CONDENSED BALANCE SHEET AS AT SEPTEMBER 30, 2008 Schedule Rupees in crores Rupees in crores SOURCES OF FUNDS: 1 SHAREHOLDERS' FUND (a) Share Capital A 197.86 197.86 (b) Reserves and Surplus B 11891.28 10806.95 12089.14 11004.81 2 LOAN FUNDS (a) Secured Loans C - 9.27 (b) Unsecured Loans D 8.52 8.98 8.52 18.25 3 DEFERRED TAX LIABILITIES (NET) E 186.69 121.76 4 TOTAL FUNDS EMPLOYED 12284.35 11144.82 APPLICATION OF FUNDS: 5 FIXED ASSETS (a) Gross Block F 3861.18 3240.64 (b) Less :- Accumulated Depreciation 1472.81 1300.11 (c) Net Block 2388.37 1940.53 (d) Capital Work-in-Progress 759.14 889.74 3147.51 2830.27 6 INVESTMENTS G 4653.61 4509.33 7 DEFERRED TAX ASSETS (NET) E 69.29 67.27 8 CURRENT ASSETS, LOANS AND ADVANCES (a) Interest Accrued on Investments 0.64 1.07 (b) Inventories H 17.63 17.19 (c) Unbilled Revenues 864.78 870.18 (d) Sundry Debtors I 4373.43 3747.01 (e) Cash and Bank Balances J 736.60 527.52 (f) Loans and Advances K 2943.73 2166.60 8936.81 7329.57 9 CURRENT LIABILITIES AND PROVISIONS (a) Current Liabilities L 3435.92 2404.18 (b) Provisions M 1086.95 1187.44 4522.87 3591.62 10 NET CURRENT ASSETS [ (8) less (9) ] 4413.94 3737.95 11 TOTAL ASSETS (NET) 12284.35 11144.82 12 NOTES TO ACCOUNTS Q As per our report attached For and on behalf of the Board For Deloitte Haskins & Sells Chartered Accountants N. Venkatram S. Ramadorai Partner CEO and Managing Director Mumbai, October 22, 2008 S. Mahalingam Chief Financial Officer and Executive Director Suprakash Mukhopadhyay Company Secretary Mumbai, October 22, 2008
CONDENSED PROFIT AND LOSS ACCOUNT Schedule For the quarter For the quarter September 30, 2007 For the six months For the six months September 30, 2007 Rupees in Crores Rupees in Crores INCOME 1 Information technology and consultancy services 5446.67 4341.48 10410.52 8299.33 2 Sale of equipment and software licences 253.29 145.25 501.44 321.80 3 Other income, (net) N (179.17) 194.76 (150.37) 396.10 5520.79 4681.49 10761.59 9017.23 EXPENDITURE 4 Employee costs O 1858.48 1474.78 3605.73 2993.45 5 Operation and other expenses P 2240.24 1802.81 4341.46 3358.22 6 Interest 0.17 1.10 0.58 1.21 7 Depreciation F 102.86 107.81 184.72 208.60 4201.75 3386.50 8132.49 6561.48 PROFIT BEFORE TAXES 1319.04 1294.99 2629.10 2455.75 8 PROVISION FOR TAXES (a) Current tax (Refer note 7) 209.63 216.32 391.75 390.08 (b) Deferred tax expenses/ (benefit) 40.15 8.65 62.89 4.29 (c) Fringe benefit tax 6.00 5.40 12.00 10.65 (d) MAT credit entitlement (109.78) (82.49) (214.59) (170.23) NET PROFIT FOR THE PERIOD 1173.04 1147.11 2377.05 2220.96 9 Balance brought forward from previous period 8235.43 5650.37 7374.89 4919.99 AMOUNT AVAILABLE FOR APPROPRIATION 9408.47 6797.48 9751.94 7140.95 10 APPROPRIATIONS (a) Interim dividends on equity shares 293.58 293.58 587.16 587.16 (b) Tax on dividend 49.89 49.89 99.78 99.78 (c) Balance carried to Balance Sheet 9065.00 6454.01 9065.00 6454.01 9408.47 6797.48 9751.94 7140.95 11 Earnings per share - Basic and diluted (Rs.) 11.99 11.72 24.29 22.70 Weighted average number of shares 97,86,10,498 97,86,10,498 97,86,10,498 97,86,10,498 12 NOTES TO ACCOUNTS Q As per our report attached For and on behalf of the Board For Deloitte Haskins & Sells Chartered Accountants N. Venkatram S. Ramadorai Partner CEO and Managing Director Mumbai, October 22, 2008 S. Mahalingam Chief Financial Officer and Executive Director Suprakash Mukhopadhyay Company Secretary Mumbai, October 22, 2008
STATEMENT OF CONDENSED CASH FLOWS For the six months Rupees in crores For the six months September 30, 2007 Rupees in crores 1 Net cash provided by operating activities 1730.39 1713.32 2 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of fixed assets (505.10) (457.81) Proceeds from sale of fixed assets 15.60 2.24 Purchase of other investments (net of mutual funds dividend reinvested) (net) (34.99) (353.12) Loans given to subsidiaries (net) (65.57) (175.00) Inter-corporate deposits (net) (80.00) - Dividends received from subsidiaries 8.52 6.19 Dividends received from other investments 8.90 7.52 Interest received 20.56 9.45 Net cash used in investing activities (632.08) (960.53) 3 CASH FLOWS FROM FINANCING ACTIVITIES Borrowings (net) (9.73) (40.98) Dividend paid, including dividend tax (915.46) (801.05) Interest paid (0.55) (1.14) Net cash used in financing activities (925.74) (843.17) Net increase / (decrease) in cash and cash equivalents 172.57 (90.38) Cash and cash equivalents at beginning of the period 527.52 557.14 Exchange difference on translation of foreign currency cash and cash equivalents 36.51 (8.26) Cash and cash equivalents at end of the period 736.60 458.50 As per our report attached For and on behalf of the Board For Deloitte Haskins & Sells Chartered Accountants N. Venkatram S. Ramadorai Partner CEO and Managing Director Mumbai, October 22, 2008 S. Mahalingam Chief Financial Officer and Executive Director Suprakash Mukhopadhyay Company Secretary Mumbai, October 22, 2008
Schedules forming part of the Condensed Balance Sheet SCHEDULE 'A' SHARE CAPITAL (a) Authorised (i) 120,00,00,000 equity shares of Re.1 each 120.00 120.00 (March 31, 2008 : 120,00,00,000 equity shares of Re.1 each) (ii) 100,00,00,000 redeemable preference shares of Re.1 each 100.00 100.00 (March 31, 2008 : 100,00,00,000 redeemable preference shares of Re.1 each) 220.00 220.00 (b) Issued, Subscribed and Paid up (i) 97,86,10,498 equity shares of Re.1 each 97.86 97.86 (March 31, 2008 : 97,86,10,498 equity shares of Re.1 each) (ii) 100,00,00,000 redeemable preference shares of Re.1 each 100.00 100.00 (March 31, 2008 : 100,00,00,000 redeemable preference shares of Re.1 each) Note: 197.86 197.86 72,17,02,199 equity shares (March 31,2008 : 73,41,04,023 equity shares) and 100,00,00,000 redeemable preference shares (March 31, 2008 : 100,00,00,000 redeemable preference shares) are held by Tata Sons Limited, the holding company. SCHEDULE 'B' RESERVES AND SURPLUS (a) (b) Securities Premium Account (i) Opening balance 2016.33 2017.75 (ii) Share issue expenses - (1.42) 2016.33 2016.33 General Reserve (i) Opening balance 1394.67 915.12 (ii) Adjustment for change in accounting policy - 28.67 (iii) Transferred from Profit and Loss Account - 450.88 1394.67 1394.67 (c) Balance in Profit and Loss Account 9065.00 7374.89 (d) Foreign currency translation reserve 89.77 36.21 (e) Hedging reserve account (674.49) (15.15) 11891.28 10806.95
Schedules forming part of the Condensed Balance Sheet SCHEDULE 'C' SECURED LOANS From Banks Overdrafts - 9.27 Note: Bank overdrafts are secured against domestic book debts. - 9.27 SCHEDULE 'D' UNSECURED LOANS From others 8.52 8.98 Loans repayable within one year Rs.1.25 crores (March 31, 2008 : Rs. 1.25 crore) 8.52 8.98
Schedules forming part of the Condensed Balance Sheet SCHEDULE 'E' DEFERRED TAX BALANCES (a) (b) Deferred Tax Liabilities (Net) (i) Foreign branch profit tax 154.05 104.70 (ii) Depreciation 31.18 10.07 (iii) Others 1.46 6.99 186.69 121.76 Deferred Tax Assets (Net) (i) Depreciation 17.73 21.51 (ii) Employee benefits 27.36 23.53 (iii) Provision for doubtful debts 16.99 13.91 (iv) Others 7.21 8.32 69.29 67.27
Schedules forming part of the Condensed Balance Sheet SCHEDULE 'F' FIXED ASSETS Rupees in crores Description Gross Block as at April 1, 2008 Additions Deletions/ Adjustments Gross Block as at Accumulated Depreciation as at April 1, 2008 Depreciation for the period Deletions/ Adjustments Accumulated Depreciation as at Net book value as at Net book value as at March 31, 2008 (a) TANGIBLE FIXED ASSETS FREEHOLD LANDS 274.39 30.00-304.39 - - - - 304.39 274.39 LEASEHOLD LANDS 62.12 2.34-64.46 (6.66) (0.67) - (7.33) 57.13 55.46 FREEHOLD BUILDINGS 852.06 172.86 (4.84) 1020.08 (118.44) (24.81) 4.32 (138.93) 881.15 733.62 LEASEHOLD BUILDINGS 9.81 - - 9.81 (3.92) (0.50) - (4.42) 5.39 5.89 LEASEHOLD IMPROVEMENTS 212.55 51.95 (0.04) 264.46 (97.59) (28.34) 0.04 (125.89) 138.57 114.96 PLANT AND MACHINERY 11.75 0.13-11.88 (9.06) (0.93) - (9.99) 1.89 2.69 COMPUTER EQUIPMENT 1050.83 205.55 (2.19) 1254.19 (748.04) (63.92) 2.08 (809.88) 444.31 302.79 MOTOR CARS 35.63 1.92 (7.71) 29.84 (20.51) (1.99) 5.24 (17.26) 12.58 15.12 OFFICE EQUIPMENT 341.53 51.49 (0.12) 392.90 (97.67) (20.24) 0.13 (117.78) 275.12 243.86 ELECTRICAL INSTALLATIONS 234.89 42.45 (0.25) 277.09 (66.34) (14.15) 0.20 (80.29) 196.80 168.55 FURNITURE AND FIXTURES 142.37 45.90 (0.01) 188.26 (119.17) (27.73) 0.01 (146.89) 41.37 23.20 FURNITURE AND FIXTURES UNDER FINANCE LEASE - 31.11-31.11 - (1.44) - (1.44) 29.67 - (b) INTANGIBLE ASSETS INTELLECTUAL PROPERTY / DISTRIBUTION RIGHTS 12.71 - - 12.71 (12.71) - - (12.71) - - Total 3240.64 635.70 (15.16) 3861.18 (1300.11) (184.72) 12.02 (1472.81) 2388.37 1940.53 Previous year 2315.36 943.87 (18.59) 3240.64 (854.75) (458.78) 13.42 (1300.11) 1940.53 1460.61 Capital Work-in-Progress (including Capital Advances Rs. 233.62 crores. (March 31, 2008: Rs. 243.81 crores)) 759.14 889.74 Grand Total 3147.51 2830.27 Notes: (1) Freehold buildings include Rs.2.67 Crores (March 31, 2008 Rs.2.67 Crores) being value of investment in shares of Co-operative Housing Societies and Limited Companies. (2) Legal formalities relating to registration of certain assets are pending completion.
Schedules forming part of the Condensed Balance Sheet TATA CONSULTANCY SERVICES LIMITED SCHEDULE 'G' INVESTMENTS (A) TRADE INVESTMENTS (at cost) (i) Subsidiary Companies (a) Fully Paid Equity Shares (Quoted) CMC Limited 379.89 379.89 (b) Fully Paid Equity Shares (Unquoted) TCS Iberoamerica S.A. 165.23 165.23 APOnline Limited - - Tata Consultancy Services, Belgium S.A. 1.06 1.06 Tata Consultancy Services, Netherlands B.V. 402.87 402.87 Tata Consultancy Services, Sverige AB 18.89 18.89 Tata Consultancy Services, Deutscheland GmbH 1.29 1.29 Tata America International Corporation 452.92 452.92 Tata Consultancy Services, Asia Pacific Pte Limited 18.69 18.69 WTI Advanced Technology Limited 38.52 38.52 * TCS FNS Pty Ltd. Australia 3.38 3.38 Diligenta Limited UK 199.89 199.89 Exegenix Canada Inc. - - Tata Infotech Deutscheland Gmbh 0.43 0.43 Tata Infotech (Singapore) Pte. Ltd 0.15 0.15 * C-Edge Technologies Limited 5.10 5.10 * MP Online Limited 0.89 0.89 Tata Consultancy Services, Morocco SARL - - Tata Consultancy Services (Africa) Pty Ltd. 4.92 4.92 (c) Fully Paid Preference Shares (Unquoted) Diligenta Ltd, UK 363.04 363.04 Exegenix Canada Inc. 6.02 6.02 APOnline Limited 2.80 2.80 (ii) Others (a) Fully Paid Equity Shares (Unquoted) Yodlee, Inc. - - (b) Fully Paid Preference Shares (Unquoted) Rallis India Limited 3.50 3.50 7.5 % Cumulative redeemable preference shares Tata AutoComp Systems Limited 5.00 5.00 7% Cumulative redeemable preference shares (B) OTHERS (i) Bonds and Debentures (Quoted) 10 % Housing Urban Development Corporation Limited Bonds ( 2014 ) 1.50 1.50 8% IDBI Bonds ( 2013 ) 1.80 1.80 8% IDBI Bonds ( 2018 ) 0.10 0.10 10 % Housing Urban Development Corporation Limited Bonds ( 2012 ) 0.25 0.25 6.75% tax free US 64 bonds ( 2008) - 0.79 5% NABARD (2008) 9.68 29.30 (20,000 bonds redeemed during the period ) (ii) Bonds and Debentures (Unquoted) 14.75 % NCD in Tata Motors Limited ( 2008 ) 0.10 0.10 (iii) Investment in Mutual Funds (Unquoted) 2570.20 2405.51 4658.11 4513.83 Provision for diminution in value of investment (4.50) (4.50) 4653.61 4509.33 Notes: 1 Market value of quoted investments 355.56 661.29 Book value of quoted investments 393.22 413.64 Book value of unquoted investments (net of provision) 4260.39 4095.69 2 Investments, other than in mutual funds, bonds and debentures are long-term. * 3 Equity investments in these companies are subject to certain restrictions on transfer, as per the terms of individual contractual agreements.( Refer note 2 )
Schedules forming part of the Condensed Balance Sheet SCHEDULE 'H' INVENTORIES (a) Stores and spares - 0.89 (b) Raw materials, sub-assemblies and components 15.46 12.32 (c) Goods-in-transit 1.42 2.66 (d) Finished goods and Work-in-progress 0.75 1.32 17.63 17.19 SCHEDULE 'I' SUNDRY DEBTORS (Unsecured) (a) (b) Over six months (i) Considered good 680.70 415.74 (ii) Considered doubtful 84.56 67.44 Others (i) Considered good 3692.73 3331.27 (ii) Considered doubtful - 2.31 4457.99 3816.76 Less: Provision for doubtful debts (84.56) (69.75) 4373.43 3747.01 SCHEDULE 'J' CASH AND BANK BALANCES (a) Cash on hand 1.02 1.65 (b) Cheques on hand 14.35 42.97 (c) Remittances in transit 120.28 - (d) Bank Balances (i) with Scheduled Banks (1) In current accounts 46.40 23.84 (2) In deposit accounts 170.71 125.28 (ii) with Foreign Banks - in current accounts 383.84 333.78 7263685793 736.60 527.52
Schedules forming part of the Condensed Balance Sheet SCHEDULE 'K' LOANS AND ADVANCES (Unsecured) (a) Considered good (i) Loans and advances to employees 215.47 219.04 (ii) Loans and advances to subsidiary companies 563.07 446.74 (iii) Advances recoverable in cash or kind or for value to be received 1,300.36 970.77 (iv) Advance tax (including refunds receivable) (net) 298.66 178.47 (v) MAT credit entitlement 566.17 351.58 2943.73 2166.60 (b) Considered doubtful (i) Loans and advances to employees 18.17 13.17 (ii) Advances recoverable in cash or kind or for value to be received 5.28 5.28 23.45 18.45 Less: Provision for doubtful loans and advances (23.45) (18.45) 2943.73 2166.60 Notes: 1 Loans and advances to subsidiary companies: TCS FNS Pty Limited 200.73 185.16 CMC Limited 31.19 29.33 Tata Consultancy Services Asia Pacific Pte. Ltd. 43.46 37.10 MP Online Limited 1.70 1.70 Tata Consultancy Services, Netherland B.V - 2.41 TCS Iberoamerica S.A. 277.86 186.89 Tata Consultancy Services, Morocco SARL AU 8.13 4.15 2 Advances recoverable in cash or kind or for value to be received include fair 23.80 59.01 values of foreign exchange forward and currency option contracts. 3 Advances recoverable in cash or kind or for value to be received include balances 0.33 0.33 with Customs and Excise Authorities. 4 Advances recoverable in cash or kind or for value to be received include Intercorporate deposits. 100.00 20.00 SCHEDULE 'L' CURRENT LIABILITIES (a) Sundry Creditors 1453.81 1239.37 (b) Subsidiary companies 252.62 229.56 (c) Advances from customers 82.24 44.76 (d) Advance billings and deferred revenues 481.26 460.55 (e) Equity share application monies refundable 0.05 0.05 (f) Investor Education and Protection Fund - Unpaid dividends (not due) 4.00 3.52 (g) Other liabilities 1161.55 426.01 (h) Interest accrued but not due 0.39 0.36 3435.92 2404.18 Note: Other liabilities include fair values of foreign exchange forward and currency option contracts. 741.74 191.08
Schedules forming part of the Condensed Balance Sheet SCHEDULE 'M' PROVISIONS (a) Current income taxes (net) 397.39 277.15 (b) Fringe benefit tax 1.05 2.76 (c) Employee benefits 344.74 334.83 (d) Proposed final dividend - 489.31 (e) Interim dividend 293.58 - (f) Tax on dividend 49.89 83.16 (g) Provision for warranties 0.30 0.23 1086.95 1187.44
Schedules forming part of the Condensed Profit and Loss Account TATA CONSULTANCY SERVICES LIMITED SCHEDULE 'N' For the quarter For the quarter September 30, 2007 For the six months For the six months September 30, 2007 OTHER INCOME (a) Interest 14.40 9.59 29.79 16.51 (b) Dividend from subsidiaries (trade investments) - - 8.52 6.19 (c) Dividends from other long-term investments (trade investments) - - 0.26 0.26 (d) Dividends from mutual funds (other investments) 33.89 24.53 71.37 45.19 (e) Profit on sale of mutual funds and other current investments (net) 9.70 1.65 46.56 13.26 (f) Rent 0.73 0.39 0.85 0.48 (g) Profit on sale of fixed assets (net) 12.92 (0.10) 12.46 0.14 (h) Exchange gains (loss), (net) (254.22) 151.47 (334.84) 303.34 (I) Miscellaneous income 3.41 7.23 14.66 10.73 (179.17) 194.76 (150.37) 396.10
Schedules forming part of the Condensed Profit and Loss Account For the quarter For the quarter September 30, 2007 For the six months For the six months September 30, 2007 Rupees in Crores Rupees in Crores SCHEDULE 'O' EMPLOYEE COSTS (a) Salaries and Incentives 1597.70 1261.06 3109.62 2579.35 (b) Contributions to - (i) Provident Fund 54.89 48.24 107.08 93.10 (ii) Superannuation Scheme 16.27 13.70 33.52 25.07 (c) Gratuity Fund Contributions 19.25 20.55 24.93 34.66 (d) Social security and other benefit plans (overseas employees) 30.12 15.53 54.62 48.23 (e) Staff welfare expenses 140.25 115.70 275.96 213.04 1858.48 1474.78 3605.73 2993.45
Schedules forming part of the Condensed Profit and Loss Account SCHEDULE 'P' For the quarter For the quarter September 30, 2007 For the six months For the six months September 30, 2007 Rupees in Crores Rupees in Crores Rupees in crores Rupees in Crores OPERATION AND OTHER EXPENSES (a) Overseas business expenses 1,184.47 962.06 2308.96 1686.96 (b) Services rendered by business associates and others 298.47 157.81 467.56 317.68 (c) Software, hardware and material costs 204.52 203.11 465.18 392.99 (d) Cost of software licences 69.75 62.07 150.49 137.37 (e) Communication expenses 67.33 59.17 137.57 119.62 (f) Travelling and conveyance expenses 71.43 65.55 145.51 125.69 (g) Rent 115.12 75.25 218.49 145.08 (h) Legal and professional fees 26.10 19.58 53.53 39.44 (i) Repairs and maintenance 28.35 28.22 57.62 54.35 (j) Electricity expenses 42.49 36.07 83.40 68.19 (k) Bad debts - 5.72 0.65 10.35 (l) Provision for doubtful debts 14.38 6.02 14.81 8.37 (m) Provision for doubtful advances 1.26 3.04 5.00 5.44 (n) Advances written-off - 0.03-0.18 (o) Recruitment and training expenses 27.63 35.50 52.52 62.04 (p) Commission and brokerage 9.67 6.74 13.19 11.38 (q) Printing and stationery 9.39 6.85 20.18 16.95 (r) Insurance 3.56 4.29 8.32 9.23 (s) Rates and taxes 9.11 8.67 18.57 13.37 (t) Entertainment 2.30 2.44 4.72 4.63 (u) Other expenses 54.91 54.62 115.19 128.91 Notes: 2,240.24 1802.81 4341.46 3358.22 1 Overseas business expenses includes: Travel expenses 70.55 61.64 151.98 122.39 Employee allowances 1077.08 875.88 2082.02 1509.67 2 Repairs and maintenance includes: Buildings 13.59 8.37 24.84 16.23 Office and computer equipment 14.76 19.84 32.78 38.12
SCHEDULE Q - NOTES TO ACCOUNTS 1) Significant accounting policies a) Basis of Preparation These condensed financial statements have been prepared in accordance with Accounting Standard 25 Interim Financial Reporting (AS - 25) issued pursuant to the Companies (Accounting Standards) Rules 2006. These condensed financial statements should be read in conjunction with the annual financial statements of the Company for the year and as at March 31, 2008. In the opinion of the management, all adjustments which are necessary for a fair presentation have been included. The accounting policies followed in preparation of the condensed financial statements are consistent with those followed in the preparation of the annual financial statements. The results of interim periods are not necessarily indicative of the results that may be expected for any interim period or for the full year. b) Use of estimates The preparation of financial statements requires the management of the Company to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to the contingent liabilities as at the date of the financial statements and reported amounts of income and expenses during the year. Example of such estimates include provision for doubtful debts, employee benefits, provision for income taxes, accounting for contract costs expected to be incurred to complete software development and the useful lives of fixed assets. c) Fixed Assets Fixed assets are stated at cost, less accumulated depreciation. Costs include all expenses incurred to bring the assets to its present location and condition. Fixed assets exclude computers and other assets individually costing Rs. 50,000 or less which are not capitalised except when they are part of a larger capital investment programme. d) Depreciation Depreciation other than on freehold land and capital work-in-progress is charged so as to write-off the cost of assets, on the following basis: Leasehold Land and Buildings Straight line Lease period Freehold Buildings Written down value 5% Leasehold Improvements Straight line Lease period Plant and Machinery Straight line 33.33% Computer Equipment Straight line 25% (previous period: 50%) Motor Cars Written down value 25.89% Office Equipment Written down value 13.91% Electrical Installations Written down value 13.91% Furniture and Fixtures Straight line 100% Intellectual Property / Distribution Rights Straight line 24 36 months Fixed assets purchased specifically for projects are depreciated over the project period. e) Leases Assets leased by the Company in the capacity of the lessee, where the Company has substantially all the risks and rewards of ownership are classified as finance lease. Such lease are capitalised at the inception of the lease at lower of the fair value or the present value of the minimum lease payments and a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each year. Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor, are recognised as operating leases. Lease rentals under operating leases are recognised in the profit and loss account on a straight-line basis.
f) Impairment At each balance sheet date, the Management reviews the carrying amounts of its assets and goodwill included in each cash generating unit to determine whether there is any indication that those assets were impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of impairment loss. Recoverable amount is the higher of an asset s net selling price and value in use. In assessing value in use, the estimated future cash flows expected from the continuing use of the asset and from its disposal are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of time value of money and the risks specific to the asset. Reversal of impairment loss is recognised immediately as income in the profit and loss account. g) Investments Long-term investments are stated at cost, less provision for other than temporary diminution in value. Current investments comprising investments in mutual funds are stated at the lower of cost and fair value, determined on a portfolio basis. h) Employee benefits i) Post-employment benefit plans Contributions to defined contribution retirement benefit schemes are recognized as an expense when employees have rendered services entitling them to contributions. For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognised in full in the profit and loss account for the period in which they occur. Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised on a straight-line basis over the average period until the benefits become vested. The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to the present value of available refunds and reductions in future contributions to the scheme. ii) Short-term employee benefits The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the service. These benefits include compensated absences such as paid annual leave, overseas social security contributions and performance incentives. iii) Long-term employee benefits Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognized as a liability at the present value of the defined benefit obligation at the balance sheet date. i) Revenue recognition Revenues from contracts priced on a time and materials basis are recognised when services are rendered and related costs are incurred. Revenues from turnkey contracts, which are generally time bound fixed price contracts, are recognised over the life of the contract using the proportionate completion method, with contract costs determining the degree of completion. Foreseeable losses on such contracts are recognised when probable. Revenues from the sale of equipment are recognised upon delivery, which is when title passes to the customer. Revenue from sale of software licences are recognised upon delivery where there is no customization required. In case of customization the same is recognised over the life of the contract using the proportionate completion method.
Revenues from maintenance contracts are recognised pro-rata over the period of the contract. Revenues from Business Process Outsourcing (BPO) services are recognised on time and material, fixed price and unit priced contracts. Revenue on time and material, unit priced contracts is recognised as the related services are rendered. Revenue from fixed price contracts is recognized as per the proportionate completion method with contract cost determining the degree of completion. Dividends are recorded when the right to receive payment is established. Interest income is recognised on time proportion basis. j) Research and Development Research and Development expenditure is recognised in the profit and loss account when incurred. Fixed assets utilised for research and development are capitalised and depreciated in accordance with the depreciation rates set out in note 1(d). k) Taxation Current income tax expense comprises taxes on income from operations in India and in foreign jurisdictions. Income tax payable in India is determined in accordance with the provisions of the Income Tax Act, 1961. Tax expense relating to foreign operations is determined in accordance with tax laws applicable in countries where such operations are domiciled. Minimum alternative tax (MAT) paid in accordance to the tax laws, which gives rise to future economic benefits in the form of adjustment of future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax after the tax holiday period. Accordingly, MAT is recognized as an asset in the balance sheet when it is probable that the future economic benefit associated with it will flow to the Company and the asset can be measured reliably. Deferred tax expense or benefit is recognised on timing differences being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. In the event of unabsorbed depreciation and carry forward of losses, deferred tax assets are recognised only to the extent that there is virtual certainty that sufficient future taxable income will be available to realise such assets. In other situations, deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available to realise these assets. Advance taxes and provisions for current income taxes are presented in the balance sheet after offsetting advance taxes paid and income tax provisions arising in the same tax jurisdiction and the Company intends to settle the asset and liability on a net basis. The Company offsets deferred tax assets and deferred tax liabilities if it has a legally enforceable right and these relate to taxes on income levied by the same governing taxation laws. l) Foreign currency transactions Income and expenses in foreign currencies are converted at exchange rates prevailing on the date of the transaction. Foreign currency monetary assets and liabilities other than net investments in nonintegral foreign operations are translated at the exchange rate prevailing on the balance sheet date. Exchange difference arising on a monetary item that, in substance, forms part of an enterprises net investments in a non-integral foreign operation are accumulated in a foreign currency translation reserve. Premium or discount on forward exchange contracts are amortized and recognized in the profit and loss account over the period of the contract. Forward contracts and currency options outstanding at the balance sheet date, other than designated cash flow hedges, are stated at fair values and any gains or losses are recognised in the profit and loss account. m) Derivative instruments and hedge accounting The Company uses foreign currency forward contracts and currency options to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The Company designates these hedging instruments as cash flow hedges applying the recognition and measurement principles set out in the Accounting Standard 30 Financial Instruments: Recognition and Measurement (AS 30).
The use of hedging instruments is governed by the Company s policies approved by the board of directors, which provide written principles on the use of such financial derivatives consistent with the Company s risk management strategy. Hedging instruments are initially measured at fair value, and are remeasured at subsequent reporting dates. Changes in the fair value of these derivatives that are designated and effective as hedges of future cash flows are recognised directly in shareholders funds and the ineffective portion is recognised immediately in the profit and loss account. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the profit and loss account as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At that time for forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in shareholders funds is retained there until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in shareholders funds is transferred to the profit and loss account for the period. n) Inventories Raw materials, sub-assemblies and components are carried at lower of cost and net realisable value. Cost is determined on a weighted average basis. Purchased goods in transit are carried at cost. Work-in-progress is carried at lower of cost and net realisable value. Stores and spare parts are carried at cost, less provision for obsolescence. Finished goods produced or purchased by the Company are carried at lower of cost and net realisable value. Cost includes direct material and labour cost and a proportion of manufacturing overheads. 2) The Company has given undertakings to (a) Bank of China Co. Limited, not to transfer its controlling interest in Financial Network Services Pty Ltd. (b) The Government of Madhya Pradesh not to divest its shareholding in MP Online Limited except to an affiliate, (c) State Bank of India not to sell, transfer or otherwise dispose off its share or any interest in C-Edge Technologies Limited. 3) Consequent to the Guidance on implementing Accounting Standard 15 Employee Benefits (AS-15) which clarifies the applicability of the Accounting Standard, the Company has considered certain entitlements to earned leave which can be carried forward to future periods as a long-term employee benefit. The resultant reduction of Rs. Nil (March 31, 2008: Rs. 28.67 crores - net of deferred tax) in the net liability in respect of employee benefit arising on April 1, 2006, the date of adoption has been adjusted to General Reserves. 4) Unbilled revenue as at amounting to Rs.864.78 crores (March 31, 2008: Rs. 870.18 crores) primarily comprises of the revenue recognised in relation to efforts incurred on turnkey contracts priced on a fixed time, fixed price basis. 5) Sale of Equipment is net of excise duty Rs1.42 crores. (September 30, 2007: Rs. 0.90 crores). 6) The useful life of computer equipment has been reviewed by the management and the original estimate of the useful life of these assets has been revised to four years. The unamortised depreciable amount is charged over the revised remaining useful life of these assets. Consequently, depreciation for the quarter and six months is lower by Rs.47.83 crores and Rs. 97.49 crores respectively and the profit for the period is higher by the corresponding amount. 7) Current tax is net of the effect of additional provision (net) of Rs. 6.31 crores for the quarter (September 30, 2007: Rs. Nil) and write-back of provisions (net) and refunds received of Rs. 25.41 crores for the six months (September 30, 2007: Rs. 29.97 crores) in domestic and certain overseas jurisdictions relating to earlier years.
8) Segment Reporting The Company has identified geographic segments as its primary segment and industry segments as its secondary segment. Geographic segments of the Company are Americas, Europe, India and Others. Secondary segments of the Company are Banking, Financial Services and Insurance (BFSI), which are considered as single segment, Manufacturing, Retail and Distribution, Telecom and Others. Others comprise Transportation, Life Sciences and Healthcare, Energy and Utilities, s-governance, Media and Entertainment, Travel and Hospitality services and sale of products. Revenue and expense directly attributable to segments are reported under each reportable segment. Expenses incurred in India on behalf of other segments and not directly identifiable to each reportable segment have been allocated to each segment on the basis of associated revenues of each segment. All other expenses which are not attributable or allocable to segments have been disclosed as unallocable expenses. Assets and liabilities that are directly attributable to segments are disclosed under each reportable segment. All other assets and liabilities are disclosed as unallocable. Fixed assets have not been allocated between segments as these are used interchangeably between segments. QUARTER ENDED SEPTEMBER 30, 2008 Particulars Geographic Segment (Rs. in crores) Americas Europe India Others Total Revenue 3131.77 1721.32 447.61 399.26 5699.96 2557.59 1289.74 354.31 285.09 4486.73 Identified operating Expenses 1780.69 933.01 333.08 231.16 3277.94 1448.88 657.75 236.87 182.98 2526.48 Allocated expenses 326.51 170.02 62.13 42.45 601.11 333.61 195.07 43.98 22.57 595.23 Segment result 1024.57 618.29 52.40 125.65 1820.91 775.10 436.92 73.46 79.54 1365.02 Unallocable expenses (net) 322.70 264.79 Operating income 1498.21 1100.23 Other income (179.17) 194.76 Profit before taxes 1319.04 1294.99 Tax expense 146.00 147.88 Net profit 1173.04 1147.11
SIX MONTHS ENDED SEPTEMBER 30, 2008 Particulars Geographic Segment (Rs. in crores) Americas Europe India Others Total Revenue 6050.58 3235.89 897.26 728.23 10911.96 4926.02 2500.05 674.31 520.75 8621.13 Identified operating Expenses 3496.91 1710.92 693.19 434.82 6335.84 2802.58 1293.19 475.14 326.29 4897.20 Allocated expenses 680.54 362.63 106.65 89.82 1239.64 651.42 360.70 85.62 52.49 1150.23 Segment result 1873.13 1162.34 97.42 203.59 3336.48 1472.02 846.16 113.55 141.97 2573.70 Unallocable expenses (net) 557.01 514.05 Operating income 2779.47 2059.65 Other income (150.37) 396.10 Profit before taxes 2629.10 2455.75 Tax expense 252.05 234.79 Net profit 2377.05 2220.96 As at Americas Europe India Others Total Segment Assets 1529.10 2213.42 1685.71 968.76 6396.99 Unallocable assets 10410.23 Total Assets 16807.22 Segment Liabilities 1172.19 792.12 575.91 218.56 2758.78 Unallocable liabilities 1959.30 Total Liabilities 4718.08
9) Contingent Liabilities (Rs. in crores) (Rs. in crores) Claims against the Company not acknowledged as debt (See note (i) below) 132.29 130.85 Guarantees given by the Company on behalf of subsidiaries (See note (ii) below) 2237.90 2091.86 Claims against the Company not acknowledged as debt includes: i) Rs.96.92 crores (March 31, 2008: Rs. 93.37 crores) in respect of claims made by lessors for properties leased under tenancy agreements. These claims are being contested in the courts by the Company. The management does not expect these claims to succeed. An amount of Rs.12.25 crores (March 31, 2008: Rs. 11.83 crores) has been accrued under other liabilities. ii) The Company has provided guarantees aggregating to Rs. 2137.07 crores (GBP 252.50 million) (March 31, 2008: Rs. 2006.93 crores) (GBP 252.50 million) to third parties on behalf of its subsidiary Diligenta Limited. 10) Derivative Financial Instruments The Company, in accordance with its risk management policies and procedures, enters into foreign currency forward contracts and currency option contracts to manage its exposure in foreign exchange rates. The counter party is generally a bank. These contracts are for a period between one day and eight years. The Company has following outstanding derivative instruments as on : (i) The following are outstanding Foreign Exchange Forward contracts, which have been designated as Cash Flow Hedges, as on: Foreign Currency March 31, 2008 Notional Notional amount of Fair Value amount of No. of No. of Forward (Rs. in Forward Contracts Contracts contracts crores) contracts (million) (million) Gain / (Loss) Fair Value (Rs. in crores) Gain / (Loss) U.S.Dollar 26 365.00 (112.04) 14 290.00 (25.21) Sterling Pound - - - 3 15.00 (3.91) Euro 1 10.00 (10.85) 3 19.00 (11.78) (ii) The following are outstanding Currency Option contracts, which have been designated as Cash Flow Hedges, as on: Foreign Currency March 31, 2008 Notional Notional amount of Fair Value amount of No. of No. of Forward (Rs. in Forward Contracts Contracts contracts crores) contracts (million) (million) Gain / (Loss) Fair Value (Rs. in crores) Gain / (Loss) U.S.Dollar 55 2198.68 (536.86) 67 3871.50 (88.70) Sterling Pound 11 149.45 (11.41) 7 55.65 (2.23) Euro 10 75.00 (31.88) 12 99.25 (38.75) Net loss on derivative instruments of Rs. 473.04 crores recognised in Hedging Reserve as of, is expected to be reclassified to the profit and loss account by September 30, 2009.
The movement in Hedging Reserve during the period, for derivatives designated as Cash Flow Hedges is as follows: Period September, 2008 Year March 31, 2008 (Rs. in crores) (Rs. in crores) Balance at the beginning of the period (15.15) 73.71 Gains / (losses) transferred to income statement on 27.65 (64.91) occurrence of forecasted hedge transaction Changes in the fair value of effective portion of outstanding (596.83) (174.78) cash flow derivatives Net derivative gain / (losses) related to a discontinued cash (90.15) 150.83 flow hedge Balance at the end of the period (674.48) (15.15) In addition to the above cash flow hedges, the Company has outstanding foreign exchange forward contracts and currency option contracts aggregating Rs. 3144.92 crores (March 31, 2008: Rs. 2141.23 crores) whose fair value showed a loss of Rs. 14.90 crores as on (March 31, 2008: loss of Rs. 4.46 crores), to hedge the future cash flows. Although these contracts are effective as hedges from an economic perspective, they do not qualify for hedge accounting and accordingly these are accounted as derivatives instruments at fair value with changes in fair value recorded in the profit and loss account. Exchange loss of Rs. 342.94 crores (September 30, 2007: Exchange gain of Rs.147.86 crores) and Rs. 626.21 crores (September 30, 2007: Exchange gain of Rs. 337.48 crores) on foreign exchange forward contracts and currency option contracts for the quarter and six months respectively, have been recognized in the profit and loss account. 11) Subsequent event: On October 8, 2008 the Company entered into a binding agreement to acquire 96.26 percent equity interest in Citigroup Global Services Limited(CGSL), a business process outsourcing provider within Banking and Financial Services sector, for a cash consideration of Rs. 2373 crores (USD 505 million ). 12) The Board of Directors declared an interim dividend of Rs.3 per equity share in their meeting held on October 22, 2008. 13) Previous period figures have been recast / restated wherever necessary. 14) Previous period figures are in italics.