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Matrimony.com

BSE: 540704|NSE: MATRIMONY|ISIN: INE866R01028|SECTOR: Miscellaneous
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Notes to Accounts Year End : Mar '18

1. Corporate information

Matrimony.com Limited (‘Matrimony.com’ or the ‘Company’) is a public company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. The Company offers online matchmaking services on internet and mobile platforms. The Company delivers matchmaking services to users in India and the Indian diaspora through websites, mobile sites and mobile apps complemented by a wide on-the-ground network in India. Such services are primarily delivered online through popular domain specific web portals like BharatMatrimony.com, CommunityMatrimony.com, AssistedMatrimony.com and EliteMatrimony.com. Revenue comprises of membership subscription, assisted matrimonial service fees and sales from online advertising packages.The Company has expanded into marriage services such as MatrimonyDirectory.com, a listing website for matrimony-related directory services including listings for wedding related services such as wedding planners, venues, cards and caterers. The Company has also recently introduced MatrimonyPhotography.com to provide wedding photography and videography services.

On September 21, 2017, the Company listed its equity shares with National Stock Exchange of India Ltd and BSE Ltd. The registered office of the company is located at No: 94, TVH Beliciaa Towers, MRC Nagar, Mandaveli, Chennai - 600028.

The standalone financial statements were authorised for issue in accordance with a resolution of the directors on May 3, 2018.

2. Significant accounting policies

2.1. Basis of preparation

The standalone financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards)Rules, 2015, read with Companies (Indian Accounting Standards) as amended.

For all periods up to and including the year ended March 31, 2017, the Company prepared its standalone financial statements in accordance with accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 as amended (Indian GAAP). These standalone financial statements for the year ended March 31, 2017 are the first the Company has prepared in accordance with Ind AS. Refer to note 42 for information on how the Company adopted Ind AS.

The standalone financial statements have been prepared on an accrual basis under the historical cost convention except for certain financial assets and financial liabilities are measured at fair value (refer accounting policy regarding financial instruments)

The standalone financial statements are presented in INR (its functional currency) and all values are rounded to the nearest lakhs, except where otherwise indicated.

* The Management had earlier decided to wind-up the operations of its subsidiary M/s Community Matrimony Private Limited to curtail the losses incurred by these businesses in the future. On March 28, 2018, the Board of Directors of the subsidiary passed a resolution to have the entity’s name struck-off from register of companies maintained by Registrar of Companies (ROC) pursuant to Section 248 of the Companies Act, 2013. Accordingly, the Company has provided for impairment allowance for the carrying value of such investment amounting to Rs. 1.00 lakh during the year.

** As at March 31, 2016, management had decided to phase out the operations of its subsidiaries M/s Tambulya Online Marketplace Private Limited and M/s Matchify Services Private Limited to curtail the losses incurred by these businesses in the future. This decision was approved by the Company’s board of directors in their meeting dated July 21, 2016. The Company has provided for the impairment allowance for the carrying value of such investments amounting to Rs. 664.45 lakhs and Rs. 717.45 lakhs as at March 31, 2016 and March 31, 2017 respectively. On March 28, 2018, the Board of Directors of the respective subsidiaries passed a resolution to have the entity’s name struck-off from register of companies maintained by Registrar of Companies (ROC) pursuant to Section 248 of the Companies Act, 2013. The impairment allowance for such investment as at March 31, 2018 amounts to Rs. 717.45 lakhs.

* The Company has pledged Rs. 1,000 lakhs as on March 31, 2018 (Rs. 5,000 lakhs as on March 31, 2017 & Rs. 6,000 lakhs as on April 1, 2016) of its deposits along with the applicable accrued interest on the said fixed deposits to fulfill collateral requirements.

Fixed deposits earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Company, and earn interest at the respective short-term deposit rates.

Also refer note 46 for disclosure on Specified Bank Notes (SBN) for the year ended March 31, 2017.

The tax losses of Company (business and unabsorbed depreciation) as at March 31, 2018 is Rs Nil (March 31, 2017: Rs. 1,879.87 lakhs and April 1, 2016: Rs. 4,767.28 lakhs). No deferred taxes have been created against these losses as at March 31, 2017 and April 1, 2016 in the absence of reasonable certainty that taxable profits will be available in future to utilise these losses.

The Company has re-assessed the previously unrecognised deferred tax assets on certain temporary differences and recognised deferred tax assets (excluding MAT credit) of Rs. 96.01 lakhs in the statement of profit and loss account and Rs. 32.26 lakhs in the statement of other comprehensive income for the year ended March 31, 2018. Accordingly the deferred tax credit relating to year ended March 31, 2018 is not comparable to other periods presented.

The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

(b) Terms/rights attached to equity shares

The Company has only one class of equity shares having par value of Rs. 5/- per share. Each holder of equity shares is entitled to one vote per share. All these shares have the same rights and preference with respect to payment of dividend, repayment of capital and voting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

(c) Terms of conversion of CCPS

The preference shares will be converted into equal number of equity shares, subject to anti-dilution rights under clause 5.5 of the Shareholder’s agreement, after the end of twenty years from the date of issue or before Initial Public Offer of the Company in India, and the option rests with the holder. In the event of liquidation of the Company before conversion of CCPS, the holders of CCPS will have priority over equity shares in the repayment of capital. These preference shares have been fully converted on August 10, 2016 and there are no outstanding Compulsorily Convertible Preference Shares post conversion.

Consequent to the grant of bonus shares to equity share holders during the year ended March 31, 2015, the conversion ratio for such CCPS has been revised in accordance with the terms of the underlying agreements to stand at 1.77 resultant equity shares for every preference share held in the Company.

(i) On December 31, 2014, the Company issued bonus shares to the existing share holders, in the ratio of 18:100. The Securities premium account was utilised to the extent of Rs 74.69 lakhs for the issue of said bonus shares. On January 27, 201 5, the Company issued bonus shares to the existing share holders, in the ratio of 1:2. The Securities premium account was utilised to the extent of Rs 244.82 lakhs for the issue of said bonus shares.

(ii) In Extraordinary General Meeting held on August 05, 201 5, the Shareholders approved the consolidation of shares as follows - every 5 (Five) existing equity shares of nominal face value of Rs. 3/- (Rupee Three Only) each fully paid up into 3 (Three) equity shares of nominal face value of Rs. 5/- (Rupees Five Only) each fully paid-up and every 5 (Five) existing preference shares of nominal face value of Rs. 3/-(Rupee Three Only) each fully paid up into 3 (Three) preference shares of nominal face value of Rs. 5/- (Rupees Five Only) each fully paid-up.

(iii) On August 10, 2016, the Company converted 6,385,672 compulsorily convertible preference shares into equity shares in the ratio of 1:1.77 and securities premium was utilised to the extent of Rs. 138.90 lakhs for the conversion.

(f) Shares reserved for issue under options

For details of shares reserved for issue under the employee stock option plan of the Company, please refer note 34.

(g) During the year ended March 31, 2018, the Company has not issued shares for consideration other than cash.

* The loan is secured by hypothecation of vehicle and is repayable in 36 equated monthly installments starting from September 5, 2014.

** As of March 31, 2018, the Overdraft facility is maintained with HDFC Bank which is repayable on demand. The said facility is secured by hypothecation of all current assets of the Company as a primary security. In addition to it, as a collateral security, fixed deposits of Rs. 1,000 lakhs along with the applicable accrued interest on the said fixed deposits have been lien marked in favour of the Bank. The change in the borrowings from April 1, 2017 to March 31, 2018 represents the repayment of borrowings and there are no other cash flow / non-cash changes.

(a) Service tax: The Company has made provision of Rs.13.29 lakhs for certain disputed liabilities relating to service tax.

(b) Employees’ Provident Fund (EPF) : During the year ended March 31 2015, the company received a demand order from Regional Commissioner of Provident Fund, on account of non- inclusion of various allowances for the calculation of PF contribution for the period April 2012 to May 2014. The company has obtained a stay order from the Honourable High Court of Madras. The Company has also appealed against the order with PF Appellate Tribunal. Since various high courts have rendered different judgments which are in conflict to each other and the matter is now pending with the Honourable Supreme Court, as a matter of prudence the Company has provided for the demand of Rs. 162.91 lakhs and other related liabilities of Rs 17.58 lakhs.

Note:

i) During the previous year, management had taken a decision to phase out the operations of its subsidiaries M/s Tambulya Online Marketplace Private Limited and M/s Matchify Services Private Limited to curtail the losses incurred by these businesses in the future. This decision was approved by the Company’s board of directors in their meeting dated July 21, 2016. In view of the above, the Company has provided for impairment allowance in value of such investments. Additional loss of Rs. 53.00 lakhs provided during the year ended March 31, 2017 has been disclosed as exceptional item as the transaction not expected to recur frequently.

ii) Profit from liquidation of BharatMatrimony LLC, Dubai has been disclosed as exceptional item as the amount is significant and non-recurring in nature.

iii) The Company had earlier filed their Draft Red Herring Prospectus (DRHP) on August 18, 2015, as part of its previous IPO efforts. The Board at its meeting held on November 30, 2016 decided to defer the launch of IPO due to market conditions. Subsequently the Board in its meeting on April 21, 2017 decided to proceed with the IPO activity. Consequent to the decision, the IPO related expenses incurred in the earlier period were reviewed. A sum of Rs. 460.71 lakhs is not eligible to be appropriated against securities premium account as prescribed under section 52 of the Companies Act 2013, and has been expensed as exceptional item for the financial year ended March 31, 2017.

3 Earnings Per Share (EPS)

Basic EPS amounts are calculated by dividing the profit for the year attributable to equity holders of the parent by the weighted average number of Equity shares outstanding during the year.

Diluted EPS amounts are calculated by dividing the profit attributable to equity holders of the parent by the weighted average number of Equity shares outstanding during the year plus the weighted average number of Equity shares that would be issued on conversion of all the dilutive potential Equity shares into Equity shares.

The following reflects the income and share data used in the basic and diluted EPS computations:

4 Details of dues to micro and small enterprises as defined under the Micro, Small & Medium Enterprises Development Act, 2006

The information regarding micro or small enterprise has been determined on the basis of information available with the management and there are no dues to Micro and Small Enterprises as on March 31, 2018.

5 Significant accounting judgements, estimates and assumptions

The preparation of financial statements in conformity with Ind AS requires the Company’s management to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities recognised in the financial statements that are not readily apparent from other sources. The judgements, estimates and associated assumptions are based on historical experience and other factors including estimation of effects of uncertain future events that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates (accounted on a prospective basis) are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The following are the critical judgements and estimations that have been made by the management in the process of applying the Company’s accounting policies that have the most significant effect on the amounts recognised in the financial statements and/or key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

(A) Judgements

In the process of applying the Company’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements.

(i) Operating lease commitments - Company as lessee

The Company has entered into leases for office premises and retail outlets. The Company has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the land and office premises and the fair value of the asset, that it does not retain significant risks and rewards of ownership of the land and the office premises and accounts for the contracts as operating leases.

(ii) Taxes

Determining of income tax liabilities using tax rates and tax laws that have been enacted or substantially enacted requires the management to estimate the level of tax that will be payable based upon the Company’s / expert’s interpretation of applicable tax laws, relevant judicial pronouncements and an estimation of the likely outcome of any open tax assessments including litigations or closures thereof.

Deferred income tax assets are recognized to the extent that it is probable that future taxable income will be available against which the deductible temporary differences, unused tax losses, unabsorbed depreciation and unused tax credits could be utilized.

In respect of other taxes which are in disputes, the management estimates the level of tax that will be payable based upon the Company’s / expert’s interpretation of applicable tax laws, relevant judicial pronouncements and an estimation of the likely outcome of any open tax assessments including litigations or closures thereof.

(iii) Fair value measurement of financial instruments

When the fair values of financial assets and financial liabilities recorded in the Balance Sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See Note 39 for further disclosures.

(B) Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the these financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

(i) Impairment of non - financial assets

I mpairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. These estimates are most relevant to goodwill and other intangibles with indefinite useful lives recognised by the Company.

(ii) Defined benefit plans

The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. Further details about gratuity obligations are disclosed in Note 35.

(iii) Share-based payments

Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimation requires determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The Black Scholes valuation model has been used by the Management for share-based payment transactions. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 34.

(iv) Depreciation on property, plant and equipment

The management has estimated the useful life of its property, plant and equipment based on technical assessment. The estimate has been supported by independent assessment by technical experts. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.

6 Employee stock option plans Employee Stock Option Scheme

On October 13, 2010, the Board of Directors approved the Employee Stock Option Scheme for providing stock options to its employees (“ESOS 2010”). The said scheme has been subsequently amended and renamed as Employee Stock Option Scheme 2014 (“ESOS 2014” or “Scheme”) vide resolution passed in the Board Meeting dated April 7, 2014. The Scheme has also been approved by Extra-Ordinary General Meeting of the members of the Company held on November 19, 2010 and April 11, 2014, noting the approval accorded to the original Scheme and the subsequent amendments respectively. The Scheme is administered by the Nomination and Remuneration Committee of the Board. The details of Scheme are given below:

Exercise Period:

As per the Scheme, the options can be exercised with in a period of 5 years from the date of vesting.

The expense recognised for share options during the year is Rs. 7.33 lakhs (March 31, 2017: 33.86 lakhs). There are no cancellations or modifications to the awards in March 31, 2018 or March 31, 2017.

The grant wise information is as below:

The weighted average share price at the date of exercise of the options was Rs. 840.60/- (Face value Rs. 5/- per share).

The range of exercise prices for options outstanding at the end of the year was Rs. 103 to Rs 807.50 (March 31, 2017: Rs 103 to Rs. 350).

The weighted average remaining contractual life for the share options outstanding as at March 31, 2018 is in the range of 2 to 4.25 years (March 31, 2017: 3.04 to 5.25 years).

The following tables list the inputs to the models used for ESOS 2014 for the years ended March 31, 2018 and March 31, 2017, respectively:

7 Employee benefits

Defined Contribution Plans - General Description Provident Fund & other funds:

During the year, the Company has recognised Rs. 858.93 lakhs (March 31, 2017 - Rs. 721.17 lakhs) as contribution to provident fund and other funds in the Statement of Profit and Loss (included in Contribution to Provident and Other Funds in Note - 23).

Other long-term employee benefits - General Description

Leave Encashment:

Each employee is entitled to get 12 earned leaves for each completed quarter of service. Encashment of earned leaves is allowed only on completion of 1 year after separation subject to maximum accumulation up to 24 days.

Defined Benefit Plans - General Description Gratuity:

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets gratuity on departure at 15 days salary (last drawn salary) for each completed year of service subject to a maximum of Rs 20 lakhs. The plan assets are in the form of corporate bond in the Company’s name with Reliance Nippon Life Insurance.

The following tables summarise the components of net benefit expense recognised in the statement of profit or loss and the funded status and amounts recognised in the balance sheet:

The overall expected rate of return on assets is determined based on market prices prevailing on that date, applicable to the period over which the obligation is to be settled. The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. Based on the experience of the previous years, the Company expects to contribute Rs. 54.88 lakhs to the gratuity fund in the next year. However, the actual contribution by the Company will be based in the actuarial valuation report received from the insurance Group.

The major categories of plan assets of the fair value of the total plan assets are as follows:

Note:

(i) In a law suit filed in May 2011 in the Superior Court of New Jersey, Mercer County, Law Division, USA by certain plaintiffs, against the Company’s US subsidiary Consim Info USA Inc., USA, (“Consim US”) Infonauts Inc., USA (“Infonauts US”) (Promoter owned entity) and subsequently in 2012, Murugavel Janakiraman (“Promoter”) and the Company were made co-defendants. The Company along with the other defendants entered into a binding Settlement Agreement (“Agreement”) with the plaintiffs on December 30, 201 5 to settle the abovementioned litigation. As per the terms of this Agreement, Consim US is to pay the plaintiffs, a sum of eighty lakh dollars (USD 8,000,000) (“Settlement Amount”), in full settlement of the plaintiffs’ claims against the defendants. The settlement amount is to be paid in 22 instalments (“Settlement Payment”) and is supported by an irrevocable corporate guarantee from the Company. Upon execution of the Agreement, Consim US executed a confession of judgment on December 30, 201 5 in favour of the plaintiffs (“Confession of Judgement”). The Confession of Judgement acknowledges a debt owed by Consim US to the plaintiffs corresponding to the Settlement Amount, and may be enforced by the plaintiffs if Consim US does not make any of the Settlement Payments.

If Consim US fails to make any of the remaining Settlement Payment in terms of the Agreement, the US Plaintiffs may invoke the corporate guarantee requiring the Company to make the relevant Settlement Payment within 15 days. If the Settlement Payment is not furnished by the Company within 15 days, (a) the remaining Settlement Amount will be due immediately with interest at the rate of the 8.75% over the Prime Rate (being the rate charged by US banks as reported by the Wall Street Journal’s bank survey), on the unpaid amount, and (b) the Plaintiffs will be entitled to file and enforce the Confession of Judgement.

The Company obtained the regulatory approval from the Reserve Bank of India for the provision for such corporate guarantee and has executed a Deed of Guarantee with the plaintiff and Consim US, guaranteeing the payment of the Settlement Amount by Consim US. Consim US has commenced the payments under the Settlement Agreement and the first payment of ten lakhs dollars (USD$ 1.000.000) was made on March 28, 2016. After the payment of first instalment of the settlement, the parties filed for and obtained the dismissal of the litigation in New Jersey and in India. The remaining settlement payments are due on the last day of each month commencing after the first Settlement Payment, from April 2016 till December 2017 and are required to be of a minimum of USD$ 250.000, provided that the total paid in each quarter is at least USD$ 1,000,000. Consim US has paid the entire amount of the liability as at March 31, 2018, and the corporate guarantee has consequently been cancelled.

Since the cause of action of this litigation and settlement lies in the USA, Consim US will take primary responsibility for payment of the Settlement Amounts.

Voluntary contribution by Promoter:

In order to accede to the entry of, and the terms of the Settlement Agreement, the Company along with other defendants entered into an inter-se agreement on December 21, 2015 and subsequently amended on April 29, 201 7 (“Inter Se Agreement”). In the Inter Se Agreement, in settlement of any claims that the Company may have against the Promoter in relation to this law suit, the Promoter has agreed to make a voluntary contribution of US$ 2,000,000 (“Voluntary Contribution”) to the Company. The Voluntary Contribution will be made by the Promoter upon the Company calling upon the Promoter to pay the Voluntary Contribution on the expiry of 15 months of the date of allotment of its equity shares pursuant to the Initial public offering (“IPO”), and in the event the IPO does not happen by September 30, 201 7, no later than March 31, 2018.

During the current year, the Company’s subsidiary completed the settlement / payment process in respect of a litigation and based on a call made by the Company, the Promoter paid an agreed sum of Rs. 128,191,600 ($ 2,000,000) towards his voluntary contribution to the Company under an Inter Se Agreement between the Company including certain subsidiaries and its directors and the Promoter. As the amount involved is significant, the related income has been disclosed as exceptional item in the financial statements for the year ended March 31, 2018.

Note:

(i) During the previous year the Company has obtained stay against the retrospective implementation of Payment of Bonus (Amendment) Act, 2015 with the Madras High Court for the year 2014-15, contending that such retrospective application is unconstitutional, ultra-vires and void. The impact of such change for the financial year 2014-15 is Rs.55.00 lakhs. Based on the legal advice, management believes that it has a fair chance of defending its position. Accordingly, no provision has been maintained with respect to the financial year 2014-15. The Company has implemented Payment of Bonus (Amendment) Act, 2015 w.e.f April 1, 2015.

(ii) The Company has certain pending litigations with CESTAT, and on a prudent basis, the Company has provided for the service tax liabilities and interest. Further the Company received a demand order from Commissioner of Service tax for the period 2007-08 to 2009-10 under section 78 of the Finance Act regarding non-payment of service tax on import of certain services made during that period. The Company admitted the liability and made payments along with interest. Based on legal consultation, it believes that no provision is required to be made in the books in respect of the penalty of Rs. 69.12 lakhs demanded by the authorities.

(iii) In earlier years, the Company and its wholly owned overseas subsidiary had made certain remittances aggregating to USD 0.04 lakhs towards equity capital for the incorporation of two entities. The said two companies did not commence commercial operations and one of which was liquidated in 2013. During October 2016, the Company received a communication from the Reserve Bank of India (“RBI”) intimating the Company on their contraventions to the provisions of the Foreign Exchange Management Act, 1999 (‘FEMA Regulations’) in respect of these remittances made in earlier years. The Company has filed applications with RBI for compounding of these offences pursuant to the applicable provisions of FEMA Regulations. Based on the communication received from the RBI on this matter and the nature of these contraventions, management believes that the matter will not have any material impact on the financial statements.

(iv) The Company received assessment orders from the Assessing Officer of Income tax for assessment years 2008-09 and 2009-10 with additions in relation to the disallowance of reimbursement of webhosting charges and marketing expenses incurred by wholly owned subsidiaries of the Company on Company’s behalf aggregating to Rs. 1,032.96 lakhs, due to non-deduction of withholding taxes on the same. The Company received favourable orders from Income Tax Appellate Tribunal (ITAT) for Assessment year 2008-09 and Assessment year 2009-10, against which Revenue has filed appeals with High Court. Based on the legal advice received from the consultants, the management believes that the ultimate outcome of this proceeding would be favourable.

The Company received assessment orders from the Assessing Officer of Income tax for assessment years 2014-15 and 2015-16 with additions in relation to the disallowance of online marketing expenses paid to vendors outside India aggregating to Rs. 520.06 lakhs, due to non-deduction of withholding taxes on the same. The Company has filed appeals with CIT (Appeals). Management believes that the ultimate outcome of this proceedings would be favourable.

Terms and Conditions of transaction with Related Parties

The sale to and purchases from Related Parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. For the years ended March 31, 2018 and March 31, 2017, the Company has not recorded any impairment of receivables (excluding investment made in equity shares) relating to amounts owed by Related Parties (Refer Note 10 and Note 17A for Trade Receivables and Trade Payables respectively).

8 Segment reporting

For management purposes, the Company’s operations are organised into two major segments - Matchmaking services and Marriage services and related sale of products.

Matchmaking services - The company offers online matchmaking services on internet and mobile platforms. Matchmaking services are delivered to users in India and the Indian diaspora through websites, mobile sites and mobile apps complemented by a wide on-the-ground network in India.

Marriage services- The Company has introduced MatrimonyPhotography.com, Matrimonybazar.com and Matrimonymandap.com to provide wedding photography, videography services and allied marriage services.

The Management Committee headed by Managing Director consisting of Chief Financial Officer, Head of Departments and Human resources have identified the above two reportable business segments. The committee monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment.

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

9 Fair Values

Set out below, is a comparison by class of the carrying amounts and fair value of the Company’s financial instruments, other than those with carrying amounts that are reasonable approximations of fair values. The management assessed that the cash and cash equivalents, trade receivables, trade payables, fixed deposits, bank overdrafts and other payables approximate their carrying amounts largely due to the short-term maturities of these instruments.

The following table provides the fair value measurement hierarchy of the Company’s assets and liabilities:

10 Financial risk management objectives and policies

The Company’s principal financial liabilities, comprise bank overdraft and trade and other payables. The main purpose of these financial liabilities is to raise finance for the Company’s operations. The Company has various financial assets such as trade receivables, cash, security deposits, investments and fixed term deposits, which arise directly from its operations.

The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. The Company’s senior management is supported by a financial risk committee that advises on financial risks and the appropriate financial risk governance framework for the Company. The financial risk committee provides assurance to the Company’s senior management that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.

Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans, trade payables, FVTPL investments and receivables.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of change in market interest rates.

Other than overdraft facilities maintained with HDFC Bank which are secured against our bank deposit, the Company do not have any credit facilities from any banks or financial institutions. As a result, changes in interest rates are not likely to substantially affect our business or results of operations.

Interest rate sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of borrowings affected. With all other variables held constant, the Company’s profit before tax is affected through the impact on floating rate borrowings, as follows:

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an expenses will fluctuate because of change in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expenses is denominated in a foreign currency) and the Company’s net investment in foreign subsidiary.

The majority of the Company’s revenue and expenses are in Indian Rupees, however significant percentage of revenue are denominated in US dollars. The company currently do not use any foreign exchange hedging contracts to manage our exchange rate risk. However, historically, our results of operations have not been materially affected by fluctuation in exchange rates.

The following table demonstrate the sensitivity to a reasonably possible change in USD exchange rates, with all other variables held constant. The Company’s exposure to foreign currency changes for all other currencies is not material.

Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. In the matchmaking segment, the Company collects the money upfront, hence there is no credit risk. With respect to marriage services segment the Company collects only part of the consideration as an advance before the performance of services, thus exposed to credit risks. Credit quality of a customer cannot be assessed as the Company is largely in to Business to Customer (B2C) model, however the Company through its established policy, procedures and control relating to credit risk management manages the credit risk. An impairment analysis is performed at each reporting date and the Company has a provisioning policy for making provision on receivables. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 10. The Company does not hold collateral as security.

Credit risk from balances with banks and financial institutions is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty so as to minimise concentration of risks and mitigate consequent financial loss. Counterparty credit limits are reviewed by the Company’s Board of Directors on an annual basis, and may be updated throughout the year subject to approval of the Company’s Finance Committee. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk was Rs. 16,789.65 lakhs, 5,500.70 lakhs and Rs. 5,377.06 lakhs as at March 31, 2018, March 31, 2017 and April 1, 2016 respectively, being the total of the carrying amount of balances with banks, fixed term deposits with banks, investment in mutual funds and other financial assets excluding equity investments.

Liquidity risk

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements.

The Company’s prime source of liquidity is cash and cash equivalent and the cash generated from operations. In addition, Company has overdraft facility with HDFC bank. The Company invests its surplus funds in bank, fixed deposits and mutual funds, which carry minimal mark to market risks.

The table below summarises the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments.

11 Capital management

For the purpose of the Company’s capital management, capital includes issued equity capital, convertible preference shares, share premium and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Company’s capital management is to maximise the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.

No changes were made in the objectives, policies or processes for managing capital during the years ended March 31, 2018, March 31, 2017 and April 1, 2016.

12 First-time adoption of Ind AS

These financial statements, for the year ended March 31, 2018, are the first the Company has prepared in accordance with Ind AS. For periods up to and including the year ended March 31, 2017, the Company prepared its Standalone Financial Statements in accordance with accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).

Accordingly, the Company has prepared Standalone Financial Statements which comply with Ind AS applicable for periods ending on March 31, 2018, together with the comparative period data as at and for the year ended March 31, 2017, as described in the summary of significant accounting policies. In preparing these financial statements, the Company’s opening balance sheet was prepared as at April 1, 2016, the Company’s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at April 1, 2016 and the financial statements as at and for the year ended March 31, 2017.

Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:

1) The Company has elected to regard carrying values for all of property plant and equipment and intangibles as deemed cost at the date of the transition.

2) Ind AS 102 Share-based Payment has not been applied to equity instruments in share-based payment transactions that vested before April 1, 2016.

3) The cost of a subsidiary in the Company’s Standalone financial statements is the Indian GAAP carrying amount at the transition date.

4) The Company has elected not to apply Ind-AS 103 to business combinations occurring before the date of transition.

Estimates

The estimates at April 1, 2016 and at March 31, 2017 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies) apart from Impairment of financial assets based on expected credit loss model where application of Indian GAAP did not require estimation. The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at April 1, 2016 (i.e. the date of transition to Ind-AS) and as of March 31, 2017.

Effect of the Transition to Ind AS

Reconciliations of the Company’s balance sheets prepared under Indian GAAP and Ind AS as of April 1, 2016 and March 31, 2017 are also presented in Note 46. Reconciliations of the Company’s income statements for the year ended March 31, 2017 prepared in accordance with Indian GAAP and Ind AS in Note 46.

13 Standards issued but not effective

Amendments to Ind AS 12 Recognition of Deferred Tax Assets for Unrealised Losses

The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount. Entities are required to apply the amendments retrospectively. However, on initial application of the amendments, the change in the opening equity of the earliest comparative period may be recognised in opening retained earnings (or in another component of equity as appropriate), without allocating the change between opening retained earnings and other components of equity. Entities applying this relief must disclose that fact.

These amendments are effective for annual periods beginning on or after April 1, 2018. These amendments are not expected to have any impact on the Company.

Appendix B to Ind AS 21 Foreign Currency Transactions and Advance Consideration

The Appendix clarifies that, in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the de-recognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine the transaction date for each payment or receipt of advance consideration.

Entities may apply the Appendix requirements on a fully retrospective basis. Alternatively an entity may apply these requirements prospectively to all assets, expenses and income in its scope that are initially recognised on or after:

(i) The beginning of the reporting period in which the entity first applies the Appendix, or

(ii) The beginning of a prior reporting period presented as comparative information in the financial statements of the reporting period in which the entity first applies the Appendix.

The Appendix is effective for annual periods beginning on or after April 1, 2018. However, since the Company’s current practice is in line with the Interpretation, the Company does not expect any effect on its financial statements.

Ind AS 115 Revenue from Contracts with Customers

Ind AS 115 was issued in February 2016 and notified by the Ministry of Corporate Affairs on March 29, 2018. It establishes a five-step model to account for revenue arising from contracts with customers. Under Ind AS 115 revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard will supersede all current revenue recognition requirements under Ind AS. This standard will come into force from accounting period commencing on or after April 1, 2018. The Company will adopt the new standard on the required effective date. During the current year, the Company performed a preliminary impact assessment of adoption of Ind AS 115 and the same is found to be immaterial.

14 Initial public offering of equity shares

The Company has completed the Initial Public Offer (IPO) of 5,102,151 equity shares of Rs. 5 each at an issue price of Rs. 985 per share consisting of fresh issue of 1,334,897 equity shares and an offer for sale of 3,767,254 equity shares by selling shareholders.

The Company has incurred Rs. 2,989.62 lakhs as IPO related expenses as at March 31, 2018 as against the original estimate of Rs. 3,210.87 lakhs as per Prospectus. These IPO related expenses have been allocated between the Company and the selling shareholders in proportion to the equity shares allotted to the public as fresh issue by the Company and under the offer for sale by selling shareholders in the IPO. The Company’s revised share of total IPO expenses is Rs. 777.55 lakhs as against the original estimate of Rs. 843.36 lakhs as per the Prospectus, and the unspent amount of Rs. 65.81 lakhs has been utilised against General Corporate purposes. The total IPO related expenses attributable to the Company of Rs. 777.55 lakhs has been adjusted against securities premium. The revised amounts and the details of the utilization of IPO proceeds as at March 31, 2018 has been presented above. The Company utilised the savings on purchase of land amounting to Rs. 3.40 lakhs, towards “General Corporate Purposes”. On an overall basis the entire proceeds from IPO has been fully utilised as at March 31, 2018.

15 Acquisition of Second Shaadi.com

The Company entered into a business transfer agreement and domain transfer agreement dated March 1, 2018 with Accentium Web Private Limited for the purchase of Second Shaadi.com along with the related assets, liabilities, rights and obligations, for a consideration of Rs. 110.00 lakhs. The summary of assets and liabilities as at the date of acquisition is as below:

Note: The book value of assets and liabilities approximates the fair value, except for domain mentioned above which has been valued using discounted cash flow method.

This acquisition is not material to the financial statements of the Company.

Footnotes to the reconciliation of equity as at April 1, 2016 and March 31, 2017 and profit or loss for the year ended March 31, 2017.

1. Reclassification

The assets and liabilities as at April 1, 2016 and March 31, 2017 have been re-grouped / re-classified, where necessary to comply with the accounting policies of the Company under Ind AS.

2. Security deposit

Under Indian GAAP, interest free lease security deposits (that are refundable in cash on completion of the lease term) are recorded at their transaction value. Under Ind AS, all financial assets are required to be recognised at fair value. Accordingly the Company has fair valued these security deposits under Ind AS. Difference between the fair value and transaction value of the security deposit has been recognised as prepaid rent. The prepaid rent is amortised over the period of the deposit.

3. Other comprehensive income

Under Indian GAAP, the Company has not presented other comprehensive income (OCI) separately. Hence, it has reconciled Indian GAAP profit or loss to profit or loss as per Ind AS. Further, Indian GAAP profit or loss is reconciled to total comprehensive income as per Ind AS.

4. Re-measurement of actuarial gains/ (losses):

Both under Indian GAAP and Ind AS, the costs related to its post-employment defined benefit plan were recognised on an actuarial basis. Under Indian GAAP, the entire cost, including actuarial gains and losses, are charged to profit or loss. Under Ind AS, re-measurements (comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets excluding amounts included in net interest on the net defined benefit liability) are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI.

5. Share based payment

Under Indian GAAP, the Company recognised only the intrinsic value for the long-term incentive plan as an expense. Ind AS requires the fair value of the share options to be determined using an appropriate pricing model recognised over the vesting period.

6. Financial liability at amortised cost

Under Indian GAAP, the Company did not recognise financial guarantee obligation for corporate guarantee given to Consim US. Ind AS prescribes accounting for financial guarantees at the fair value. Subsequently these financial guarantee obligation and Guarantee fee receivable are measured at amortised cost using Effective Interest Rate (EIR) method and been recognised in the Balance Sheet.

7. Leases - Reversal of rent straight lining

Under Indian GAAP, the Company recognised the provision for rent escalation over the lease period for office premises and retail outlets taken on lease. Under Ind AS, if the increase in the payments to the lessor is on account of expected general inflation, straight lining of rental expenses is not required.

8. Statement of cash flows

The transition from Indian GAAP to Ind AS has not had a material impact on the statement of cash flows.

16 Events after the reporting period

Subject to the approval of the shareholders in the ensuing Annual General Meeting of the Company, the Board of Directors has recommended a final dividend of Rs. 1.50 per equity share of Rs. 5 each.

17 Previous year comparatives

Previous year figures have been reclassified / regrouped wherever necessary to conform to current year’s classification.

Source : Dion Global Solutions Limited
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