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NOTES TO ACCOUNTS

Infibeam Avenues Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 3058.24 Cr. P/BV 1.16 Book Value (₹) 39.76
52 Week High/Low (₹) 243/28 FV/ML 1/1 P/E(X) 34.67
Bookclosure 29/09/2018 EPS (₹) 1.33 Div Yield (%) 0.43
Year End :2018-03 

1. CORPORATE INFORMATION

Infibeam Incorporation Limited (‘the Company’) was incorporated on June 30, 2010 under the Company Act, 1956. The Company is primarily engaged in business software development services, maintenance, web development, e-commerce, payment gateway services and other ancillary services.

The Company is a public company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. The Company’s shares are listed on the BSE Limited and National Stock Exchange of India Limited in India. The registered office of the Company is located at 28th Floor, GIFT Two Building, Block No. 56, Road-5C, Zone-5, GIFT CITY, Gandhinagar, Taluka & District -Gandhinagar - 382 355.

The financial statements were authorised for issue in accordance with a resolution of the directors on May 30, 2018.

2. BASIS OF PREPARATION

These financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values, the provisions of the Companies Act , 2013 (Act’) (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.

The Company has adopted all the Ind AS standards and the adoption was carried out in accordance with Ind AS 101 First time adoption of Indian Accounting Standards. The transition was carried out from Indian Accounting Principles generally accepted in India as prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (IGAAP), which was the previous GAAP The financial statements have been prepared on a historical cost basis, except for the following :

- Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments),

The financial statements are presented in Indian Rupee (‘INR’) which is also the Company’s functional currency and all values are rounded to the nearest millions, except when otherwise indicated.

3. CRITICAL ACCOuNTING ESTIMATES

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:

3.1. Estimates and assumption

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 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.

3.2. defined benefit plans

The cost of the defined benefit plans and the present value of the 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. The parameter most subject to change is the discount rate. Discount rate has been determined by reference to market yields on the government bonds as at the balance sheet date. The mortality rate is based on publicly available mortality tables. Those mortality tables tend to change only at intervals in response to demographic changes. Future salary increases are based on expected future inflation rates for the country.

Further details about defined benefit obligations are provided in Note 25.

3.3. Share-based payments

The Company initially measures the cost of equity-settled transactions with employees using a black schole model to determine the fair value of the liability incurred. 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 estimate also 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. For equity-settled share-based payment transactions, the liability needs to be measured at the time of grant. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 28.

3.4. Taxes

Deferred tax assets are recognised for unused tax credits to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

The Company has Rs.82.04 million (March 31, 2017 : ‘ Nil) of MAT tax credits carried forward. These credits expire in 10 - 15 years. The Company does not have tax planning opportunities available that could support the recognition of these credits as deferred tax assets. On this basis, the Company has determined that it cannot recognise deferred tax assets on the MAT tax credits carried forward.

If the Company was able to recognise unrecognised deferred MAT tax assets, profit and equity would have increased by Rs.82.05 million. Further details on taxes are disclosed in Note 24.

3.5. Intangible asset including intangible asset under development

Intangible development costs are capitalised as and when technical and commercial feasibility of the asset is demonstrated, future economic benefits are probable. The costs which can be capitalized include the salary and ESOP cost of employees that are directly attributable to development of the asset for its intended use. Research and maintenance costs are expensed as incurred. Intangible assets are tested for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Refer Note 4.6 for the estimated useful life of Intangible assets. The carrying value of Intangible assets has been disclosed in Note 6.

3.6. Property, plant and equipment

Refer Note 4.5 for the estimated useful life of Property, plant and equipment. The carrying value of Property, plant and equipment has been disclosed in Note 5.

3.7. Revenue recognition

Revenue from the services rendered is recognised proportionally over the period in which the services are rendered as per the rates and terms agreed with the customer.

3.8. Investments

Investment in subsidiaries and associates is carried at cost in the standalone financial statements.

4.1. Terms/Rights attached to the equity shares

The Company has equity shares having a par value of Rs.1 per share. All equity shares rank equally with regard to dividend and share in the Company’s residual assets in proportion of amount paid up. The equity shares are entitled to receive dividend as declared from time to time. Each holder of the equity shares is entitled to one vote per share. On winding up of Company, the holder of equity shares will be entitled to receive the residual assets of Company, remaining after distribution of all preferential amounts in proportion to number of equity shares held. Terms attached to stock options granted to employees are described in note 28 regarding employee share based payments.

4.2. Terms/Rights attached to preference shares

Each convertible preference share has a par value of Rs.10 and is convertible at the option of the shareholders into one Equity shares of the Company . The preference shares carry a dividend of 0.01% per annum, payable annually. The dividend rights are cumulative. The preference shares rank ahead of the equity shares in the event of a liquidation. These, however are not issued.

Note: As per records of the Company, including its register of shareholders / members and other declarations received from the shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.

4.3. Shares reserved for issue under options

For information relating to Infibeam Incorporation Limited Employee Stock Option Plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the reporting period please refer to note 28. Also refer note 36, for shares to be issued under business combination.

Securities Premium Reserve

Where the Company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount of the premium received on those shares shall be transferred to “Securities Premium Reserve”. The Company may issue fully paid-up bonus shares to its members out of the Securities Premium Reserve and the Company can use this reserve for buy-back of shares

General reserve

General Reserve is created out of the profits earned by the Company by way of transfer from surplus in the Statement of Profit and Loss. The Company can use this reserve for payment of dividend and issue of fully paid-up bonus shares.

Employees Stock Options Outstanding

The share based option outstanding account is used to recognise the grant date fair value of options issued to employees under employee stock option schemes.

Money received against share warrants

The Board of Directors of Infibeam Incorporation Limited in its meeting held on February 14, 2018 issued 21,45,002 warrants to TV18 Broadcast Limited (a company not forming part of promoter and promoter group) on preferential basis with a right to apply and get allotment of equity shares of the Company of face value of Rs.1 each within a period of 18 months from the date of allotment of warrant at a price of Rs.186.48 (including premium of Rs.185.48 each) aggregating to consideration not exceeding Rs.400 million. The Company has received Rs.100 million on March 28, 2018 and allotted warrants for the same on March 29, 2018.

Terms of borrowings:

Term Loan:

The company has a Rupee Term Loan facility of Rs.2,250 million from Indusind Bank Limited. The facility carries interest of 9.75% for loan disbursed upto Rs.1,350 million and 9.90% for loan disbursed upto Rs.900 million. The facility is secured against the mortgage of Gift Two building, Gift City , Gandhinagar. The term loan is repayable in 20 quarterly installments of Rs.22.50 million each starting from June 30, 2018.

LC arrangement

Company has availed letter of credit from HDFC Bank Ltd for INR 130 million towards purchase of Capital Assets expiring at 175 Days from acceptance date. The same is secured against fixed deposit of INR 26 million.

Demand loan:

Demand loan from Barclays Investments and Loans India Limited is unsecured, repayable on demand and carrying interest @ 8% p.a. The loan does not carry any financial covenants.

Loan Covenant

Bank loans availed by the Company are subject to certain covenants relating to Debt Service Coverage Ratio (DSCR), Interest Coverage Ratio etc which Company has to maintain from Financial Year 2019.

*Represents interest income under the effective interest method on interest free loan given to Subsidiary Company (refer note 26)

** The Company has entered into lease agreement for office premises with its subsidiary companies. The leasing agreement is cancellable, and renewable on a periodic basis by mutual consent on mutually accepted terms including escalation of lease rent. Lease income recognised in the Statement of Profit and Loss for the year amounts to Rs.6.96 million (March 31, 2017: Nil). (refer note 26)

#Fair valuation of investment in CCPS on account of step up acquisition of equity shares of Avenues India Private Limited (refer note 36)

One of the party has filed civil suit against Company and NSI Infinium Global Private Limited (Subsidiary Company) for violating trademark at civil court of Ahmedabad claiming damages of Rs.20 million. The matter is pending before the commercial court of Ahmedabad. The Company’s management in consultation with their legal council does not reasonably expect that these legal action, when ultimately concluded and determined, will have a material and adverse effect on the Company’s financial position.

NOTE 5 : FOREIGN ExCHANGE DERIvATIvES And ExPOSuRES NOT Hedged

A. Foreign Exchange Derivatives: The Company does not have any foreign exchange derivatives

B. Exposure Not Hedged

Deferred income tax assets have not been recognised on temporary differences and unabsorbed brought forward loss and depreciation amounting Rs.178.90 million and ‘ Nil as of March 31, 2018 and March 31, 2017, respectively, as it is probable that the temporary differences and unabsorbed brought forward loss and depreciation will not reverse in the foreseeable future.

MAT Credit have not been recognized amounting to Rs.82.05 million and ‘ Nil as of March 31, 2018 and March 31, 2017, respectively, as it is probable that MAT credit will not be utilised in the foreseeable future.

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.

In assessing the realisability of deferred income tax assets, management considers whether some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred income tax assets are deductible, management believes that the Company will realize the benefits of those deductible differences. The amount of the deferred income tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.

NOTE 6 : DISCLOSuRE PuRSuANT TO EMPLOYEE Benefits

The Company makes contributions, determined as a specified percentage of employee salaries, in respect of qualifying employees towards provident fund and employee state insurance, which is a defined contribution plan. The Company has no obligations other than to make the specified contributions. The contribution is charged to the Statement of profit and loss as they accrue. The amount recognised as an expense towards contribution to provident fund and other funds for the year are as follows:

*Amount less than 1 million

Terms and conditions of transactions with related parties

(1) Transaction entered into with related party 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. There have been no guarantees provided or received for any related party receivables or payables.

(2) For the year ended March 31, 2018, the Company has not recorded any impairment of receivables relating to amounts owed by related parties except otherwise mentioned in the financial statement (March 31, 2017: ‘ Nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

(3) Adjustments in balance of investments, loan balance and interest income of NSI Infinium Global Private Limited represents Ind AS adjustment on interest free loan given to subsidiary company

A All the transactions pertaining to purchase, sales, expenses etc. entered with NSI Infinium Global Private Limited are adjusted against reimbursement of expenses. Hence, the net amount of reimbursement has been derived considering the transactions entered into between the parties during the period.

The Shareholders of the Company have approved the split/sub-division of each equity share of the Company from the existing Face Value of Rs.10/ - ( Rupees Ten Only) per equity share to face value of Rs.1/- ( Rupee One Only) per equity share in Extra Ordinary General Meeting dated August 11, 2017. The record date for subdivision was September 1, 2017. The Earning Per Share figures for the year ended March 31, 2017 has been restated to give effect of split/sub-division as required by IND AS 33.

NOTE 7: Share Based PAYMENTS

Employee stock option (ESOP) scheme (2013-14):

The scheme has been adopted by the Board of Directors pursuant to resolution passed at its meeting held on February 17, 2013, read with Special Resolution passed by shareholder of the company at the extra ordinary general meeting held on March 30, 2013. The plan entitles senior employees to purchase shares in the Company at the stipulated exercise price, subject to compliance with vesting conditions. All exercised options shall be settled by physical delivery of shares. As per the plan, holders of vested options are entitled to purchase one equity share for every option at an exercise price of Rs.10 which is 97.65% below the market price at the date of grant, i.e., April 1, 2013 and April 1, 2014.

Employee stock option (ESOP) scheme (2014-15)

The scheme has been adopted by the Board of Directors pursuant to resolution passed at its meeting held on February 27, 2014, read with Special Resolution passed by shareholder of the company at the extra ordinary general meeting held on March 31, 2014. The plan entitles senior employees to purchase shares in the Company at the stipulated exercise price, subject to compliance with vesting conditions. All exercised options shall be settled by physical delivery of shares. As per the plan, holders of vested options are entitled to purchase one equity share for every option at an exercise price of Rs.10 which is 97.65% below the market price at the date of grant, i.e., April 1, 2014, April 1, 2015, April 1, 2016, October 1, 2014, October 1, 2015 and October 1, 2016.

The Shareholders of the Company have approved the split/sub-division of each equity share of the Company from the existing Face Value of Rs.10/ - ( Rupees Ten Only) per equity share to face value of Rs.1/- ( Rupee One Only) per equity share in Extra Ordinary General Meeting dated August 11, 2017. The record date for subdivision was September 1, 2017. The ESOP figured for the year ended March 31, 2017 and March 31, 2018 has been restated to give effect of split/sub-division.

The fair value of the share based payment options granted on is determined using the black scholes model using the following inputs at the grant date which takes in to account the exercise price, the term of the option, the share price at the grant date, and the expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.

The company has formed ‘Infibeam Employee Welfare Trust’ (IEW trust) for implementation of the schemes that are notified or may be notified from time to time by the Company under the plan, providing share based payment to its employees. IEW trust purchases Company’s shares out of funds provided by the Company. The Company treats IEW as its extension and accordingly shares held by IEW are treated as treasury shares.

The Consolidation of the IEW trust financials statements with that of the Company does not in any manner affect the independence of the trustees where the rights and obligations are regulated by the trust deed.

Own equity instruments (treasury shares) are deducted from equity.

Other items adjusted owing to the Trust consolidation include :

(a) Treasury shares

Upon consolidation, the investment in the Company’s equity shares made by IEW Trust is debited to the Company’s equity as treasury shares amounting to Rs.278.71 million as at March 31, 2018.

(b) Dividend Income

The dividend income of the Trust is debited to the Company’s retained earning amounting to Rs.0.17 million as at March 31, 2018 (shown as deduction from dividend paid).

(c) Other Non Current Financial Assets and other income

Loan advanced to the Trust is eliminated on consolidation amounting to Rs.280 million as at March 31, 2018 forming a part of current loans. Accordingly, interest on above loan is also eliminated amounting to Rs.8.25 million

Geographical segments for the Company are secondary segments. Segment revenue is analysed based on the location of customers regardless of where the services are provided from. The following provides an analysis of the Company’s sales by Geographical Markets. For management purposes, the Company operates in three principal geographical areas of the world, in India, UAE and the other countries.

A. Information about geographical areas

The Company operates in three principal geographical areas of the world, in India, middle east, and the other countries. As the Company does not operate in more than one business segment, disclosures for primary segment as required under Ind AS 108 have not been given.

B. unallocated items:

Domestic geographical segment includes certain assets which are common to both the geographical segment (i.e. India, Middle East and Others).

Non-current assets exclude financial instruments, deferred tax assets and tax assets.

C. Segment policies:

The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.

D. Major customer

Revenue from one customer of the Company’s India segment is Rs.357.3 million and one customer of the Company’s Middle East segment is Rs.344.6 million which is more than 10 percent of the Company’s total revenue for the year ended March 31, 2018. Revenue from one customer of the Company’s India segment is Rs.200 million and two customer of the Company’s Middle East segment is Rs.192.72 million which is more than 10 percent of the Company’s total revenue for the year ended March 31, 2017.

NOTE 8: OPERATING LEASE

The Company has taken commercial premises under operating leases. The leases have an average life of between one and five years with renewal options included in contracts. Renewals are at the mutual consent of lessor and lessee. Lease payments recognised in the statement of Profit and Loss for the year amounts to Rs.9.96 million (previous year: Rs.1.56 million) Future minimum lease rentals payable under non-cancellable operating leasees are as follows:

NOTE 9 : CORPORATE SOCIAL RESPONSIBILITY (CSR) ACTIVITIES:

a. The Company is required to spend Rs.1.38 million (Previous Year ‘ Nil) on CSR activities.

b. Amount spent during the year on:

NOTE 10 : FINANCIAL INSTRUMENTS - FAIR VALUES AND RISK MANAGEMENT

The significant accounting policies, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 2 to the Financial Statements.

The management assessed that cash and cash equivalents, other bank balances, loans, trade receivables, trade payables, other current financial assets and other current financial liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments

* The management assessed that carrying value approximates to the fair value Fair value hierarchy

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

Level 1 - valuation technique and significant observable inputs for assets and liabilities

Current Investment represents investment in mututal funds. The fair value of investment is derived based on the fund statement provided by the fund manager.

Reconciliation of Level 1 fair values

The following table shows a reconciliation from the opening balances to the closing balances for Level 1 fair values.

Level 2 - valuation technique and significant observable inputs for assets and liabilities

Long term borrowings represents loan taken from bank. The fair value of borrowing is derived based on market observable interest rate.

The fair values of the unquoted non current investment have been estimated using a DCF model. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows and discount rate. The probabilities of the various estimates within the range can be reasonably assessed and are used in management’s estimate of fair value for these unquoted preference investments.

B. Financial risk management

The Company has exposure to the following risks arising from financial instruments:

- Credit risk ;

- Liquidity risk ; and

- Market risk

i. Risk management framework

The Company’s board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company manages market risk through a treasury operations, which evaluates and exercises independent control over the entire process of market risk management. The finance team recommends risk management objectives and policies. The activities of this operations include management of cash resources, borrowing strategies, and ensuring compliance with market risk limits and policies.

The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

The audit committee oversees how management monitors compliance with the company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.

ii. Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investments in debt securities. The carrying amount of following financial assets represents the maximum credit exposure.

Financial Instruments and Cash Deposits

The credit risk from balances/deposits with Banks, current investments and other financial assets are managed in accordance with company’s policy. Investment of surplus funds are primarily made in Liquid/Short Term Plan of Mutual Funds and in Bank Deposits which carry a high external rating.

Trade receivables

Trade receivables of the company are typically unsecured. Credit risk is managed through periodic monitoring of the creditworthiness of customers to which company grants credit terms in the normal course of business. The allowance for impairment of Trade receivables is created to the extent and as and when required, based upon the expected collectability of accounts receivables.

The above receivables which are past due but not impaired are assessed on individual case to case basis and relate to a number of independent third party customers from whom there is no recent history of default. These financial assets were not impaired as there had not been a significant change in credit quality and the amounts were still considered recoverable based on the nature of the activity of the customer portfolio to which they belong and the type of customers. There are no other classes of financial assets that are past due but not impaired except for Trade receivables as at March 31, 2018 and March 31, 2017.

iii. Liquidity risk

Liquidity risk is the risk that the Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses. The Company’s objective is to, at all times maintain optimum levels of liquidity to meet its cash and collateral requirements. The Company closely monitors its liquidity position and deploys a robust cash management system.

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

(a) 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. Financial instruments affected by market risk include loans and borrowings, deposits.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company transacts business in local currency and in foreign currency, primarily in USD, AED and SAR. The Company has foreign currency trade payables and receivables and is, therefore, exposed to foreign exchange risk. The Company does not use any derivative instruments to hedge its risks associated with foreign currency fluctuations.

Foreign currency sensitivity

The following tables demonstrate the sensitivity to a reasonably possible change in USD, AED and SAR rates to the functional currency of respective entity, with all other variables held constant. The Company’s exposure to foreign currency changes for all other currencies is not material. The impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities.

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 changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations with floating interest rates. The Company manages its interest rate risk by having a balanced portfolio of fixed plus variable rate borrowings.

For the purpose of the Company’s capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to ensure that it maintains an efficient capital structure in order to support its business and maximise shareholder value.

The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions or its business requirements. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company includes within net debt, interest bearing loans and borrowings less cash and short-term deposits (including other bank balance).

NOTE 11 : DuES TO MICRO, SMALL AND MEDiuM SuPPLIERS

The Ministry of Micro, Small and Medium Enterprises has issued an office memorandum dated August 26, 2008 which recommends that the Micro and Small Enterprises should mention in their correspondence with its customers the Entrepreneurs Memorandum Number as allocated after filing of the Memorandum in accordance with the ‘Micro, Small and Medium Enterprises Development Act, 2006’ (‘the MSMED Act’) accordingly, the disclosure in respect of the amounts payable to such enterprises as at March 31, 2018 has been made in the financial statements based on information received and available with the Company. Further in view of the Management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any supplier as at the balance-sheet date.

On basis of information and records available with the Company, the above disclosures are made in respect of amount due to the micro, small and medium enterprises, which have been registered with the relevant competent authorities. This has been relied upon by the auditors.

NOTE 12 : AMALGAMATON WITH AVENUES (INDIA) PRIVATE LIMITED

Based on the definitive Memorandum of Understanding (MoU), the Company obtained operational and financial control in Avenues (India) Private Limited (Avenues) as well as board control with effect from April 1, 2017. Further, in the Board meeting held on July 13, 2017, the Board of directors approved the scheme of amalgamation of Avenues with the Company. Subsequent to the year end, on May 9, 2018, the Company has received approval to aforesaid scheme of amalgamation from National Company Law Tribunal (“NCLT”) with appointed date of April 1, 2017, which the Company filed with Registrar of Companies (RoC) on May 10,2018. In accordance with Ind AS 103 “Business Combinations”, the Company has given effect of amalgamation with Avenues with the appointed date i.e. April 1, 2017.

In accordance with the provisions of the aforesaid scheme -

The approved share swap ratio for 100 equity share of Avenues (India) Private Limited (AIPL) of the face value of Rs.10 each fully paid up held by the shareholders on the Record date shall be allotted 2600 equity shares of Infibeam Incorporation Limited of the face value of Rs.1 each fully paid up.

The shares have been allotted subsequent to the March 31, 2018, the same has been disclosed as Shares required to be issued as per Scheme of Amalgamation till the date of allotment i.e. May 30, 2018 under other equity.

In accordance with the scheme, the amalgamation has been accounted under the acquisition method as prescribed by Ind AS 103 “Business Combinations”.

Accordingly, the accounting treatment has been given as under: -

(i) The assets and liabilities of Avenues as at April 1, 2017 have been incorporated at their fair values in the financial statements of the Company.

(ii) The existing investments in Avenues as at April 1, 2017 have been fair valued on account of acquisition as prescribed by Ind AS 103 (step up acquisition).

(iii) All inter-corporate balances (including investments held by the Company in Avenues, deposits, loans and advances, outstanding balances) between the Company and Avenues stands cancelled.

The excess of value of equity shares over the fair value of assets and liabilities transferred and cancellation of Investments in Avenues held by the Company amounting to Rs.18,645.18 million has been recorded as follows after considering the impact of identified and unrecorded intangible assets (net of deferred tax) as prescribed by Ind AS 103: *The Company has acquired following investment on amalgamation with Avenues

(1) Avenues Infinite Private Limited - 10,00,200 equity shares at fair value of ‘ Nil

(2) Avenues Payments Private Limited - 36,541 equity shares at fair value of Rs.224.80 million

(3) JRI Technologies Private Limited - 2,20,625 equity shares at fair value of Rs.15.79 million

**The goodwill comprises the value of expected synergies arising from the amalgamation. Due to the contractual terms and nature of industry, the customer contract is not separately valued. Goodwill recognised on amalgamation is not expected to be deductible for Income tax purposes.

Pursuant to the above mentioned, the financials stament of the current year are not strictly comparable to those of the previous year.

The Company maintains nodal account with ICICI bank. The nodal accounts are operated as per RBI guidelines pertaining to settlement of payment for electronic payment transactions for payment gateway business. The balance in the nodal accounts represents money collected from customers on transaction undertaken and is used for settling of dues to various merchants as per RBI guidelines.

Receivable for settlement of transactions:

The balance in receivable for settlement of transaction represents the amount pending to be received from pooling bank account and payment gateway for successful online transaction completed by the customer of the merchant into the nodal accounts. These amounts once collected in Nodal account will be utilised for payment to the merchants.

Payable for settlement of transactions:

The balance in payable for settlement of transaction represents the amount pending to be paid to merchant for successful online transaction completed by the customer of the merchant. The amount for the nodal accounts are transferred to the merchant designated bank account as per RBI guidelines, after deducting applicable charges.

13 During the year ended March 31, 2016, the Company raised funds through an Initial Public Offering (IPO) for the purpose of setting up of cloud data centre, purchase of property for shifting and setting up of its registered and corporate office, setting up of 75 logistic centres, purchase of software and general corporate purposes. Pursuant to this, the Company issued 10,416,666 equity shares of Rs.10 each at an issue price of Rs.432 per equity share. The proceeds from IPO is Rs.4499.99 million. The net proceeds from IPO after incurring expenses (such as merchant bankers fees, underwriting fees, selling commission, legal counsel fees, registrar to the issue, brokerage and selling commission, printing and stationary expenses, advertising and marketing expenses and other incidental expenses amounted to Rs.338.3 million) was Rs.4,161.7 million. Of the total IPO expenses, expenses aggregating to Rs.312.78 million have been adjusted towards the securities premium account. Further IPO expenses aggregating to Rs.25.51 million have been charged to the Statement of Profit and Loss. Summary of utilised amount and unutilised amount is stated below :

14 The Company’s transactions with associated enterprises are at arm’s length. Management believes that company’s domestic transactions with associated enterprises post March 31, 2017 continue to be at arm’s length and that the transfer pricing legislation will not have any impact on the financial statements particularly on the amount of the tax expense for the year and the amount of the provision for the taxation at the period end.

15 Previous year figures have been regrouped or recast wherever necessary to make them comparable with those of current year.

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