying US $ term loan. The period of the swap contract is co terminus with the period of the underlying term
loan. As per the terms of the arrangement, the Group shall pay fixed rate of interest (ranging from 6.3% p.a. to 6.5% p.a.) and
receive variable rate of interest equal to LIBOR + fixed rate (ranging from LIBOR + 3.5% to LIBOR + 4.5%) on notional amount.
The swap arrangement is marked to market at the end of every period and gains and losses are recognised in the Statement of Income.
The maturity of these
contracts extends till five years. The table below summarizes the cash flows (interest) of these derivative financial instruments
into relevant maturity groupings based on the remaining period as at the end of the year:
|
|
As of
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
|
|
Receivable
(US $)
|
|
|
Payable
(US $)
|
|
|
Receivable
(US $)
|
|
|
Payable
(US $)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 1 year
|
|
|
210
|
|
|
|
283
|
|
|
|
288
|
|
|
|
419
|
|
One to two years
|
|
|
106
|
|
|
|
149
|
|
|
|
192
|
|
|
|
283
|
|
Two to three years
|
|
|
12
|
|
|
|
18
|
|
|
|
97
|
|
|
|
149
|
|
Three to four years
|
|
|
-
|
|
|
|
-
|
|
|
|
11
|
|
|
|
18
|
|
Four to five years
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total cash flows
|
|
|
328
|
|
|
|
450
|
|
|
|
588
|
|
|
|
869
|
|
Total
notional amount outstanding as of March 31, 2018 is US $ 5,272 (March 31, 2017: US $ 7,381)
.
Net
gain on account of interest rate swaps amount to ₹ 1,560 for the year ended March 31, 2018 (March 31, 2017: ₹ 7,073
– net Gain).
Fair value measurements:
The
details of assets and liabilities that are measured on fair value on recurring basis are given below:
|
|
Fair value as of March
31, 2018
|
|
|
Fair value as of March
31, 2017
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial assets – gain on outstanding forward/options
contracts
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial liabilities – loss on outstanding
forward/options contracts
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(18,079
|
)
|
|
|
-
|
|
Derivative financial liabilities - loss on outstanding cross currency swaps
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,987
|
)
|
Derivative financial liabilities - loss on outstanding interest rate swaps
|
|
|
-
|
|
|
|
-
|
|
|
|
1,729
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,094
|
)
|
|
·
|
Level
1 – unadjusted quoted prices in active markets for identical assets and liabilities.
|
|
·
|
Level
2 – Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived
from prices).
|
|
·
|
Level
3 – unobservable inputs for the asset or liability
|
|
o
|
Loss
on cross currency swaps are valued using present value of cash flows from the swap contract
estimated using swap rates calculated from respective countries’ yield curves.
|
Interest income/ (expenses), gains/ (losses)
recognized on financial assets and liabilities
Recognized in profit or loss
|
|
Year ended
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
|
March 31, 2016
|
|
Financial assets at amortised cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income on bank deposits
|
|
|
25,168
|
|
|
|
26,463
|
|
|
|
28,015
|
|
Interest income from other financial assets
|
|
|
104,157
|
|
|
|
96,121
|
|
|
|
14,336
|
|
Impairment loss of trade receivables
|
|
|
(370,000
|
)
|
|
|
(383,534
|
)
|
|
|
(182,161
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value through profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in fair value of derivative financial instruments gain/(loss)
|
|
|
8,365
|
|
|
|
10,828
|
|
|
|
(48,188
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities at amortised cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expenses on lease obligations
|
|
|
(31,169
|
)
|
|
|
(88,138
|
)
|
|
|
(126,433
|
)
|
Interest expenses on borrowings from banks, others and overdrafts
|
|
|
(381,644
|
)
|
|
|
(255,273
|
)
|
|
|
(312,936
|
)
|
|
36.
|
Financial Risk Management
|
The Group has exposure
to the following risks from its use of financial instruments:
The Board of Directors
has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board of Directors
has established a risk management policy to identify and analyze the risks faced by the Group, to set appropriate risk limits
and controls, and to monitor risks and adherence to limits. Risk management systems are reviewed periodically to reflect changes
in market conditions and the Group’s activities. The Group Audit Committee oversees how management monitors compliance with
the Group’s risk management policies and procedures, and reviews the risk management framework. The Group Audit Committee
is assisted in its oversight role by Internal Audit. Internal Audit undertakes reviews of risk management controls and procedures,
the results of which are reported to the Audit Committee.
Credit risk
: Credit
risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Group’s trade receivables, treasury operations and other activities that are
in the nature of leases.
Trade and other receivables
The Group’s exposure
to credit risk is influenced mainly by the individual characteristics of each customer. Management considers that the demographics
of the Group’s customer base, including the default risk of the industry and country in which customers operate, has less
of an influence on credit risk.. Credit risk is managed through credit approvals, establishing credit limits and continuously
monitoring the credit worthiness of the customers to which the Company grants credit terms in the normal course of the business.
Cash and cash equivalents
and other investments
In the area of treasury
operations, the Group is presently exposed to counter-party risks relating to short term and medium term deposits placed with
public-sector banks, and also to investments made in mutual funds.
The Chief Financial Officer
is responsible for monitoring the counterparty credit risk, and has been vested with the authority to seek Board’s approval
to hedge such risks in case of need.
Exposure to credit
risk
The gross carrying amount
of financial assets, net of any impairment losses recognized represents the maximum credit exposure. The maximum exposure to credit
risk as at March 31, 2018 and 2017 was as follows:
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Cash and cash equivalents
|
|
|
2,288,121
|
|
|
|
1,884,265
|
|
Other assets
|
|
|
360,378
|
|
|
|
213,424
|
|
Trade receivables
|
|
|
8,820,579
|
|
|
|
6,950,563
|
|
Other receivables
|
|
|
48,141
|
|
|
|
101,098
|
|
Other investments
|
|
|
145,718
|
|
|
|
74,653
|
|
|
|
|
11,662,937
|
|
|
|
9,224,003
|
|
Financial assets that
are past due but not impaired
There is no other class
of financial assets that is past due but not impaired other than trade receivables. The age analysis of trade receivables have
been considered from the date of invoice. The ageing of trade receivables, net of allowances that are past due, is given below:
Period (in days)
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Past due 181 - 270 days
|
|
|
825,461
|
|
|
|
892,375
|
|
Past due 271 - 365 days
|
|
|
272,913
|
|
|
|
344,529
|
|
More than 365 days
|
|
|
885,644
|
|
|
|
961,295
|
|
|
|
|
1,984,018
|
|
|
|
2,198,199
|
|
See note 12 for the activity
in the allowance for impairment of trade account receivables.
Financial assets that
are not past due
Cash and cash equivalents,
other assets, other receivables and finance lease receivables are neither past due nor impaired. The total trade receivables that
are not past due as at March 31, 2018 amounts to ₹ 6,836,561 (March 31, 2017: ₹ 4,752,364) and impairment has not
been recorded on the same.
Details of collateral
and other credit enhancements held
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Security deposits received for Internet access services
|
|
|
497
|
|
|
|
497
|
|
Liquidity risks
:
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities
that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure,
as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under normal and stressed
conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Typically the Group ensures
that it has sufficient cash on demand to meet expected operational expenses, servicing of financial obligations. In addition,
the Group has concluded arrangements with well reputed Banks, and has unused lines of credit that could be drawn upon should there
be a need. The Company is also in the process of negotiating additional facilities with Banks for funding its requirements.
The following are the
contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:
As at March 31, 2018
|
|
Carrying
amount
|
|
|
Contractual
cash
flows
|
|
|
0-12 months
|
|
|
1-3 years
|
|
|
3-5 years
|
|
Non-derivative financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank overdrafts
|
|
|
2,121,537
|
|
|
|
2,121,537
|
|
|
|
2,121,537
|
|
|
|
-
|
|
|
|
-
|
|
Finance lease liabilities
|
|
|
185,965
|
|
|
|
210,302
|
|
|
|
105,274
|
|
|
|
101,888
|
|
|
|
3,140
|
|
Other liabilities
|
|
|
207,046
|
|
|
|
207,046
|
|
|
|
207,046
|
|
|
|
-
|
|
|
|
-
|
|
Borrowing from banks
|
|
|
2,021,228
|
|
|
|
2,240,152
|
|
|
|
949,352
|
|
|
|
1,209,181
|
|
|
|
81,619
|
|
Borrowings from others
|
|
|
1,464,637
|
|
|
|
1,851,840
|
|
|
|
769,409
|
|
|
|
893,774
|
|
|
|
188,657
|
|
Trade and other payables
|
|
|
6,779,018
|
|
|
|
6,779,018
|
|
|
|
6,779,018
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
12,779,431
|
|
|
|
13,409,895
|
|
|
|
10,931,636
|
|
|
|
2,204,843
|
|
|
|
273,416
|
|
As at March 31, 2017
|
|
Carrying
amount
|
|
|
Contractual
cash
flows
|
|
|
0-12 months
|
|
|
1-3 years
|
|
|
3-5 years
|
|
Non-derivative financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank overdrafts
|
|
|
991,161
|
|
|
|
991,161
|
|
|
|
991,161
|
|
|
|
-
|
|
|
|
-
|
|
Finance lease liabilities
|
|
|
519,219
|
|
|
|
577,646
|
|
|
|
367,620
|
|
|
|
210,026
|
|
|
|
-
|
|
Other liabilities
|
|
|
201,679
|
|
|
|
201,679
|
|
|
|
201,679
|
|
|
|
-
|
|
|
|
-
|
|
Borrowing from banks
|
|
|
2,567,076
|
|
|
|
2,711,343
|
|
|
|
1,974,313
|
|
|
|
571,339
|
|
|
|
165,691
|
|
Borrowings from others
|
|
|
844,002
|
|
|
|
915,494
|
|
|
|
676,150
|
|
|
|
239,343
|
|
|
|
-
|
|
Trade and other payables
|
|
|
5,648,740
|
|
|
|
5,648,740
|
|
|
|
5,648,740
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
10,771,877
|
|
|
|
11,046,063
|
|
|
|
9,859,663
|
|
|
|
1,020,708
|
|
|
|
165,691
|
|
Market risk:
Market
risk is the risk of loss of future earnings or fair values or future cash flows that may result from a change in the price of
a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign exchange
rates and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive
financial instruments including foreign currency receivables and payables. The Group is exposed to market risk primarily related
to foreign exchange rate risk (currency risk), interest rate risk and the market value of its investments. Thus the Group’s
exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in
foreign currencies.
Currency risk
:
The Group’s exposure in US $, Euro and other foreign currency denominated transactions gives rise to Exchange Rate fluctuation
risk. Group’s policy in this regard incorporates:
|
·
|
Forecasting
inflows and outflows denominated in US$ for a twelve-month period
|
|
·
|
Estimating
the net-exposure in foreign currency, in terms of timing and amount
|
|
·
|
Determining
the extent to which exposure should be protected through one or more risk-mitigating
instruments to maintain the permissible limits of uncovered exposures.
|
|
·
|
Carrying
out a variance analysis between estimate and actual on an ongoing basis, and taking stop-loss
action when the adverse movements breaches the 5% barrier of deviation, subject to review
by Audit Committee.
|
The Group’s exposure
to foreign currency risk as at March 31, 2018 was as follows:
|
|
All amounts in respective
currencies as mentioned (in thousands)
|
|
|
|
US $
|
|
|
CA $
|
|
|
CHF
|
|
|
EUR
|
|
|
GBP
|
|
|
DHS
|
|
|
HK $
|
|
Cash and cash equivalents
|
|
|
3,835
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Trade receivables
|
|
|
11,310
|
|
|
|
-
|
|
|
|
-
|
|
|
|
66
|
|
|
|
8
|
|
|
|
-
|
|
|
|
-
|
|
Trade payables
|
|
|
(10,076
|
)
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
(29
|
)
|
|
|
-
|
|
|
|
(57
|
)
|
|
|
(2
|
)
|
Foreign currency loan
|
|
|
(20,005
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net balance sheet exposure
|
|
|
(14,951
|
)
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
37
|
|
|
|
8
|
|
|
|
(57
|
)
|
|
|
(2
|
)
|
The Group’s exposure
to foreign currency risk as at March 31, 2017 was as follows:
|
|
All amounts in respective
currencies as mentioned (in thousands)
|
|
|
|
US $
|
|
|
CA $
|
|
|
CHF
|
|
|
EUR
|
|
|
GBP
|
|
|
DHS
|
|
|
HK $
|
|
Cash and cash equivalents
|
|
|
5,180
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Trade receivables
|
|
|
11,226
|
|
|
|
-
|
|
|
|
-
|
|
|
|
44
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
Trade payables
|
|
|
(10,949
|
)
|
|
|
(4
|
)
|
|
|
(1
|
)
|
|
|
(110
|
)
|
|
|
(10
|
)
|
|
|
(38
|
)
|
|
|
-
|
|
Foreign currency loan
|
|
|
(29,374
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net balance sheet exposure
|
|
|
(23,917
|
)
|
|
|
(4
|
)
|
|
|
(1
|
)
|
|
|
(66
|
)
|
|
|
(11
|
)
|
|
|
(38
|
)
|
|
|
-
|
|
Sensitivity analysis
A 10% strengthening of
the rupee against the respective currencies as at March 31, 2018 and 2017 would have increased / (decreased) other comprehensive
income and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates,
remain constant. The analysis is performed on the same basis for 2017.
|
|
Other comprehensive
income
|
|
|
Profit or ( loss)
|
|
March 31, 2018
|
|
|
-
|
|
|
|
96,585
|
|
March 31, 2017
|
|
|
-
|
|
|
|
155,702
|
|
A 10% weakening of the
rupee against the above currencies as at March 31, 2018 and 2017 would have had the equal but opposite effect on the above currencies
to the amounts shown above, on the basis that all other variables remain constant.
Interest Rate Risk:
Interest rate risk is the risk that an upward movement in interest rates would adversely affect the borrowing costs of the
group.
Profile
At
the reporting date the interest rate profile of the Group’s interest –bearing financial instruments were as follows:
|
|
Carrying amount
|
|
|
|
March 31, 2018
|
|
|
March 31, 2017
|
|
Fixed rate instruments
|
|
|
|
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
- Fixed deposits with banks
|
|
|
413,082
|
|
|
|
449,195
|
|
- Investment in debt securities
|
|
|
144,008
|
|
|
|
72,943
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
- Borrowings from banks
|
|
|
609,382
|
|
|
|
687,461
|
|
- Borrowings from others
|
|
|
1,464,637
|
|
|
|
844,002
|
|
|
|
|
|
|
|
|
|
|
Variable rate instruments
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
- Borrowings from banks
|
|
|
1,411,846
|
|
|
|
1,879,615
|
|
- Bank overdrafts
|
|
|
2,121,537
|
|
|
|
991,161
|
|
Fair value sensitivity
for fixed rate instruments
The
Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Group
does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore
a change in interest rates at the reporting date would not affect profit or loss.
Cash
flow sensitivity for variable rate instruments
An
increase of 100 basis points in interest rates at the reporting date would have increased / (decreased) equity and profit or loss
by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.
The analysis has been performed on the same basis as 2017.
|
|
Equity
|
|
|
Profit or (loss)
|
|
March 31, 2018
|
|
|
-
|
|
|
|
(32,644
|
)
|
March 31, 2017
|
|
|
-
|
|
|
|
(24,161
|
)
|
A
decrease of 100 basis points in the interest rates at the reporting date would have had equal but opposite effect on the amounts
shown above, on the basis that all other variable remain constant.
|
37.
|
Issue of shares
on a private placement basis to the existing promoter group
|
On
August 4, 2010, the Board of Directors of the company approved the issuance, in a private placement, of upto an aggregate of 125,000,000
of the company’s equity shares, par value ₹ 10 per share (“Equity shares”) at a discount compared to market
value of , for an aggregate purchase price of ₹ 4,000,000, to a group of investors affiliated with the company’s promoter
group, including entities affiliated with Mr Raju Vegesna, the company’s CEO, Chairman and Managing Director and Mr Ananda
Raju Vegesna, Executive Director and brother of Mr Raju Vegesna (the “Offering”). The company’s shareholders
approved the terms of the Offering at the Company’s Annual General Meeting held on September 27, 2010.
On
October 22 2010, the company entered into a Subscription Agreement with Mr Ananda Raju Vegesna, acting as representative (the
“Representative”) of the purchasers in connection with the Offering. In pursuance of the Agreement, the company issued
and allotted 125,000,000 equity shares to M/s Raju Vegesna Infotech and Industries Private Limited (“RVIIPL”), a promoter
group company. In accordance with Indian law, the purchase price is to be paid at such time as determined by Board of Directors
of the company.
On
August 14, 2011, the company received a letter from RVIIPL expressing its intention to transfer the above partly paid shares to
its wholly owned subsidiary M/s Ramanand Core Investment Company Private limited (“RCICPL”). The company, on August
26, 2011, registered such transfer of partly paid shares in the name of RCICPL.
On
September 7, 2011, the parties entered into an amendment to the Subscription Agreement (the “Amendment”) extending
the validity of the agreement period to September 26, 2013. This Amendment provides the Board of Directors of the Company
with additional time to call upon the purchasers to pay the balance money, in accordance with the terms of the Subscription Agreement.
As
on March 31, 2018, these shares are partly paid to the extent of ₹ 7.75 (March 31, 2017: ₹ 7.75) per share. Until
the full purchase price is paid by the purchasers, the company retains a lien on the equity shares purchased in connection with
the Offering. As of March 31, 2018, entities affiliated with our CEO, Chairman and Managing Director, Raju Vegesna, beneficially
owned approximately 86.22% of our outstanding equity shares, which includes the 125,000,000 shares (partly paid with proportionate
voting rights) issued in connection with the above Offering.
|
38.
|
Corporate Social
Responsibility (CSR) expenditure
|
Section
135 of the Companies Act, 2013, requires Company to spend towards Corporate Social Responsibility (CSR). The Company is expected
to spend ₹ 9,898 towards CSR in compliance of this requirement. A sum of ₹ 9,540 has been spent during the fiscal
year towards CSR activities as per details given below. The balance amount to be spent is ₹ 358.
Organisation
|
|
Amount (₹)
|
|
VIRRD Trust, Dwarakha Tirumala
|
|
|
6,300
|
|
M/s Jateeya Vidya Seva Samithi
|
|
|
2,500
|
|
Sri Hanuman Mani Education & Culture Trust
|
|
|
740
|
|
Total
|
|
|
9,540
|
|
The
Group's capital comprises equity share capital, share premium, and other equity attributable to equity holders. The primary objective
of Group's capital management is to maximise shareholders value. The Group manages its capital and makes adjustment to it in light
of the changes in economic and market conditions. The Group does so by adjusting dividend paid to shareholders. The total capital
as on March 31, 2018 is ₹ 9,004,953 (Previous Year: ₹ 8,264,419). No changes were made in the objectives, policies
or processes for managing capital of the Group during the current and previous year.
Item
19. Exhibits
Number
|
|
Description
|
|
|
|
1.1
|
|
Amended Articles of Association of Sify Technologies Limited. (1)
|
|
|
|
1.2
|
|
Memorandum of Association of Sify
Technologies Limited. (2)
|
|
|
|
1.3
|
|
Amendment of Memorandum of Association. (3)
|
|
|
|
2.1
|
|
Deposit Agreement, dated as of October 18, 1999, among Sify Technologies Limited, Citibank,
N.A. and holders from time to time of American Depository Shares evidenced by American Depository Receipts issued thereunder
(including, as an exhibit, the form of American Depository Receipt). (4)
|
|
|
|
2.2
|
|
Amendment No. 1 to Deposit Agreement among Sify Technologies Limited, Citibank, N.A. and holders
from time to time of American Depository Shares evidenced by American Depository Receipts issued thereunder (including, as
an exhibit, the form of American Depository Receipt). (4)
|
|
|
|
2.3
|
|
Amendment No. 2 to Deposit Agreement among Sify Technologies Limited, Citibank, N.A. and holders
from time to time of American Depository Shares evidenced by American Depository Receipts issued thereunder (including, as
an exhibit, the form of American Depository Receipt). (5)
|
|
|
|
2.4
|
|
Subscription Agreement dated November 10, 2005 between Sify Technologies Limited and Infinity
Capital Ventures, LP. (9)
|
|
|
|
2.5
|
|
Standstill Agreement dated November 10, 2005 by and among Sify Technologies Limited, Infinity
Capital Ventures, LP and Mr Raju Vegesna. (9)
|
|
|
|
2.6
|
|
Shareholders’ Agreement dated December 20, 2005 between Sify Technologies Limited, Infinity
Satcom Universal (P) Limited, and Sify Communications Limited (erstwhile subsidiary). (10)
|
|
|
|
2.7
|
|
Shareholders’ Agreement dated November 25, 2005 between Sify Technologies Limited and
Man Financial. (11)
|
|
|
|
4.1
|
|
Associate Stock Option Plan 2000 (6)
|
|
|
|
4.2
|
|
Associate Stock Option Plan 2002 (6)
|
|
|
|
4.3
|
|
Associate Stock Option Plan 2005 (12)
|
|
|
|
4.4
|
|
Associate Stock Option Plan 2007 (14)
|
|
|
|
4.5
|
|
Associate Stock Option Plan 2014
|
|
|
|
4.6
|
|
Form of Indemnification Agreement. (7)
|
|
|
|
4.7
|
|
License Agreement for Provision of Internet Service, including Internet Telephony dated as
of April 1, 2002 by and between Sify Technologies Limited and the Government of India, Ministry of Communications and Information
Technology, Department of Telecommunications, Telecom Commission. (3)
|
|
|
|
4.8
|
|
Bank Guarantee, dated as of November 4, 1998. (2)
|
|
|
|
4.9
|
|
Agreement, dated November 10, 2004, between Sify Technologies Limited, Satyam Computer Services
Limited, SAIF Investment Company Limited and Venture Tech Solutions Pvt. Ltd. (8)
|
|
|
|
4.10
|
|
Subscription Agreement dated March 24, 2008 between Sify Technologies Limited and Infinity
Satcom Universal Private Limited. (13)
|
|
|
|
4.11
|
|
Scheme of Amalgamation between Sify Communications Limited with Sify Technologies Limited
and their respective shareholders (15)
|
(1)
|
|
Previously filed as an exhibit to
the Report on Form 6-K filed with the Commission on October 17, 2007 and incorporated herein by reference.
|
|
|
|
(2)
|
|
Previously filed as an exhibit to Amendment No. 1 to the Registration Statement on Form F-1
filed with the Commission on October 4, 1999 and incorporated herein by reference.
|
|
|
|
(3)
|
|
Previously filed as an exhibit to
the Report on Form 6-K filed with the Commission on October 17, 2007 and incorporated herein by reference.
|
|
|
|
(4)
|
|
Previously filed as an exhibit to the Post-Effective Amendment No. 1 to Form F-6 filed with
the Commission on January 5, 2000 and incorporated herein by reference.
|
|
|
|
(5)
|
|
Previously filed as an exhibit to the Registration Statement on Form S-8 (File No. 333-101322)
filed with Commission on November 20, 2002 and incorporated herein by reference.
|
|
|
|
(6)
|
|
Previously filed as an exhibit to the Annual Report on Form 20-F filed with the Commission
on June 29, 2004 and incorporated herein by reference.
|
|
|
|
(7)
|
|
Previously filed as an exhibit to Amendment No. 2 to the Registration Statement on Form F-2
filed with the Commission on October 13, 1999 and incorporated herein by reference.
|
|
|
|
(8)
|
|
Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on November
30, 2004 and incorporated herein by reference.
|
|
|
|
(9)
|
|
Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on November
21, 2005 and incorporated herein by reference.
|
|
|
|
(10)
|
|
Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on December
7, 2005 and incorporated herein by reference.
|
|
|
|
(11)
|
|
Previously filed as an exhibit to
the Report on Form 6-K filed with the Commission on December 23, 2005 and incorporated herein by reference.
|
|
|
|
(12)
|
|
Previously filed as an exhibit to
the Annual Report on Form 20-F filed with the Commission on June 30, 2006 and incorporated herein by reference.
|
(13)
|
|
Previously filed as an exhibit to the Report on Form 6-K filed with the Commission
on April 14, 2008 and incorporated herein by reference.
|
|
|
|
(14)
|
|
Previously filed as an exhibit to the Report on Form 20-F filed with the Commission on October
11, 2008 and incorporated herein by reference.
|
|
|
|
(15)
|
|
Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on January
23, 2009 and incorporated herein by reference.
|
|
|
|
(16)
|
|
Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on November
15, 2010 and incorporated herein by reference.
|
|
|
|
(17)
|
|
Previously filed as an exhibit to the Report on Form 6-K filed with the Commission on September
8, 2011 and incorporated herein by reference.
|