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Affle (India) Ltd. Notes to Accounts
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You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (Rs.) 14605.58 Cr. P/BV 9.96 Book Value (Rs.) 104.59
52 Week High/Low (Rs.) 1337/867 FV/ML 2/1 P/E(X) 59.72
Bookclosure 08/10/2021 EPS (Rs.) 17.44 Div Yield (%) 0.00
Year End :2023-03 

Terms/rights attached to preference shares

*The Company has the right to be entitled to receive dividend if declared at any point of time. These preference shares can be convertible into equity shares of Affle X Private Limited after complying the provision of Companies Act, 2013 and the manner as specified in the subscription agreement. The Company does not have any voting rights in the invested entity except in case any resolution is passed. The holders shall have an option to redeem the only fully paid up Preference share having maximum redemption period of 20 years.

**The Company has granted employees stock option to the selected employees of its direct subsidiaries and step down subsidiary. This has been treated as deemed investent in respective subsidiary by the Company as per guidance under IND AS.

*During the previous year, the Company had increased its stake into Talent Unlimited Online Services Private Limited (“Bobble”), as a result investment in Talent Unlimited Online Services Private Limited was being converted into investment in associates under Note 5(b) (also refer note 45).

In the current year, the board of directors had authorized the management to either divest or invest further in Bobble. Accordingly, the management had decided to classify the investment in Bobble as held for sale in accordance with Ind AS 105 considering a possibility of divestment. The investment is disclosed as an investment held for sale as at March 31, 2023. The Company holds 26.24% stake on fully diluted basis in Bobble.

Terms/rights attached to preference shares

**Each Series C CCPS shall be converted by the Company into 1 equity share at the rate of INR 10 (Indian Rupees Ten only) per share after 20 years from the date of issuance of the Series C CCPS. It carries a noncumulative dividend rate of 0.1% (Zero Point One Percent) per annum. The Series C CCPS may not be redeemed by the Company for cash.

*Security deposits primarily include deposits given towards rented premises and other miscellaneous deposits. It represents fair value of amount paid to landlord for the leases premises. As at March 31, 2023, remaining tenure for security deposits ranges from one to five years.

“Includes the following:

- amount recoverable from related parties of INR 1.09 million (March 31, 2022: INR 0.95 million) pertaining to reimbursement of expenses not yet billed as at the year end.

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 relates to income taxes levied by the same tax authority.

In assessing the realisibility of deferred tax assets, management considers whether it is probable, that some portion, or all, of the deferred tax assets will not be realised. The ultimate realisation of deferred tax assets is dependent upon the generation of future taxable income during the years in which the temporary differences become deductible. Management considers the 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 incomes over the years in which the deferred tax assets are deductible, management believes that it is probable that the Company will be able to realise the benefits of those deductible differences in future.

3) During the period ended March 31, 2023 & March 31, 2022; there were no balances of trade receivables with a significant increase in credit risk.

Contract assets

As at March 31, 2023, the Company has contract assets of INR 502.82 million (March 31, 2022: INR 410.54 million) which is net of an allowance for expected credit losses of INR 5.27 million (March 31, 2022: INR 4.56 million).

4) No trade or other receivables are due from directors or any other officers of the company either severally or jointly with any other person. Nor any trade or other receivable are due from firms or private companies respectively in which any director is a partner, a director or a member.

*Balances with banks on current accounts includes balance in cash credit facility account amounting to Nil (March 31, 2022: Nil). The cash credit facility in the year ended March 31, 2023 is secured by hypothecation of fixed & current assets of the Company including other intangible assets. The rate of interest to be charged on the utilisation of the facility amount is 6M MCLR 1.10% (presently 9.00% p.a.) payable at monthly intervals. The amount utilised is payable on demand and the tenure of the cash credit limit is one year from the date of sanction.

**Short-term deposits are made for varying periods of between one date and three months depending on the cash requirements of the company. Company also earns an interest on these short-term deposits at the rate ranging from 3% to 7.50%.

*Pursuant to the approval of the shareholders in its annual general meeting held on October 23, 2021, each equity share of face value of INR 10 per share have been subdivided into five equity shares of face value of INR 2 per share, with effect from October 08, 2021.

B. Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of INR 2 per share. The holders of equity shares are entitled to receive dividends and are entitled to one vote per share. In the event of liquidation, equity shareholders will be entitled to receive assets of the Company in proportion to the number of shares held to the total equity shares outstanding as on that date.

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

Aggregate number of equity shares issued as bonus, shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date is Nil.

Nature and purpose of other equity Retained earnings

Retained earnings are the profits/(loss) that the Company has earned/incurred till date, less any transfers to general reserve, dividends or other distributions paid to shareholders. Retained earnings include remeasurement loss / (gain) on defined benefit plans, net of taxes that will not be reclassified to Statement of Profit and Loss.

Securities premium

Securities premium represents the amount received in excess of par value of equity shares. Section 52 of Companies Act, 2013 specifies restriction and utilisation of security premium.

Share based payment reserve

The share options-based payment reserve is used to recognise the grant date fair value of options issued to employees under employee stock option plan.

Treasury shares (Shares held by the ESOP Trust)

The Company has created an Employee Benefit Trust (EBT) for providing share-based payment to its employees. The Company uses EBT as a vehicle for distributing shares to employees under the employee remuneration schemes. The EBT buys shares of the company from the market, for giving shares to employees. The Company treats EBT as its extension and shares held by EBT are treated as treasury shares. Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity.

iii. Performance obligations

Information about the Company's performance obligations are summarised below:

Consumer platform

The performance obligation is satisfied at a point in time and payment is generally due within 30 to 90 days of completion of services and acceptance of the customer. In some contracts, short-term advances are required before the advertisement services are provided.

Enterprise platform

The performance obligation is satisfied over time and payment is generally due within 30 to 90 days of completion of services and acceptance of the customer. In some contracts, short-term advances are required before the software development services are provided.

As the duration of the contracts for consumer and enterprise platform is less than one year, the Company has opted for practical expedient and decided not to disclose the amount of the remaining performance obligations.

Other operating revenue

The performance obligation is satisfied at a point in time and payment is generally due within 30 to 90 days of completion of services and acceptance of the customer.

Notes:

There is no difference between the amount of revenue recognised in the profit and loss statement and the contract price.

26. 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.

For the purpose of calculating diluted EPS, the net profit for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year is adjusted for the effects of all dilutive potential equity shares.

*The weighted average number of equity shares for the year ended March 31, 2023 takes into account the weighted average effect of equity shares issued during the year.

27 Significant accounting judgements, estimates and assumptions

The preparation of the Company's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Other disclosures relating to the Group's exposure to risks and uncertainties includes:

- Capital Management, refer note 36

- Financial risk management objectives and policies, refer note 35

- Sensitivity analysis, refer note 28, note 35

Judgements

In the process of applying the Company's accounting policies, management has not made any significant judgement, which have the most significant effect on the amounts recognised in the financial statements.

a. Investment in Bobblei. Investment as associates

During the previous year, w.e.f. January 1, 2022, the Company had received a right to appoint its nominee as a director on the Board of Bobble, which was duly exercised. Given the shareholding of 17% on such date and board seat, the Company had considered Bobble as an associate over which it was deemed to have significant influence.

ii. Classified as investment held for sale

During the current year, the Company in its board meeting, had authorized the management to either divest or invest further in Bobble. Accordingly, the management had decided to classify the investment in Bobble as held for sale in accordance with Ind AS 105 considering a possibility of divestment. The investment is disclosed as an investment held for sale as at March 31, 2023. The Company holds 26.24% stake on fully diluted basis in Bobble.

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 has 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.

a. Impairment of non-financial assets

Impairment exists when the carrying value of an asset or Cash Generating Unit (“CGU”) 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 Discounted Cash flow (“DCF”) model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Company has 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 recognised by the Company. Refer note 38 for further disclosures.

b. Provision for expected credit losses of trade receivables and contract assets

Trade receivables and contract assets do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. Estimated irrecoverable amounts are based on the ageing of the receivable balances and historical experience adjusted for forward-looking estimates. Individual trade receivables are written off when management deems them not to be collectible. For details of allowance for doubtful debts please refer note 10.

c. Defined benefit plans (gratuity benefits)

The cost of the defined benefit gratuity plan and other post-employment medical benefits 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.

The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation.

The mortality rate is based on publicly available mortality tables for India. Those mortality tables tend to change only at intervals in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates for India. Further details about gratuity obligations are given in note 28.

d. Intangible assets under development

The Company capitalises intangible asset under development for a project in accordance with the accounting policy. Initial capitalisation of costs is based on management's judgement that technological and economic feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model. At March 31, 2023, the carrying amount of capitalised intangible asset under development was INR 5.17 million (March 31, 2022: INR 35.15 million).

This amount includes significant investment in the development of platforms.

e. Fair value measurement of derivative instruments

During the previous year, the Company used valuation techniques including the DCF model for the fair valuation of derivative instruments recorded in the balance sheet. The inputs to these models were taken from observable markets where possible, but where this was not feasible, a degree of judgement was required in establishing fair values. Judgements included considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of derivative instruments.

f. Leases- estimating the incremental borrowing rate

The Company cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Company 'would have to pay', which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The Company estimates the IBR using observable inputs (such as market interest rates) when available.

g. Share based payment

The Company measures the cost of equity-settled transactions with employees using Black Scholes pricing model to determine the fair value on the grant date. 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. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in note 39.

28. Employee benefitsA. Defined contribution plans

Provident fund: The Company makes contribution towards employees' provident fund. The Company has recognised INR 12.08 million (March 31, 2022: INR 12.61 million) as an expense towards contribution to this plan.

B. Defined benefit plans

Gratuity: The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, employees who have completed five years of service are entitled to specific benefit. The level of benefit provided depends on the member's length of service and salary retirement age. The employee is entitled to a benefit equivalent to 15 days salary last drawn for each completed year of service with part thereof in excess of six months. The same is payable on termination of service or retirement or death whichever is earlier.

The present value of the obligation under such defined benefit plan is determined based on an actuarial valuation as at the reporting date using the projected unit credit method, which recognizes each year of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligations are measured at the present value of the estimated future cash flows. The discount rate used for determining the present value of the obligation under defined benefit plans is based on the market yields on Government bonds as at the date of actuarial valuation. Actuarial gains and losses (net of tax) are recognised immediately in the other comprehensive income (OCI).

This is a unfunded benefit plan for qualifying employees. The scheme provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment. Vesting occurs upon completion of five years of service.

The following tables summaries the components of net benefit expense recognised in the statement of profit or loss and other comprehensive income and amounts recognised in the balance sheet for the gratuity plan:

The average duration of the defined benefit plan obligation at the end of the reporting year is 1.91 years (March 31, 2022: 2.31 years).

29. Leases

The discount rate is based on the prevailing market yields of Indian Government Securities as at the Balance Sheet date for the estimated term of the obligations. 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.


Company as lessee

The Company has taken office premises on lease. The lease has been entered for a period ranging from one to two years with renewal option. The Company has the option, under some of its lease, to renew the lease for an additional years on a mutual consent basis.

The incremental borrowing rate for the lease liabilities is 9% per annum.

Set out below are the carrying amounts of right-of-use assets recognised and the movements during the year:

The sensitivity analysis above have been determined based on a method that extrapolates the impact on define benefit obligation as a result of reasonable changes in key assumptions occurring at the end of reporting year. The sensitivity analysis are based on a change in a significant assumption, keeping all other assumptions constant. The sensitivity analysis may not be representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions would occur in isolation from one another.

Note: During the previous year ended March 31, 2022, the Company has served termination notice to vacate the premise and accordingly written off right of use asset and the lease liability.

30. Commitments and contingent liabilitiesa. Capital commitments

As at March 31, 2023, the Company has commitments on capital account and not provided for (net of advances) of INR 9.78 million (March 31, 2022: INR 8.08 million).

b. Contingent liabilities

i. Claims against the Company not acknowledged as debts includes the following:

- Income tax demand from the Income tax authorities for assessment year 2017-18 of INR 64.88 million on account of disallowance of bad debts written off, advances written off, amortization of goodwill and certain expenses under various heads as claimed by the Company in the income tax. The matter is pending before Commissioner of Income Tax (Appeals), Mumbai. In response (dated 29th January'2020) to the notice company has discharged 20% of demand i.e. INR 13 million by depositing INR 6.50 million vide challan No 11922 with HDFC Bank on January 28, 2020 and adjusting a refund of INR 6.25 million which is outstanding for AY 2015-16 on which interest under section 244A of the Act is also pending and this will exceeds a residual amount of INR 6.50 million.

- Income tax demand from the Income tax authorities order dated September 17, 2022, for assessment year 2020-21 of INR 1.13 million on account of disallowance of Corporate Social Responsibility (CSR) expenditure under section 80G of the Income Tax Act, 1961 of Rs. 2.15 million as claimed by the Company in the income tax. The matter is pending before Commissioner of Income Tax (Appeals), Mumbai.

The Company is contesting the demands and the management, including its tax advisors, believes that its position will likely be upheld in the appellate process. No tax expense has been accrued in the financial statements for the demand raised. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company's financial position and results of operations. The likelihood of the above cases going in favour of the Company is probable and accordingly has not considered any provision against the demands in the financial statements.

ii. (a) The opening balance of Stand by Letter of Credit (SBLC) as on April 01,2022 is amounting to INR 447.01 million(equivalentofUSD6.10million)wastakeninfavourofAxisBankLimited,Singapore.Duringthecurrent year it is reduced by INR 100.26 million (equivalent to USD 1.22 million). The outstanding closing balance of SBLC in favour of Axis Bank Limited, Singapore is INR 346.75 million (equivalent to USD 4.88 million).

(b) The opening balance of Stand by Letter of Credit (SBLC) as on April 01,2022 is amounting to INR 629.83 million (equivalent of USD 8.60 million) was taken in favour of Axis Bank Limited, Singapore. During the current year it is reduced by INR 276.86 million (equivalent to USD 3.37 million). The outstanding closing balance of SBLC in favour of Axis Bank Limited, Singapore is INR 352.97 million (equivalent to USD 5.23 million).

(c) The opening balance of Stand by Letter of Credit (SBLC) as on April 01, 2022 is amounting to INR 439.68 million (equivalent of USD 6.00 million) was taken in favour of HDFC Bank Limited, Bahrain. The outstanding closing balance of SBLC in favour of HDFC Bank Limited, Bahrain is INR 439.68 million (equivalent to USD 6.00 million).

No amount has been written off or written back in the year in respect of debts due from/to above related parties.

Terms and conditions of transactions with related parties

The sale and purchase from related parties are made on terms equivalent to those that prevail in arm's length transaction. Outstanding balances at the year end are unsecured and interest free and settlement occurs in cash. For the period ended March 31, 2023 and year ended March 31, 2022, the Company has not recorded any impairment of trade receivables relating to amounts owed by related parties. 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.

32. Segment information

Ind AS 108 establishes standards for the way that companies report information about operating segments and related disclosures about products and services, geographic areas, and major customers.

The Chief Operating Decision Maker (CODM) being the Board of Directors (Board) evaluates the Company's performance and allocates resources based on analysis of various performance indicators pertaining to advertisement and software development segment.

The “Consumer platform” segment provides mobile advertisement services to its customers and is a reseller of advertisement space for online publishing companies including right to use of the platform.

The “Enterprise platform” segment provides customized mobile app development services.

Transfer pricing is carried between the operating segments are set at cost plus appropriate margins. Segment revenue, segment expenses and segment result include transfers between operating segments. Those transfers are eliminated in total revenue/expense/result.

The accounting principles used in preparation of the financial statements are consistently applied to record revenue and expenditure in segment information, and are as set out in the significant accounting policies.

The Company had one customer who contributed more than 10% of the Company's revenue from contracts with customers for the year ended March 31, 2023, however for the year ended March 31, 2022 there is no such customer. The total amount of revenue from contracts with this customer for the year ended March 31, 2023 is 552.84 (March 31, 2022: INR NIL).

The management assessed that cash and cash equivalent, other bank balances, trade receivables, capital creditors, trade payables and other financial liabilities approximate their carrying amounts and fair value of the Company's financial instuments.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Further, the subsequent measurements of all assets and liabilities (other than investments) is at amortised cost, using effective interest rate (EIR) method.

The following methods and assumptions were used to estimate the fair values:

Receivables are evaluated by the Company based on parameters such as interest rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project based on this evaluation, allowances are taken into account for the expected credit losses of these receivables.

The fair value of unquoted instruments is estimated by discounting future cash flows using rates currently applicable for debt on similar terms, credit risk and remaining maturities.

For other financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

34. Fair value hierarchy

All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is insignificant to the fair value measurements as a whole.

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

Level 2 : Valuation techniques for which the lowest level inputs that has a significant effect on the fair value measurement are observable, either directly or indirectly.

Level 3 : Valuation techniques for which the lowest level input which has a significant effect on fair value measurement is not based on observable market data.

The following table provides the fair value measurement hierarchy of the Company's assets and liabilities.

Valuation technique used to derive fair values

The Company's unquoted instruments is estimated by discounting future cash flows using rates currently applicable for debt on similar terms, credit risk and remaining maturities. The valuation requires management to make certain assumptions about the model inputs, including forecast cash flows, discount rate, credit risk and volatility. 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 equity investments.

35. Financial risk management objectives and policies

The Company's principal financial liabilities comprises trade payables, other payables, capital creditors and employee related payables. The main purpose of these financial liabilities is to finance the Company's operations and to provide guarantees to support its operations. The Company's principal financial assets include trade and other receivables, and cash and cash equivalent that derive 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 responsible to ensure that 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.

a. Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of a change in market price.

i. 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's exposure to the risk of changes in foreign exchange rates relates primarily to the Company's operating activities (when revenue or expense is denominated in a foreign currency).

The Company does not use derivative financial instruments such as forward exchange contracts or options to hedge its risk associated with foreign currency fluctuations or for trading/speculation purpose.

b. 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 investing activities, including deposits with banks and financial institutions.

A counterparty whose payment is due more than 90 days after the due date is considered as a defaulted party. This is based on considering the market and economic forces in which the Company operates. The

Company write-off the amount if the credit risk of counter-party increases significantly due to its poor financial position.

All the financial assets carried at amortised cost were into good category except some portion of trade receivables considered under doubtful category (refer note 10).

Trade receivables and contract assets

Trade receivables are typically unsecured. Credit risk is managed by the Company through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.

The Company is exposed to credit risk in the event of non-payment by customers. An impairment analysis is performed at each reporting date. The Company uses a provision matrix to measure the expected credit loss of trade receivables.

None of those trade receivable past due or impaired have had their terms renegotiated. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivables presented in the financial statement. The Company does not hold any collateral or other credit enhancements over balances with third parties nor does it have a legal right of offset against any amounts owed by the Company to the counterparty. For receivables which are overdue the Company has subsequently received payments and has reduced its overdue exposure.

Financial instruments and cash deposits

Credit risk from balances with banks 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. 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.

c. Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company monitors their risk of shortage of funds using cash flow forecasting models. These models consider the maturity of their financial investments, committed funding and projected cash flows from operations. The Company's objective is to provide financial resources to meet its business objectives in a timely, cost effective and reliable manner.

36. Capital management

The Board's policy maintains a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitor the return on capital employed as well as the amount of dividend if any to shareholders.

For the purpose of the Company's capital management, capital includes issued equity capital and general reserves attributable to the equity holders. 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.

38. Business combination

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, trade and other payables, less cash and cash equivalents. The Company's policy is to keep the gearing ratio between 0% and 30%.

In order to achieve this overall objective, the Company's capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing borrowings that define capital structure requirements. There have been no breaches in the financial covenants of any interest-bearing borrowings in the current period.

No changes were made in the objectives, policies or processes for managing capital during the year.


38.1 Business combinations under common control Scheme of amalgamation in accordance with previous GAAP

During the year ended March 31, 2017, the Holding Company has merged its fellow subsidiaries i.e. AD2C Holdings, AD2C India, Appstudioz Technologies into one merged entity, Affle India Limited (formerly known as “Affle (India) Private Limited”) under the court approved scheme of amalgamation in accordance with erstwhile applicable previous GAAP.

Business combination under common control has been accounted for using purchase method in accordance with previous GAAP as prescribed under court scheme instead of using pooling interest method as prescribed under Ind AS 103. Business Combinations as the approved court scheme will prevail over applicable accounting standard.

Accordingly, the Scheme was accounted for using purchase method in accordance with erstwhile applicable Accounting Standard 14 “Accounting for Amalgamations”. All the assets and liabilities of the Transferor Companies have been incorporated at fair values as at 1 April 2015 against the purchase consideration of INR 84.64 million which resulted in the Goodwill on amalgamation of amounting INR 59.24 million.

Goodwill acquired through business combinations have indefinite life. The Company performed its impairment test for the year ended March 31, 2023.

38.2 Impairment testing of goodwill

Goodwill acquired through business combinations have indefinite life. The Company performs the impairment testing at the initial recognition of Godwill. The Company further performs impairment testing at every year end. At present there is no indcator for impairment of Goodwill. The Company considers the relationship between its value in use and its carrying value, among other factors, when reviewing for indicators of impairment.

The recoverable amount of the goodwill is determined based on value in use ('VIU') calculated using cash flow projections from financial budgets approved by management covering a five year period and the terminal value (after considering the relevant long-term growth rate) at the end of the said forecast periods. The Company has used long-term growth rate of 5% (March 31, 2022: 2%) and discount rate of 10% (March 31, 2022: 10%) for calculation of terminal value.

The said cash flow projections are based on the senior management past experience as well as expected met trends for the future periods. The projected cash flows have been updated to reflect the decreased demand for services. The calculation of weighted average cost of capital (WACC) is based on the Company's estimated capital structure as relevant and attributable to the Company. The WACC is also adjusted for specific risks, market risks and premium, and other inherent risks associated with similar type of investments to arrive at an approximation of the WACC of a comparable market participant. The said WACC being pre-tax discount rates reflecting specific risks, are then applied to the above mentioned projections of the estimated future cash flows to arrive at the discounted cash flows.

Discount rates represent the market assessment of the risks specific to Cash generating unit (CGU), taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Company and its operating segments and is derived from its WACC.

The key assumptions used in the determination of VIU are the revenue annual growth rates and the EBITDA growth rate. Revenue and EBITDA growths are based on average value achieved in preceding years. Also, the growth rates used to extrapolate the cash flows beyond the forecast period are based on industry standards.

Based on the above assumptions and analysis, no impairment was identified as at March 31, 2023 (March 31, 2022: Nil). Further, on the analysis of the said calculation's sensitivity to a reasonably possible change in any of the above mentioned key assumptions/parameters on which the management has based determination of the recoverable amount, there are no scenarios identified by the management wherein the carrying value could exceed its recoverable amount.

39. Employee share based payment

During the previous year ended March 31, 2022, the Company has issued Employee Stock Option Scheme -2021. The relevant details of the scheme and the grant are as follows:

Scheme: Affle (India) Limited Employee Stock Option Scheme - 2021

a. The Company instituted an Employees Stock Option Scheme (“ESOPs”) for certain employees of the Company, its subsidiary and its step down subsidiaries (together know as Group) as approved by the shareholders on October 23, 2021 which provides for a grant of 3,750,000 options (each option convertible into share) to employees of the Group.

During the year ended March 31, 2023 the Company has further granted 25,057 options to the eligible employees on March 23, 2023 as approved by the nomination and remuneration committee of the Company.

40. Capitalisation of intangible assets

The Company has capitalized the following expenses of revenue nature to the internally developed software. Consequently, the expenses disclosed under the respective heads are net of amounts capitalised by the Company.

41. Other statutory information

i. The Company does not have any Benami property, where any proceeding has been initiated or pending against the Group for holding any Benami property under the Benami Transactions (Prohibition) Act, 1988 and rules made thereunder.

ii. The Company has balance with the below-mentioned company struck off under section 248 of Companies Act, 2013 or section 560 of Companies Act, 1956.

iii. The Company do not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.

iv. The Company has not traded or invested in Cryptocurrency transactions / balances or Virtual Currency during the financial year ended March 31, 2023 and March 31, 2022.

v. The Company have not advanced or loaned or invested funds to Intermediaries for further advancing to any other person(s) or entity(ies), including foreign entities (Intermediaries).

vi. The Company has not received any funds or further advances in form of any fund from any person(s) or entity(ies), including guarantee to the Ultimate beneficiaries.

42. The Code on Social Security, 2020 ('Code') relating to employee benefits during employment and post employment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified and the final rules/interpretation have not yet been issued. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective.

43. The Company has appointed independent consultants for conducting a Transfer pricing study to determine whether the transactions with associated enterprise were undertaken at “arm length price”. The management confirms that all domestic and international transactions with associated enterprises are undertaken at negotiated contracted price on usual commercial terms and is confident of there being no adjustment on completion of the study. Adjustment, if any, arising from the transfer pricing study shall be accounted for as and when the study is completed.

44. During the previous year, the Company had completed Qualified Institutional Placement (“QIP”) by issuing 1,153,845 equity shares aggregating to INR 5,906.90 million (net of QIP expenses of INR 93.09 million). As at March 31, 2023 the Company has utilised INR 2,524.25 million towards purposes specified in the placement document and the balance amount of QIP's net proceeds remains invested in fixed and other deposits.

45. During the earlier years, Company had made a strategic, non-controlling investment in Talent Unlimited Online Services Private Limited (“Bobble”). The Company had received a right to appoint its nominee as a director on the board of Bobble, effective January 01, 2022, which was duly exercised. Given the shareholding and board seat, the Company had considered Bobble as an associate. As at March 31, 2023, the carrying value of investment in Bobble of INR 1,350.29 million was shown as the deemed cost of investment.

The Company in its board meeting; had authorized the management to either divest or invest further in Bobble. Accordingly, the management has classified the investment in Bobble as held for sale in accordance with Ind AS 105 considering a possibility of divestment. The investment continues to be disclosed as an investment held for sale as at March 31, 2023. The Company holds 26.24% stake on fully diluted basis in Bobble.

46. The Finance Act, 2021 has introduced an amendment to section 32 of the Income Tax Act, 1961, whereby Goodwill of a business will not be considered as a depreciable asset and depreciation on goodwill will not be allowed as deductible expenditure effective April 1, 2020. In accordance with the requirements of Ind AS 12 - Income Taxes, the Company has recognised one-time tax expense amounting to INR 14.18 million for the year ended March 31, 2021 respectively being the deferred tax liabilities recognized by the Company on difference between book basis and tax basis of goodwill consequent upon enactment of above provisions. This deferred tax liability is not expected to be a cash outflow in the future and its reversal is deemed unlikely as the value of its associated goodwill is expected by value in use.

*During the current year, investment in Bobble (associate) has been classified as held for sale and hence not considered for retrun on Investment in an associate ratio. Further, during the previous year ended March 31, 2022, the Company has increased its stake into Bobble, as a result investment in Bobble is being converted into investment in associates (refer note 46).

Note 1: T1 = end of time period, T0 = beginning of time period, t = specific date falling between T1 and T0, MV(T1) = market Value at T1, MV(T0) = market Value at T0, C(t) = cash inflow, cash outflow on specific date, W(t) = weight of the net cash flow (i.e. either net inflow or net outflow) on day 't', calculated as [T1 - t] / T1. Note 2: Debt service = Interest & Lease Payments Principal Repayments Note 3: Net credit sales consist of gross credit sales minus sales return.

Note 4: Net credit purchases consist of gross credit purchases minus purchase return.

Note 5: Net sales shall be calculated as total sales minus sales returns.

Note 6: Working capital shall be calculated as current assets minus current liabilities.

Note 7: Capital Employed = Tangible Net Worth Total Debt Deferred Tax Liability

Note 8: T1 = End of time period, T0 = Beginning of time period, t = Specific date falling between T1 and T0, MV(T1) = Market Value at T1, MV(T0) = Market Value at T0, C(t) = Cash inflow, cash outflow on specific date, W(t) = Weight of the net cash flow (i.e. either net inflow or net outflow) on day 't', calculated as [T1 - t] / T1.


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