Tech Mahindra

1. The estimated amount of contracts remaining to be executed on
 capital account (net of capital advances), and not provided for as at
 March 31, 2009 Rs. 986 Million (previous year : Rs. 1,378 Million).
 
 2.  Contingent liabilities :
 
 i) The Company has received demand notices from Income Tax Authorities
 resulting in a contingent liability of Rs. 263 Million (previous year
 Rs. 158 Million). This is mainly on account of the following : (a)
 Disallowance of software maintenance activity, deduction under section
 80HHE amounting to Rs. 38 Million (b) Deduction under Section 10A
 amounting to Rs. 209 Million in relation to adjustment of expenditure
 in foreign currency being excluded only from Export turnover and not
 from Total turnover. The company has already won the appeal before the
 Mumbai Tribunal for the Assessment year 2002- 2003. The department
 intends to pursue the matter before High Court and (c) an amount of Rs.
 16 Million relating to Fringe Benefit Tax. The Company has appealed
 before Appellate Authorities and is hopeful of succeeding in the same.
 
 ii) Bank Guarantees outstanding Rs. 967 Million (previous year : Rs.
 160 Million).
 
 iii) Claims from Statutory Authorities for TML is Rs. 2 Million
 (Provident Fund) (previous year : Rs. 2 Million). Based on letter
 received from Service Tax Authority for erstwhile TMR&D is Rs. 7
 Million (previous year Rs. 7 Million) towards service tax on marketing
 fees for the financial year 2006- 2007. The above amount is paid by the
 Company Under Protest. The company is awaiting demand notice and
 would be filling an appeal against the same.
 
 iv) Claims against the company not acknowledged as debts amounting to
 Rs. 130 Million (previous year Rs. Nil).
 
 v) Based on the demand letter of Rs. 6 Million (previous year Rs. Nil)
 received from the office of the assistant development commissioner of
 NSEZ for rent arrears on account of revision of rent of the SEZ
 premises the company has paid an amount of Rs. 3 Million (previous year
 Rs. Nil) Under Protest.
 
 3.  During the year ended March 31 2006, the Company had acquired Tech
 Mahindra (R&D services) Limited (TMRDL) vide Share Purchase Agreement
 dated 15th November, 2005, for an initial consideration of Rs. 1,755
 Million (including stamp duty). As a result, TMRDL and its two wholly
 owned subsidiaries became subsidiary / step subsidiaries of the Company
 with effect from the date of acquisition i.e. 28th November, 2005.
 
 During the year ended March 31, 2008, the company had acquired
 additional 1,600 shares at total consideration of Rs. 0.30 Million and
 the same has been accounted as additional investment.
 
 The terms of purchase also provide for payment of contingent
 consideration (earn out) to all the selling shareholders, payable over
 three years i.e. up to March 31st 2008 and calculated based on achievement 
 of specific targets. The consideration so payable would be accounted 
 in the books of account in the year of achieving the milestones under 
 the agreement. The total contingent consideration is payable in cash and 
 cannot exceed Rs. 641 Million. Accordingly, total earn out payment of 
 Rs.155 Million had been provided as additional cost of acquisition till 
 March 31, 2008.
 
 4.  During the year 2007-08, the Company had acquired entire
 shareholding of iPolicy Networks Limited (formerly known as iPolicy
 Networks Private Limited) vide Share Purchase Agreement dated January
 18, 2007 for a consideration of Rs. 29 Million. As a result, iPolicy
 Networks Limited became a wholly owned subsidiary of the Company with
 effect from the date of acquisition.
 
 During the previous year, the Company had made an additional investment
 of Rs. 381 Million after the acquisition.
 
 5.  a) Tech Mahindra (R & D services) Limited, iPolicy networks limited
 - wholly owned subsidiaries of TML have been amalgamated with the
 company with effect from April 1, 2008 in terms of the scheme of
 amalgamation (‘scheme) sanctioned by the Honorable High Court of
 judicature at Mumbai, Delhi & Karnataka vide their approvals dated
 March 28, 2008, April 4, 2008 & April 3, 2008 respectively.
 
 Tech Mahindra (R & D services) Limited provides technology solutions to
 leading Telecom Equipment Manufacturers in the areas of Research &
 Development, Product Engineering and Life Cycle Support. iPolicy
 Networks Limited develops next-generation, carrier-grade integrated
 network security solutions for enterprise and service providers.
 
 The mergers would result in operational synergies, enhance financial
 strength and rationalization of costs. Accordingly the above stated
 subsidiaries stand dissolved without winding up and all assets and
 liabilities have been transferred to and vested with the company with
 effect from April 1, 2008, the appointed date. As the above stated
 subsidiaries were wholly owned by the company, no shares were exchanged
 to effect the amalgamation. The amalgamation was accounted as per the
 pooling of interest method as prescribed in Accounting Standard 14.
 All the assets and liabilities have been taken over at their respective
 book values as at the date of amalgamation.
 
 In accordance with the Scheme of amalgamation approved by the
 Honorable High Courts, the excess of liabilities over the assets have
 been charged to general reserves.  Accordingly the share capital and
 reserves of the company were adjusted against general reserves of TML.
 
 Had the treatment based on Accounting Statement 14 on Accounting for
 Amalgamation followed, securities premium, capital reserves and profit
 and loss account (on amalgamation) would have been higher by Rs. 252
 Million, Rs.1 Million and Rs. 517 Million respectively and general
 reserves would have been lower by Rs.769 million.
 
 b) The Board of Tech Mahindra (R&D Services) Inc.  (TMRDS), a
 subsidiary of TML had approved the plan and agreement for amalgamation
 with its fellow subsidiary Tech Mahindra Americas Inc.  (TMA) effective
 July 01, 2008. The amalgamation has been duly authorized in compliance
 with the jurisdictional laws. According to these authorizations, TMRDS
 ceased to exist on and after July 1, 2008.
 
 6.  During the previous year ended March 31, 2008, the Company had made
 investment of Rs. 462 Million in CanvasM Technologies Limited. The
 Company holds 80.10 percent shareholding of CanvasM Technologies
 Limited.
 
 7.  During the previous year ended March 31, 2008, the Company had made
 investment of Rs. 4 Million in Tech Mahindra (Malaysia) SDN. BHD. As a
 result, Tech Mahindra (Malaysia) SDN. BHD. became a wholly owned
 subsidiary of the Company with effect from the date of this investment.
 
 8.  During the previous year ended March 31, 2008, the Company had made
 investment of Rs. 3 Million in Tech Mahindra (Beijing) IT Services
 Limited (TMCHN).  As a result, TMCHN became a wholly owned subsidiary
 of the Company with effect from the date of this investment. During the
 year an additional investment of Rs. 5 Million has been made.
 
 9.  The Company holds investments (unquoted) in two subsidiaries,
 viz., Tech Mahindra (Americas) Inc.(TMA) Tech Mahindra GmbH (TMGMBH)
 aggregating to Rs. 12 Million and Rs. 389 Million respectively (refer
 note 1 of Schedule V), which are held as strategic long- term
 investments.
 
 The Company had made provision in the year ended March 31, 2005, to the
 extent of accumulated losses in TMA, aggregating to Rs. 12 Million
 towards diminution in the value of investments and Rs.153 Million
 towards debts recoverable from TMA.
 
 The subsidiary had become profitable and its net worth had become
 positive. In view of the growth plans and considering the profitability
 in the subsequent years the provision made earlier was no longer
 required and accordingly the Company had reversed the provision of Rs.
 165 Million in the previous year and the same had been disclosed as a
 provision in respect of earlier year written back in Profit and Loss
 Account.
 
 The Company had made provision in the year ended March 31, 2005, to the
 extent of accumulated losses in TMGMBH aggregating to Rs. 354 Million
 towards diminution in the value of its investments. While TMGMBH has
 started earning profits from financial year 2006 onwards, the net worth
 of TMGMBH is still substantially eroded as per the latest available
 audited accounts of TMGMBH at March 31, 2009. In view of this no change
 in provision is required.
 
 10.  During the year ended March 31, 2009, the Company has made
 investment of Rs. 0.08 Million in Venturbay Consultants Private
 Limited. As a result, VCPL has become a wholly owned subsidiary of the
 Company with effect from the date of this investment.
 
 11.  During the previous year ended March 31, 2008, the company had
 entered in to an agreement with a customer under which it will have
 exclusivity for 90 days in negotiating an engagement.
 
 As per the terms of the agreement the company has made an ‘exclusivity
 payment of Rs. 4,401 Million to the customer which is unconditional,
 irrevocable and non refundable. Accordingly, this payment had been
 disclosed as an exceptional item in the previous years Profit and Loss
 account for the year ended March 31, 2008
 
 12.  The Inland Revenue Authorities of United Kingdom (UK) carried out
 Employer Compliance Review in 2004- 05. In the course of the review,
 they demanded from the Company Rs. 324 million for the period 2001 to
 2005 claiming that the dispensation on employee allowances was not used
 properly. They also withdrew dispensation benefit from the year
 2005-06. Based on communication from the authorities and expert
 opinion, the Company had provided tax liability without any
 dispensation benefit. The Company represented against both these
 decisions. Post completion of review the revised dispensation was
 restored with retrospective effect from year 2005-06.  The demand for
 earlier period was also settled favorably. During the year the excess
 of provision over liability, determined by the Inland Revenue,
 amounting to Rs. 673 Million has been written back to expenses.
 
 13.  Details of employee benefits as required by the Accounting
 Standard 15 (Revised) – Employee Benefits are as under :
 
 a) Defined Contribution Plan
 
 Amount recognized as an expense in the Profit and Loss Account in
 respect of defined contribution plan is Rs. 508 Million (previous year
 Rs. 402 Million).
 
 b) Defined Benefit Plan
 
 The defined benefit plan comprises of gratuity.  The gratuity plan is
 not funded.
 
 Changes in the present value of defined obligation representing
 reconciliation of opening and closing balances thereof and fair value
 of Trust Fund Receivable (erstwhile TMRDL) showing amount recognized in
 the Balance Sheet :
 
 14. In respect of equity shares issued pursuant to Employee Stock
 Option Scheme, the Company paid dividend of Rs. 1 Million for the year
 2007-08 and tax on dividend of Rs. 0 Million as approved by the
 shareholders at the Annual General Meeting held on July 22, 2008.
 
 15.  Exchange gain/(loss)(net) accounted during the year :
 
 a) The Company enters into foreign Exchange Forward Contracts and
 Currency Option Contracts to offset the foreign currency risk arising
 from the amounts denominated in currencies other than the Indian rupee.
 The counter party to the Companys foreign currency Forward Contracts
 and Currency Option Contracts is generally a bank. These contracts are
 entered into to hedge the foreign currency risks of certain forecasted
 transactions. Forward Exchange Contracts and Currency Option Contracts
 in UK Pound exposure are split into two legs, which are GBP to USD and
 USD to INR.
 
 16. The company has exercised the option given vide notification number
 G.S.R. 225 (E) dated March 31, 2009 issued by the Ministry of Corporate
 Affairs, Government of India on provisions of Accounting Standard 11,
 however this does not have any impact on the financial statements, as
 the Company does not have any long term foreign currency monetary
 items.
 
 17.  Based on the information available with the company, no creditors
 have been identified as supplier within the meaning of Micro, Small
 and Medium Enterprises Development (MSMED) Act 2006.
 
 18.  Current tax includes taxes for foreign branches amounting to Rs.
 269 Million (previous year Rs. 190 Million).
 
 19. a) The Board of Directors of Satyam Computer Services Limited on
 April 13, 2009 selected Venturbay Consultants Private Limited, a wholly
 owned subsidiary of the Company as the highest bidder to acquire a
 controlling stake in Satyam Computer Services Limited, subject to the
 approval of the Honble Company Law Board (CLB). CLB has since granted
 its approval on April 16, 2009. Venturbay has deposited a sum of Rs.
 29,107 Million in escrow to cover the cost of 31% preferential issue by
 Satyam and a 20% open offer.
 
 b) The Company has made investment of Rs. 112 Million in Mahindra
 Logisoft Business Solutions Limited (MLBSL) on April 11, 2009, as a
 result MLBSL has become a wholly owned subsidiary of the Company from
 that date.
 
 20.  Previous year figures have been regrouped wherever necessary, to
 conform to the current years classification.