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Preliminary Placement Document
Subject to Completion
Not for Circulation
Serial Number: [●]
Strictly Confidential
MAJESCO LIMITED
Our Company was incorporated as a private limited company on June 27, 2013 as “Minefields Computers Private Limited”. Pursuant to issuance of a fresh certificate of
incorporation consequent on change of name dated December 22, 2014 the name of the Company was changed to “Minefields Computers Limited”. Subsequently the name
of the Company was changed to its current name as “Majesco Limited” pursuant to issuance of a fresh certificate of incorporation consequent on change of name dated June
12, 2015. CIN: L72300MH2013PLC244874.
Registered Office and Corporate Office: Mastek New Development Centre, MBP-P-136, Mahape, Navi Mumbai - 400 710, Maharashtra, India;
Contact Person: Mr. Nishant S. Shirke, Company Secretary and Compliance Officer
Tel: +91 22 6791 4545; Fax: +91 22 2778 1332; Website: www.majesco.com;
Our Company is issuing [●] equity shares of face value of ` 5 each (the “Equity Shares”) at a price of ` [●] per Equity Share (the “Issue Price”), including a premium of
` [●] per Equity Share, aggregating approximately ` [●] million (the “Issue”).
ISSUE IN RELIANCE UPON CHAPTER VIII OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE
REQUIREMENTS) REGULATIONS, 2009, AS AMENDED (THE “SEBI ICDR REGULATIONS”) AND SECTION 42 OF THE COMPANIES ACT, 2013,
READ WITH THE RULES MADE THEREUNDER
THE ISSUE AND DISTRIBUTION OF THIS PRELIMINARY PLACEMENT DOCUMENT IS BEING MADE TO QUALIFIED INSTITUTIONAL BUYERS
(“QIBs”) AS DEFINED UNDER THE SEBI ICDR REGULATIONS IN RELIANCE UPON CHAPTER VIII OF THE SEBI ICDR REGULATIONS AND
SECTION 42 OF THE COMPANIES ACT, 2013 AND THE RULES MADE THEREUNDER. THIS PRELIMINARY PLACEMENT DOCUMENT IS
PERSONAL TO EACH PROSPECTIVE INVESTOR AND DOES NOT CONSTITUTE AN OFFER OR INVITATION OR SOLICITATION OF AN OFFER
TO THE PUBLIC OR TO ANY OTHER PERSON OR CLASS OF INVESTORS WITHIN OR OUTSIDE INDIA OTHER THAN TO QIBs. THIS
PRELIMINARY PLACEMENT DOCUMENT (WHICH INCLUDES DISCLOSURES PRESCRIBED UNDER FORM PAS-4) WILL BE CIRCULATED ONLY
TO SUCH QIBs WHOSE NAMES ARE RECORDED BY OUR COMPANY PRIOR TO MAKING AN INVITATION TO SUBSCRIBETO THE EQUITY
SHARES.
Invitations for subscription, offers and sales of Equity Shares to be issued pursuant to the Issue shall only be made pursuant to this Preliminary Placement Document together
with the Application Form and the Placement Document and the Confirmation of Allotment Note (as defined hereinafter). For further details, please see “Issue Procedure”
on page 108. The distribution of this Preliminary Placement Document or the disclosure of its contents without our Company’s prior consent to any person, other than QIBs
and persons retained by QIBs to advise them with respect to their purchase of Equity Shares, is unauthorised and prohibited. Each prospective investor, by accepting delivery
of this Preliminary Placement Document, agrees to observe the foregoing restrictions and make no copies of this Preliminary Placement Document or any documents
referred to in this Preliminary Placement Document.
A copy of this Preliminary Placement Document (which includes disclosures prescribed under Form PAS-4 (as defined hereinafter)) has been delivered to the Stock
Exchanges. A copy of the Placement Document (which shall include disclosures prescribed under Form PAS-4) will also be delivered to the Stock Exchanges. Our Company
shall also make the requisite filings with the Registrar of Companies, Maharashtra at Mumbai (the “RoC”) and the Securities and Exchange Board of India (“SEBI”) within
the stipulated period as required under the Companies Act, 2013 and the Companies (Prospectus and Allotment of Securities) Rules, 2014 and SEBI ICDR Regulations.
This Preliminary Placement Document has not been reviewed by SEBI, the Reserve Bank of India (the “RBI”), and the Stock Exchanges, RoC or any other regulatory or
listing authority and is intended only for use by QIBs. This Preliminary Placement Document has not been and will not be registered as a prospectus with the RoC, will not be circulated or distributed to the public in India or any other jurisdiction, and will not constitute a public offer in India or any other jurisdiction. The Issue is meant only
for eligible QIBs by way of a private placement and is not an offer to the public or to any other class of investors.
The information on our Company’s website or any website directly or indirectly linked to our Company’s website, or the website of the Global Coordinator and Book
Running Lead Manager or their affiliates does not form part of this Preliminary Placement Document and prospective investors should not rely on such information contained
in, or available through, any such websites.
INVESTMENTS IN EQUITY SHARES INVOLVE A HIGH DEGREE OF RISK AND PROSPECTIVE INVESTORS SHOULD NOT INVEST IN THE ISSUE
UNLESS THEY ARE PREPARED TO TAKE THE RISK OF LOSING ALL OR PART OF THEIR INVESTMENT. PROSPECTIVE INVESTORS ARE
ADVISED TO CAREFULLY READ THE SECTION “RISK FACTORS” ON PAGE 34 AND EXPECTED TO BE INCLUDED IN THE PLACEMENT
DOCUMENT BEFORE MAKING AN INVESTMENT DECISION RELATING TO THE ISSUE. EACH PROSPECTIVE INVESTOR IS ADVISED TO
CONSULT ITS OWN ADVISORS ABOUT THE PARTICULAR CONSEQUENCES OF AN INVESTMENT IN THE EQUITY SHARES BEING ISSUED
PURSUANT TO THIS PRELIMINARY PLACEMENT DOCUMENT AND PLACEMENT DOCUMENT.
The Equity Shares of the Company are listed on BSE Limited (“BSE”) and National Stock Exchange of India Limited (“NSE”) (together with BSE, the “Stock Exchanges”).
The closing price of the outstanding Equity Shares on BSE and NSE on January 23, 2018 was ` 566.45 and ` 566.15 per Equity Share, respectively. In-principle approvals under Regulation 28(1) of the SEBI Listing Regulations for listing of the Equity Shares have been received from BSE on January 23, 2018 and NSE on January 23, 2018.
Applications shall be made for obtaining the listing and trading approvals for the Equity Shares to be issued pursuant to the Issue on the Stock Exchanges. The Stock
Exchanges assume no responsibility for the correctness of any statements made, opinions expressed and/or reports contained herein. Admission of the Equity Shares to be
issued pursuant to the Issue for trading on the Stock Exchanges should not be taken as an indication of the merits of our Company or the Equity Shares.
YOU MAY NOT AND ARE NOT AUTHORISED TO (1) DELIVER THIS PRELIMINARY PLACEMENT DOCUMENT TO ANY OTHER PERSON; OR (2)
REPRODUCE THIS PRELIMINARY PLACEMENT DOCUMENT IN ANY MANNER WHATSOEVER OR (3) RELEASE ANY PUBLIC ADVERTISEMENT
OR UTILISE ANY MEDIA, MARKETING OR DISTRIBUTION CHANNELS OR AGENTS TO INFORM THE PUBLIC AT LARGE ABOUT THIS ISSUE.
ANY DISTRIBUTION OR REPRODUCTION OF THIS PRELIMINARY PLACEMENT DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED.
FAILURE TO COMPLY WITH THIS INSTRUCTION MAY RESULT IN A VIOLATION OF THE SEBI ICDR REGULATIONS OR OTHER APPLICABLE
LAWS OF INDIA AND OTHER JURISDICTIONS.
The Equity Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state of
the United States and may not be offered or sold in the United States (as defined in Regulation S under the Securities Act (“Regulation S”)) except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. The Equity Shares are being offered and sold
only outside the United States in offshore transactions in reliance on Regulation S. For a description of the selling restrictions in certain other jurisdictions, see “Selling
Restrictions” on page 122. The Equity Shares are transferable only in accordance with the restrictions described in “Transfer Restrictions” on page 127.
Our Company has prepared this Preliminary Placement Document solely for providing information in connection with the Proposed Issue.
This Preliminary Placement Document is dated January 23, 2018.
GLOBAL COORDINATOR AND BOOK RUNNING LEAD MANAGER
Edelweiss Financial Services Limited
Th
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i
TABLE OF CONTENTS
NOTICE TO INVESTORS .................................................................................................................................. 2
REPRESENTATIONS BY INVESTORS........................................................................................................... 4
CERTAIN CONVENTIONS, PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA,
CURRENCY OF PRESENTATION AND EXCHANGE RATES ................................................................. 10
INDUSTRY AND MARKET DATA................................................................................................................. 12
FORWARD-LOOKING STATEMENTS ........................................................................................................ 13
ENFORCEMENT OF CIVIL LIABILITIES .................................................................................................. 15
EXCHANGE RATES ......................................................................................................................................... 16
DEFINITIONS AND ABBREVIATIONS ........................................................................................................ 17
DISCLOSURE REQUIREMENTS UNDER FORM PAS-4 PRESCRIBED UNDER THE COMPANIES
ACT ...................................................................................................................................................................... 22
SUMMARY OF THE ISSUE ............................................................................................................................ 25
SUMMARY OF BUSINESS .............................................................................................................................. 27
SELECTED FINANCIAL INFORMATION ................................................................................................... 31
RISK FACTORS ................................................................................................................................................ 34
MARKET PRICE INFORMATION ................................................................................................................ 52
USE OF PROCEEDS ......................................................................................................................................... 54
CAPITALISATION STATEMENT ................................................................................................................. 55
CAPITAL STRUCTURE ................................................................................................................................... 56
DIVIDENDS ........................................................................................................................................................ 58
INTEREST COVERAGE RATIO .................................................................................................................... 59
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS .................................................................................................................................................... 60
INDUSTRY OVERVIEW .................................................................................................................................. 86
BUSINESS ........................................................................................................................................................... 88
REGULATIONS AND POLICIES ................................................................................................................... 97
BOARD OF DIRECTORS AND SENIOR MANAGEMENT ........................................................................ 99
PRINCIPAL SHAREHOLDERS .................................................................................................................... 105
ISSUE PROCEDURE ...................................................................................................................................... 108
PLACEMENT ................................................................................................................................................... 120
SELLING RESTRICTIONS ........................................................................................................................... 122
TRANSFER RESTRICTIONS ........................................................................................................................ 127
THE SECURITIES MARKET OF INDIA..................................................................................................... 128
DESCRIPTION OF THE EQUITY SHARES ............................................................................................... 132
STATEMENT OF TAX BENEFITS............................................................................................................... 135
LEGAL PROCEEDINGS ................................................................................................................................ 148
STATUTORY AUDITORS ............................................................................................................................. 149
GENERAL INFORMATION .......................................................................................................................... 150
FINANCIAL STATEMENTS ......................................................................................................................... 152
DECLARATION .............................................................................................................................................. 153
2
NOTICE TO INVESTORS
Our Company has furnished and accepts full responsibility for all of the information contained in this Preliminary
Placement Document and confirms that to its best knowledge and belief, having made all reasonable enquiries,
this Preliminary Placement Document contains all information with respect to our Company, subsidiaries,
associates and the Equity Shares offered in the Issue which are material in the context of the Issue. The statements
contained in this Preliminary Placement Document relating to our Company, our Subsidiaries and the Equity
Shares are, in all material respects, true and accurate and not misleading, and the opinions and intentions expressed
in this Preliminary Placement Document with regard to our Company, our Subsidiaries and the Equity Shares are
honestly held, have been reached after considering all relevant circumstances and are based on reasonable
assumptions and information presently available to our Company. There are no other facts in relation to our
Company, our Subsidiaries and the Equity Shares, the omission of which would, in the context of the Issue, make
any statement in this Preliminary Placement Document misleading in any material respect. Further, our Company
has made all reasonable inquiries to ascertain such facts and to verify the accuracy of all such information and
statements.
The Global Coordinator and Book Running Lead Manager has not separately verified all the information contained
in this Preliminary Placement Document (financial, legal or otherwise). Accordingly, neither the Global
Coordinator and Book Running Lead Manager nor any of its shareholders, employees, counsels, officers,
directors, representatives, agents or affiliates make any express or implied representation, warranty or undertaking,
and no responsibility or liability is accepted by the Global Coordinator and Book Running Lead Manager as to
the accuracy or completeness of the information contained in this Preliminary Placement Document or any other
information supplied in connection with the Equity Shares. Each person receiving this Preliminary Placement
Document acknowledges that such person has not relied on either the Global Coordinator and Book Running Lead
Manager or on any of its shareholders, employees, counsels, officers, directors, representatives, agents or affiliates
in connection with such person’s investigation of the accuracy of such information or such person’s investment
decision, and each such person must rely on its own examination of our Company, its Subsidiaries and the merits
and risks involved in investing in the Equity Shares. Prospective investors should not construe the contents of this
Preliminary Placement Document legal, tax, accounting or investment advice.
No person is authorised to give any information or to make any representation not contained in this Preliminary
Placement Document and any information or representation not so contained must not be relied upon as having
been authorised by or on behalf of our Company or by or on behalf of the Global Coordinator and Book Running
Lead Manager. The delivery of this Preliminary Placement Document at any time does not imply that the
information contained in it is correct as of any time subsequent to its date.
The Equity Shares have not been approved, disapproved or recommended by any regulatory authority in
any jurisdiction. No authority has passed on or endorsed the merits of this Issue or the accuracy or
adequacy of this Preliminary Placement Document. Any representation to the contrary may be a criminal
offence in certain jurisdictions.
The Equity Shares are not being offered or sold in the United States in this Issue. The Equity Shares have not
been, and will not be, registered under the Securities Act or the securities laws of any state of the United States
and may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act and applicable U.S. state securities laws. Accordingly,
the Equity Shares are being offered and sold only outside the United States in offshore transactions in reliance on
Regulation S. For a description of selling restrictions in certain other jurisdictions, see “Selling Restrictions” on
page 122. The Equity Shares are transferable only in accordance with the restrictions described in the section titled
“Transfer Restrictions” on page 127.
Subscribers of the Equity Shares in the Issue will be deemed to make the representations set forth in chapters
“Representations by Investors”, “Selling Restrictions” and “Transfer Restrictions” on pages 4, 122 and 127,
respectively.
Distribution of this Preliminary Placement Document to any person other than the QIBs specified by the Global
Coordinator and Book Running Lead Manager or its representatives, and those persons, if any, retained to advise
such QIBs with respect thereto, is unauthorized and any disclosure of its contents, without the prior written consent
of our Company, is prohibited. Any reproduction or distribution of this Preliminary Placement Document, in
whole or in part, and any disclosure of its contents to any other person is prohibited.
3
The distribution of this Preliminary Placement Document or the disclosure of its contents without the prior consent
of our Company to any person, other than QIBs specified by the Global Coordinator and Book Running Lead
Manager or its representatives, and those retained by QIBs to advise them with respect to their purchase of the
Equity Shares is unauthorised and prohibited. Each prospective investor, by accepting delivery of this Preliminary
Placement Document, agrees to observe the foregoing restrictions and make no copies of this Preliminary
Placement Document or any documents referred to in this Preliminary Placement Document.
The distribution of this Preliminary Placement Document and the issue of the Equity Shares may be restricted in
certain jurisdictions by law. As such, this Preliminary Placement Document does not constitute, and may not be
used for or in connection with, an offer or solicitation by anyone in any jurisdiction in which such offer or
solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation. In
particular, no action has been taken by our Company and the Global Coordinator and Book Running Lead
Manager which would permit an offering of the Equity Shares or distribution of this Preliminary Placement
Document in any jurisdiction, other than India, where action for that purpose is required. Accordingly, the Equity
Shares may not be offered or sold, directly or indirectly, and neither this Preliminary Placement Document nor
any offering material in connection with the Equity Shares may be distributed or published in or from any country
or jurisdiction, except under circumstances that will result in compliance with any applicable rules and regulations
of any such country or jurisdiction.
In making an investment decision, investors must rely on their own examination of our Company, our business
and the terms of the Issue, including the merits and risks involved. Investors should not construe the contents of
this Preliminary Placement Document as legal, tax, accounting or investment advice. Investors should consult
their own counsels and advisors as to business, legal, tax, accounting, investing and related matters concerning
the Issue. In addition, neither our Company nor the Global Coordinator and Book Running Lead Manager is
making any representation to any offeree or subscriber of the Equity Shares regarding the legality of an investment
in the Equity Shares by such offeree or subscriber under applicable legal, investment or similar laws or regulations.
Each subscriber of the Equity Shares in the Issue is deemed to have acknowledged, represented and agreed that it
is eligible to invest in India and in our Company under Indian law, including Chapter VIII of the SEBI ICDR
Regulations and Section 42 of the Companies Act, 2013 read with rules made thereunder, and that it is not
prohibited by SEBI or any other statutory, regulatory or judicial authority in India or any other jurisdiction from
buying, selling or dealing in the securities including the Equity Shares or otherwise accessing the capital markets
in India. Each subscriber of the Equity Shares in the Issue also acknowledges that it has been afforded an
opportunity to request from our Company and review information relating to our Company and the Equity Shares.
This Preliminary Placement Document contains summaries of certain terms of certain documents, which
summaries are qualified in their entirety by the terms and conditions of such document.
The information on our Company’s website, www.majesco.com, any website directly and indirectly linked to the
website of our Company or on the website of the Global Coordinator and Book Running Lead Manager, or their
affiliates, does not constitute nor form part of this Preliminary Placement Document. The prospective investors
should not rely on such information contained in, or available through, any such websites.
4
REPRESENTATIONS BY INVESTORS
References herein to “you” or “your” are to the prospective investors in the Issue.
By Bidding for and subscribing to any Equity Shares in the Issue, you are deemed to have represented, warranted,
acknowledged and agreed to our Company and the Global Coordinator and Book Running Lead Manager, as
follows:
You are a QIB as defined under Regulation 2(1)(zd) of the SEBI ICDR Regulations and not excluded pursuant
to Regulation 86(1)(b) of the SEBI ICDR Regulations, having a valid and existing registration under
applicable laws and regulations of India, and undertake to acquire, hold, manage or dispose of any Equity
Shares that are Allocated to you in accordance with Chapter VIII of the SEBI ICDR Regulations and
undertake to comply with the SEBI ICDR Regulations, the Companies Act and all other applicable laws,
including any reporting obligations;
If you are not a resident of India, but a QIB, you are an Eligible FPI having a valid and existing registration
with SEBI under the applicable laws in India or a multilateral or bilateral development financial institution
or an FVCI, and are eligible to invest in India under applicable law, including FEMA Regulations, and any
notifications, circulars or clarifications issued thereunder, and have not been prohibited by SEBI or any other
regulatory authority, from buying, selling or dealing in securities specifically, investments by FVCIs are
required to be made in compliance with Schedule 1 of FEMA 20.
You are eligible to invest in India under applicable laws, including the Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, as amended and any
notification, circulars or clarification issued thereunder, and have not been prohibited by SEBI or any other
regulatory authority from buying, selling or dealing in securities;
You will make all necessary filings with appropriate regulatory authorities, including the RBI, as required
pursuant to applicable laws;
If you are Allotted Equity Shares, you shall not, for a period of one year from the date of Allotment, sell the
Equity Shares so acquired except on the floor of the Stock Exchanges. Please see “Transfer Restrictions” on
page 127;
You have made, or are deemed to have made, as applicable, the representations set forth under the chapters
“Selling Restrictions” and “Transfer Restrictions” on pages 122 and 127, respectively;
You are aware that the Equity Shares have not been and will not be registered through a prospectus under the
Companies Act, the SEBI ICDR Regulations or under any other law in force in India. This Preliminary
Placement Document (which includes disclosures prescribed under Form PAS-4) has not been reviewed or
affirmed by the RBI, SEBI, the Stock Exchanges, the RoC or any other regulatory or listing authority and is
intended only for use by QIBs. The Preliminary Placement Document has been filed with the Stock
Exchanges for record purposes only and will be displayed on the websites of our Company and the Stock
Exchanges. Our Company shall make the requisite filings with the RoC and the SEBI within the stipulated
period as required under the Companies Act, 2013 and the Companies (Prospectus and Allotment of
Securities) Rules, 2014;
This Preliminary Placement Document will be filed with the Stock Exchanges for record purposes only and
this Preliminary Placement Document will be displayed on the websites of our Company and the Stock
Exchanges;
You are entitled to subscribe for and acquire the Equity Shares under the laws of all relevant jurisdictions that
apply to you and you have: (i) fully observed such laws; (ii) have the necessary capacity; and (iii) have
obtained all necessary consents, governmental or otherwise, and authorisations and complied with all
necessary formalities, to enable you to commit to participation in the Issue and to perform your obligations
in relation thereto (including, without limitation, in the case of any person on whose behalf you are acting,
all necessary consents and authorisations to agree to the terms set out or referred to in this Preliminary
Placement Document), and will honour such obligations;
5
Neither our Company nor the Global Coordinator and Book Running Lead Manager or any of their respective
shareholders, directors, officers, employees, counsels, representatives, agents or affiliates is making any
recommendations to you or advising you regarding the suitability of any transactions it may enter into in
connection with the Issue and your participation in the Issue is on the basis that you are not, and will not, up
to the Allotment, be a client of the Global Coordinator and Book Running Lead Manager. Neither the Global
Coordinator and Book Running Lead Manager nor any of its shareholders, directors, officers, employees,
counsels, representatives, agents or affiliates have any duties or responsibilities to you for providing the
protection afforded to their clients or customers or for providing advice in relation to the Issue and are not in
any way acting in any fiduciary capacity;
Neither the Company, the Global Coordinator and Book Running Lead Manager nor any of their respective
shareholders, directors, officers, employees, counsels, representatives, agents or affiliates, have provided you
with any tax advice or otherwise made any representations regarding the tax consequences of purchase,
ownership and disposal of the Equity Shares offered in the Issue (including the Issue and the use of proceeds
from such Equity Shares);
You confirm that, either: (i) you have not participated in or attended any investor meetings or presentations
by our Company or its agents (the “Company Presentations”) with regard to our Company or the Issue; or
(ii) if you have participated in or attended any Company Presentations: (a) you understand and acknowledge
that the Global Coordinator and Book Running Lead Manager may not have knowledge of the statements that
our Company or its agents may have made at such Company Presentations and are therefore unable to
determine whether the information provided to you at such Company Presentations may have included any
material misstatements or omissions, and, accordingly you acknowledge that the Global Coordinator and
Book Running Lead Manager has advised you not to rely in any way on any information that was provided
to you at such Company Presentations, and (b) confirm that you have not been provided any material
information relating to our Company and the Issue that was not publicly available;
All statements other than statements of historical fact included in this Preliminary Placement Document,
including, without limitation, those regarding our Company’s financial position, business strategy, plans and
objectives of management for future operations (including development plans and objectives relating to our
Company’s business), are forward-looking statements. Such forward-looking statements involve known and
unknown risks, uncertainties and other important factors that could cause actual results to be materially
different from future results, performance or achievements expressed or implied by such forward-looking
statements. Such forward-looking statements are based on numerous assumptions regarding our Company’s
present and future business strategies and environment in which our Company will operate in the future. You
should not place undue reliance on forward-looking statements, which speak only as at the date of this
Preliminary Placement Document. Our Company assumes no responsibility to update any of the forward-
looking statements contained in this Preliminary Placement Document;
You are aware and understand that the Equity Shares are being offered only to QIBs and are not being offered
to the general public, and the Allotment of the same shall be on a discretionary basis by the Company in
consultation with the Global Coordinator and Book Running Lead Manager;
You are aware that if you are Allotted more than 5.00% of the Equity Shares in the Issue, our Company shall
be required to disclose your name and the number of the Equity Shares Allotted to you to the Stock Exchanges
and the Stock Exchanges will make the same available on their website and you consent to such disclosures;
You have been provided a serially numbered copy of this Preliminary Placement Document and have read it
in its entirety, including in particular, the chapter “Risk Factors” on page 34;
In making your investment decision, you have (i) relied on your own examination of our Company, its
Subsidiaries and the terms of the Issue, including the merits and risks involved, (ii) made your own assessment
of our Company, the Equity Shares and the terms of the Issue based solely on the information contained in
this Preliminary Placement Document and no other disclosure or representation by our Company, its
Directors, Promoters and affiliates or any other party, (iii) consulted your own independent counsels and
advisors or otherwise have satisfied yourself concerning, without limitation, the effects of local laws, (iv)
relied solely on the information contained in this Preliminary Placement Document and no other disclosure
or representation by our Company or any other party, (v) received all information that you believe is necessary
6
or appropriate in order to make an investment decision in respect of our Company and the Equity Shares, and
(vi) relied upon your own investigation and resources in deciding to invest in the Issue;
Neither the Global Coordinator and Book Running Lead Manager nor any of its shareholders, directors,
officers, employees, counsels, representatives, agents or affiliates have provided you with any tax advice or
otherwise made any representations regarding the tax consequences of purchase, ownership and disposal of
the Equity Shares (including but not limited to the Issue and the use of the proceeds from the Equity Shares).
You will obtain your own independent tax advice from a reputable service provider and will not rely on the
Global Coordinator and Book Running Lead Manager or any of its shareholders, directors, officers,
employees, counsels, representatives, agents or affiliates when evaluating the tax consequences in relation to
the Equity Shares (including but not limited to the Issue and the use of the proceeds from the Equity Shares).
You waive, and agree not to assert any claim against our Company or the Global Coordinator and Book
Running Lead Manager or any of their respective shareholders, directors, officers, employees, counsels,
representatives, agents or affiliates with respect to the tax aspects of the Equity Shares or as a result of any
tax audits by tax authorities, wherever situated;
You are a sophisticated investor and have such knowledge and experience in financial, business and
investment matters as to be capable of evaluating the merits and risks of an investment in the Equity Shares.
You are experienced in investing in private placement transactions of securities of companies in a similar
nature of business, similar stage of development and in similar jurisdictions. You and any accounts for which
you are subscribing for the Equity Shares (i) are each able to bear the economic risk of your investment in
the Equity Shares, (ii) will not look to our Company and/or the Global Coordinator and Book Running Lead
Manager or any of its shareholders, directors, officers, employees, counsels, representatives, agents or
affiliates for all or part of any such loss or losses that may be suffered in connection with the Issue, including
losses arising out of non-performance by our Company of any of its respective obligations or any breach of
any representations and warranties by our Company, whether to you or otherwise, (iii) are able to sustain a
complete loss on the investment in the Equity Shares, (iv) have sufficient knowledge, sophistication and
experience in financial and business matters so as to be capable of evaluating the merits and risk of
subscribing to the Equity Shares offered in the Issue and (v) have no reason to anticipate any change in your
or their circumstances, financial or otherwise, which may cause or require any sale or distribution by you or
them of all or any part of the Equity Shares. You acknowledge that an investment in the Equity Shares
involves a high degree of risk and that the Equity Shares are, therefore, a speculative investment. You are
seeking to subscribe to the Equity Shares in the Issue for your own investment and not with a view to resell
or distribute;
If you are acquiring the Equity Shares to be issued pursuant to the Issue for one or more managed accounts,
you represent and warrant that you are authorised in writing, by each such managed account to acquire such
Equity Shares for each managed account and to make (and you hereby make) the representations, warranties,
acknowledgements and agreements herein for and on behalf of each such account, reading the reference to
“you” to include such accounts;
You are not a ‘promoter’ or ‘promoter group’ (as defined under the SEBI ICDR Regulations) of our Company
or any of its affiliates and are not a person related to the promoter, either directly or indirectly and your Bid
does not directly or indirectly represent the ‘Promoter’ or ‘Promoter Group’ (as defined under the SEBI ICDR
Regulations) of our Company or persons related to the Promoter;
You agree that in terms of Section 42(7) of the Companies Act, 2013, we shall file the list of QIBs (to whom
the Preliminary Placement Document has been circulated) along with other particulars with the RoC and
SEBI within 30 days of circulation of the Preliminary Placement Document and other filings required under
the Companies Act, 2013.
You have no rights under a shareholders’ agreement or voting agreement with the Promoter or persons related
to the Promoter, no veto rights or right to appoint any nominee director on the Board of Directors of our
Company other than the rights acquired, if any, in the capacity of a lender not holding any Equity Shares
which shall not be deemed to be a person related to the Promoter;
You will have no right to withdraw your Bid after the Bid/Issue Closing Date;
7
You are eligible to apply and hold the Equity Shares Allotted to you together with any Equity Shares held by
you prior to the Issue. Further, you confirm that your aggregate holding after the Allotment of the Equity
Shares shall not exceed the level permissible as per any applicable regulation;
You are aware that our Company shall make necessary filings with the RoC pursuant to the Allotment (which
shall include certain details such as your name, address and number of Equity Shares Allotted) and if the
Allotment of Equity Shares pursuant to the Issue results in you being one of the top ten shareholders of our
Company, we shall also be required to disclose your name and shareholding details to the RoC within 15 days
of Allotment, and you consent to such disclosure being made by us;
The Bid made by you would not result in triggering a tender offer under the Securities and Exchange Board
of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as amended (the “Takeover
Regulations”);
To the best of your knowledge and belief, the number of Equity Shares Allotted to you pursuant to the Issue,
together with other Allottees that belong to the same group or are under common control shall not exceed
50% of the Issue. For the purposes of this representation:
(a) the expression ‘belong to the same group’ shall derive meaning from the concept of ‘companies under
the same group’ as provided in sub-section (11) of Section 372 of the Companies Act, 1956; and
(b) ‘Control’ shall have the same meaning as is assigned to it by Regulation 2(1)(e) of the Takeover
Regulations;
You shall not undertake any trade in the Equity Shares credited to your beneficiary account until such time
that the final listing and trading approvals for such Equity Shares are issued by the Stock Exchanges;
You are aware that (i) applications for in-principle approval, in terms of Regulation 28 of the SEBI Listing
Regulations, for listing and admission of the Equity Shares and for trading on the Stock Exchanges, were
made and approval has been received from each of the Stock Exchanges, and (ii) the application for the final
listing and trading approval will be made only after Allotment. There can be no assurance that the final
approvals for listing and trading of the Equity Shares will be obtained in time or at all. Our Company shall
not be responsible for any delay or non-receipt of such final approvals or any loss arising from such delay or
non-receipt;
You are aware and understand that the Global Coordinator and Book Running Lead Manager will have
entered into a placement agreement with our Company whereby the Global Coordinator and Book Running
Lead Manager has, subject to the satisfaction of certain conditions set out therein, agreed to manage the Issue
and use their reasonable efforts as agents of our Company to procure subscriptions for the Equity Shares on
the terms and conditions set forth therein;
You understand that the contents of this Preliminary Placement Document are exclusively the responsibility
of our Company, and neither the Global Coordinator and Book Running Lead Manager nor any person acting
on its behalf has or shall have any liability for any information, representation or statement contained in this
Preliminary Placement Document or any information previously published by or on behalf of our Company
and will not be liable for your decision to participate in the Issue based on any information, representation or
statement contained in this Preliminary Placement Document or otherwise. By participating in the Issue, you
agree to the same and confirm that the only information you are entitled to rely on, and on which you have
relied in committing yourself to acquire the Equity Shares is contained in this Preliminary Placement
Document, such information being all that you deem necessary to make an investment decision in respect of
the Equity Shares, you have neither received nor relied on any other information, representation, warranty or
statement made by or on behalf of the Global Coordinator and Book Running Lead Manager or our Company
or any of their respective affiliates or any other person, and neither the Global Coordinator and Book Running
Lead Manager nor our Company nor any other person will be liable for your decision to participate in the
Issue based on any other information, representation, warranty or statement that you may have obtained or
received;
You understand that the Global Coordinator and Book Running Lead Manager does not have any obligation
to purchase or acquire all or any part of the Equity Shares purchased by you in the Issue or to support any
8
losses directly or indirectly sustained or incurred by you for any reason whatsoever in connection with the
Issue, including non-performance by us or any of our respective obligations or any breach of any
representations or warranties by us, whether to you or otherwise;
You agree that any dispute arising in connection with the Issue will be governed by and construed in
accordance with the laws of India, and the courts in Mumbai, India shall have exclusive jurisdiction to settle
any disputes which may arise out of or in connection with this Preliminary Placement Document and the
Placement Document;
Each of the representations, warranties, acknowledgements and agreements set out above shall continue to be
true and accurate at all times up to and including the Allotment, listing and trading of the Equity Shares in
the Issue;
You agree to indemnify and hold our Company and the Global Coordinator and Book Running Lead Manager
and their respective employees, officers, directors, affiliates, agents, associates and representatives harmless
from any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or
in connection with any breach of the foregoing representations, warranties, acknowledgements and
undertakings made by you in this Preliminary Placement Document. You agree that the indemnity set forth
in this paragraph shall survive the resale of the Equity Shares by, or on behalf of, the managed accounts; and
Our Company, the Global Coordinator and Book Running Lead Manager, their respective affiliates and others
will rely on the truth and accuracy of the foregoing representations, warranties, acknowledgements and
undertakings, which are given to the Global Coordinator and Book Running Lead Manager on its own behalf
and on behalf of our Company, and are irrevocable.
OFFSHORE DERIVATIVE INSTRUMENTS
Subject to compliance with all applicable Indian laws, rules, regulations, guidelines and approvals in terms of
Regulation 22 of the SEBI FPI Regulations, FPIs (which include FIIs) other than Category III Foreign Portfolio
Investors (as defined hereinafter) and unregulated broad based funds, which are classified as Category II foreign
portfolio investor (as defined under the SEBI FPI Regulations) by virtue of their investment manager being
appropriately regulated, including the affiliates of the Global Coordinator and Book Running Lead Manager, may
issue, subscribe or otherwise deal in offshore derivative instruments (as defined under the SEBI FPI Regulations
as any instrument, by whatever name called, which is issued overseas by an FPI against securities held by it that
are listed or proposed to be listed on any recognised stock exchange in India, as its underlying) (all such offshore
derivative instruments are referred to herein as “P-Notes”), for which they may receive compensation from the
purchasers of such instruments. Further, in accordance with SEBI Circular dated November 24, 2014, FPIs shall
issue P-Notes to only those subscribers which meet the eligibility criteria as laid down in Regulation 4 of the SEBI
FPI Regulations and which do not have any opaque structure(s), as defined under the SEBI FPI Regulations. P-
Notes may be issued only in favour of those entities which are regulated by any appropriate foreign regulatory
authorities in the countries of their incorporation, subject to compliance with ‘know your client’ requirements. An
FPI shall also ensure that no further issue or transfer of any instrument referred to above is made to any person
other than such entities regulated by appropriate foreign regulatory authorities. P-Notes have not been, and are
not being offered, or sold pursuant to this Preliminary Placement Document. This Preliminary Placement
Document does not contain any information concerning P-Notes or the issuer(s) of any P-notes, including any
information regarding any risk factors relating thereto.
In terms of the SEBI FPI Regulations, the issue of Equity Shares to a single FPI or an investor group (which means
the same set of ultimate beneficial owner(s) investing through multiple entities) is not permitted to be 10% or
above of our post-Issue Equity Share capital. As per the circular issued by SEBI on November 24, 2014, these
investment restrictions shall also apply to subscribers of offshore derivative instruments. Two or more subscribers
of offshore derivative instruments having a common beneficial owner shall be considered together as a single
subscriber of the offshore derivative instruments. In the event an investor has investments as a FPI and as a
subscriber of offshore derivative instruments, these investment restrictions shall apply on the aggregate of the FPI
and offshore derivative instruments investments held in the underlying company.
Any P-Notes that may be issued are not securities of our Company and do not constitute any obligation of, claims
on or interests in our Company. Our Company has not participated in any offer of any P-Notes, or in the
9
establishment of the terms of any P-Notes, or in the preparation of any disclosure related to any P-Notes. Any P-
Notes that may be offered are issued by, and are the sole obligations of, third parties that are unrelated to our
Company. Our Company and the Global Coordinator and Book Running Lead Manager do not make any
recommendation as to any investment in P-Notes and do not accept any responsibility whatsoever in connection
with any P-Notes. Any P-Notes that may be issued are not securities of the Global Coordinator and Book Running
Lead Manager and do not constitute any obligations of or claims on the Global Coordinator and Book Running
Lead Manager. Affiliates of the Global Coordinator and Book Running Lead Manager which are Eligible FPIs
may purchase, to the extent permissible under law, the Equity Shares in the Issue, and may issue P-Notes in respect
thereof.
Prospective investors interested in purchasing any P-Notes have the responsibility to obtain adequate
disclosures as to the issuer(s) of such P-Notes and the terms and conditions of any such P-Notes from the
issuer(s) of such P-Notes. Neither SEBI nor any other regulatory authority has reviewed or approved any
P-Notes or any disclosure related thereto. Prospective investors are urged to consult their own financial,
legal, accounting and tax advisors regarding any contemplated investment in P-Notes, including whether
P-Notes are issued in compliance with applicable laws and regulations.
DISCLAIMER CLAUSE OF THE STOCK EXCHANGES
As required, a copy of this Preliminary Placement Document has been submitted to each of the Stock Exchanges.
The Stock Exchanges do not in any manner:
1. warrant, certify or endorse the correctness or completeness of the contents of this Preliminary Placement
Document;
2. warrant that the Equity Shares will be listed or will continue to be listed on the Stock Exchanges; or
3. take any responsibility for the financial or other soundness of our Company, its promoter, its management or
any scheme or project of our Company;
and it should not for any reason be deemed or construed to mean that this Preliminary Placement Document has
been cleared or approved by the Stock Exchanges. Every person who desires to apply for or otherwise acquire
any Equity Shares may do so pursuant to an independent inquiry, investigation and analysis and shall not have
any claim against the Stock Exchanges whatsoever, by reason of any loss which may be suffered by such person
consequent to or in connection with, such subscription/acquisition, whether by reason of anything stated or omitted
to be stated herein, or for any other reason whatsoever.
10
CERTAIN CONVENTIONS, PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA,
CURRENCY OF PRESENTATION AND EXCHANGE RATES
In this Preliminary Placement Document, unless otherwise specified or the context otherwise indicates or implies,
references to ‘you’, ‘your’, ‘offeree’, ‘purchaser’, ‘subscriber’, ‘recipient’, ‘investors’, ‘prospective investors’ and
‘potential investor’ are to the prospective investors in the Issue, references to the ‘Company’, ‘Majesco’ or the
‘Issuer’ are to Majesco Limited, references to “Majesco US” are to Majesco, a California corporation and its
subsidiaries and references to ‘we’, ‘us’ or ‘our’ are to our Company together with our Subsidiaries on a
consolidated basis.
In this Preliminary Placement Document, references to ‘`’, ‘INR’, ‘Rs.’, ‘Indian Rupees’ and ‘Rupees’ are to the
legal currency of India and references to ‘US$’, ‘USD’ and ‘U.S. dollars’ are to the legal currency of the United
States of America. All references herein to the ‘US’ or ‘U.S.’ or the ‘United States’ are to the United States of
America and its territories and possessions. All references herein to ‘India’ are to the Republic of India and its
territories and possessions and the ‘Government’ or the ‘Central Government’ or the ‘State Government’ are to
the Government of India, central or state, as applicable.
References to the singular also include references to the plural and one gender also refers to any other gender,
wherever applicable. All the numbers (except U.S. dollar numbers) in this Preliminary Placement Document have
been presented in million or whole numbers where the numbers have been too small to present in millions, unless
stated otherwise. One million represents 1,000,000 and one billion represents 1,000,000,000. Unless stated
otherwise, all references to page numbers in this Preliminary Placement Document are to the page numbers of this
Preliminary Placement Document.
The financial year of our Company commences on April 1 of each calendar year and ends on March 31 of the
following calendar year, and, unless otherwise specified or if the context requires otherwise, all references to a
particular ‘financial year’, ‘Fiscal’ or ‘FY’ are to the twelve month period ended on March 31 of that year and
references to a particular ‘year’ are to the calendar year ending on December 31 of that year.
Financial Data
Our Company publishes its financial statements in Indian Rupees. The following financial statements of our
Company have been disclosed in this Preliminary Placement Document:
(a) Audited Financial Statements; and
(b) Consolidated unaudited financial results.
Unless otherwise indicated or the context requires otherwise in this Preliminary Placement Document, all financial
data as of and for the years ended March 31, 2017 and 2016 is extracted or derived from our Audited Financial
Statements, including the notes thereto and reports thereon, and consolidated unaudited financial results of and
for the quarter and six month period ended September 30, 2017 is extracted or derived from our Consolidated
Unadiuted Financial Results, including the notes thereto and reports thereon.
Prior to April 1, 2017, we prepared our financial statements in accordance with Indian GAAP and the Companies
Act. With effect from April 1, 2017, we adopted Ind-AS as notified under the Companies Act and, accordingly,
our financial statements as of the quarter and six months period ended September 30, 2017 have been prepared in
accordance with Ind-AS and the Companies Act. Ind-AS and Indian GAAP differ in certain significant respects
from each other and from International Financial Reporting Standards (“IFRS”) and U.S. GAAP and other
accounting principles with which prospective investors may be familiar. Further, the degree to which the financial
statements prepared in accordance with Ind-AS and Indian GAAP included in this Preliminary Placement
Document provide meaningful information is dependent on the reader’s familiarity with the respective accounting
policies. Any reliance by persons not familiar with Indian accounting practices on the financial disclosures
presented in this Preliminary Placement Document should accordingly be limited.
We have also included the consolidated financial statements of our Subsidary, Majesco US as of and for Fiscals
2017, 2016 and 2015 and as of and for the six months ended September 30, 2017 and September 30, 2016, each
prepared in conformity with accounting principles generally accepted in the United States of America (“US
GAAP”). The Financial Statements of Majesco US are published in US$.
11
In this Preliminary Placement Document, certain monetary thresholds have been subjected to rounding
adjustments; accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the
figures which precede them.
12
INDUSTRY AND MARKET DATA
Information included in this Preliminary Placement Document regarding market position, growth rates and other
industry data pertaining to our businesses consists of estimates based on data reports compiled by government
bodies, professional organisations and analysts, data from other external sources and knowledge of the markets in
which we operate. Unless stated otherwise, statistical information included in this Preliminary Placement
Document pertaining to the various sectors in which we operate has been reproduced from trade, industry and
government publications and websites. We confirm that such information and data has been accurately
reproduced, and that as far as they are aware and are able to ascertain from information published by third parties,
no facts have been omitted that would render the reproduced information inaccurate or misleading. Although we
believe that the industry data used in this Preliminary Placement Document is reliable, it has not been
independently verified by the Company, the Global Coordinator and Book Running Lead Manager or any of their
respective affiliates or advisors.
This information is subject to change and cannot be verified with complete certainty due to limits on the
availability and reliability of the raw data and other limitations and uncertainties inherent in any statistical survey.
In many cases, there is no readily available external information (whether from trade or industry associations,
government bodies or other organisations) to validate market-related analysis and estimates, so we have relied on
internally developed estimates.
Neither we nor the Global Coordinator and Book Running Lead Manager have independently verified this data,
nor do we or the Global Coordinator and Book Running Lead Manager make any representation regarding the
accuracy of such data. Similarly, while our Company believes its internal estimates to be reasonable, such
estimates have not been verified by any independent sources, and neither we nor the Global Coordinator and Book
Running Lead Manager can assure potential investors as to their accuracy.
The extent to which the market and industry data used in this Preliminary Placement Document is meaningful
depends on the reader’s familiarity with and understanding of the methodologies used in compiling such data.
There are no standard data gathering methodologies in the industry in which we conduct our business, and
methodologies and assumptions may vary widely among different industry sources.
Such data involves risks, uncertainties and numerous assumptions and is subject to change based on various
factors, including those disclosed in “Risk Factors” beginning on page 34. Accordingly, investment decisions
should not be based on such information.
13
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Preliminary Placement Document that are not statements of historical fact
constitute ‘forward-looking statements’. Investors can generally identify forward-looking statements by
terminology such as ‘aim’, ‘anticipate’, ‘believe’, ‘continue’, ‘can’, ‘could’, ‘estimate’, ‘expect’, ‘intend’, ‘may’,
‘objective’, ‘plan’, ‘potential’, ‘project’, ‘pursue’, ‘shall’, ‘should’, ‘will’, ‘would’, or other words or phrases of
similar import. Similarly, statements that describe the strategies, objectives, plans or goals of our Company are
also forward-looking statements. However, these are not the exclusive means of identifying forward-looking
statements.
All statements regarding our expected financial conditions, results of operations, business plans and prospects are
forward-looking statements. These forward-looking statements include statements as to our Company’s business
strategy, planned projects, revenue and profitability (including, without limitation, any financial or operating
projections or forecasts), new business and other matters discussed in this Preliminary Placement Document that
are not historical facts. These forward-looking statements contained in this Preliminary Placement Document
(whether made by our Company or any third party), are predictions and involve significant risks, uncertainties,
assumptions and other factors that may cause the actual results, performance or achievements of our Company to
be materially different from any future results, performance or achievements expressed or implied by such
forward-looking statements or other projections. All forward-looking statements are subject to risks, uncertainties
and assumptions about our Company that could cause actual results to differ materially from those contemplated
by the relevant forward-looking statement. Important factors that could cause the actual results, performances and
achievements of our Company to be materially different from any of the forward-looking statements include,
among others:
1. our ability to achieve increased market penetration for our product and service offerings and obtain new
customers;
2. our ability to raise future capital as needed to fund our growth and innovation plans;
3. growth prospects of the property & casualty and life & annuity insurance industry;
4. the strength and potential of our technology platform and our ability to innovate and anticipate future
customer needs;
5. our ability to protect our intellectual property rights;
6. our ability to compete successfully against other providers and products;
7. our dependence on certain key customers and the risk of loss of these customers;
8. the unauthorized disclosure of sensitive or confidential customer data and cybersecurity risks;
9. the risk of telecommunications or technology disruptions;
10. our ability to identify and complete acquisitions, manage growth and successfully integrate acquisitions;
11. our financial condition, financing requirements and cash flow;
12. market expectations regarding our potential growth and ability to implement our short and long-term
strategies;
13. the risk of loss of strategic relationships;
14. the success of our research and development investments;
15. changes in economic conditions, political conditions and trade protection measures and licensing
requirements in the jurisdictions in which we operate;
16. changes in laws or regulations affecting the insurance industry in particular;
17. changes in tax laws, including to the transfer pricing regime;
18. restrictions and changes in laws on immigration;
19. our inability to achieve sustained profitability;
20. our ability to obtain, use or successfully integrate third-party licensed technology;
21. our ability and cost of retaining and recruiting key personnel or the risk of loss of such key personnel;
22. the risk that our customers internally develop new inventions and competitive products;
23. the impact of new accounting standards and changes we may need to make in anticipation or as a result of
these standards; and
24. fluctuations in the exchange rates of the Rupee against the U.S. dollar and other currencies.
Additional factors that could cause actual results, performance or achievements of our Company to differ
materially include, but are not limited to, those discussed under the chapters “Risk Factors”, “Industry Overview”,
“Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
on pages 34, 86, 88 and 60, respectively.
The forward-looking statements contained in this Preliminary Placement Document are based on the beliefs of
14
management, as well as the assumptions made by, and information currently available to, management of our
Company. Although our Company believes that the expectations reflected in such forward-looking statements are
reasonable at this time, it cannot assure investors that such expectations will prove to be correct. Given these
uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements. In any
event, these statements speak only as of the date of this Preliminary Placement Document or the respective dates
indicated in this Preliminary Placement Document, and our Company undertakes no obligation to update or revise
any of them, whether as a result of new information, future events, changes in assumptions or changes in factors
affecting these forward looking statements or otherwise. If any of these risks and uncertainties materialise, or if
any of our Company’s underlying assumptions prove to be incorrect, the actual results of operations or financial
condition of our Company could differ materially from that described herein as anticipated, believed, estimated
or expected. All subsequent forward-looking statements attributable to our Company are expressly qualified in
their entirety by reference to these cautionary statements.
15
ENFORCEMENT OF CIVIL LIABILITIES
We are a public limited company incorporated under the laws of India. Most of our Directors and key managerial
personnel of our Company named herein are residents of India and a substantial portion of the assets of our
Company and of such persons are located in India. As a result, it may be difficult or may not be possible for
investors outside India to effect service of process upon our Company or such persons in India, or to enforce
judgments obtained against such parties outside India.
Recognition and enforcement of foreign judgments is provided for under Section 13 and Section 44A of the Civil
Procedure Code, 1908, as amended, on a statutory basis. Section 13 of the Civil Procedure Code provides that a
foreign judgment shall be conclusive regarding any matter directly adjudicated upon between the same parties or
parties litigating under the same title, except: (i) where the judgment has not been pronounced by a court of
competent jurisdiction; (ii) where the judgment has not been given on the merits of the case; (iii) where it appears
on the face of the proceedings that the judgment is founded on an incorrect view of international law or a refusal
to recognise the law of India in cases in which such law is applicable; (iv) where the proceedings in which the
judgment was obtained were opposed to natural justice; (v) where the judgment has been obtained by fraud; and
(vi) where the judgment sustains a claim founded on a breach of any law then in force in India. A foreign judgment
which is conclusive under Section 13 of the Civil Procedure Code may be enforced either by a fresh suit upon the
judgment or by proceedings in execution. The suit must be brought in India within three (3) years from the date
of the judgment by a court in the United States in the same manner as any other suit filed to enforce a civil liability
in India.
India is not a party to any international treaty in relation to the recognition or enforcement of foreign judgments.
However, Section 44A of the Civil Procedure Code provides that a foreign judgment rendered by a superior court
(within the meaning of that section) in any jurisdiction outside India which the Government has by notification
declared to be a reciprocating territory, may be enforced in India by proceedings in execution as if the judgment
had been rendered by a competent court in India. However, Section 44A of the Civil Procedure Code is applicable
only to monetary decrees not being in the nature of any amounts payable in respect of taxes or other charges of a
like nature or in respect of a fine or other penalties and does not include arbitration awards.
Each of the United Kingdom, Singapore and Hong Kong has been declared by the Government to be a
reciprocating territory for the purposes of Section 44A of the Civil Procedure Code, but the United States of
America has not been so declared. A judgment of a court in a jurisdiction which is not a reciprocating territory
may be enforced only by a fresh suit upon the judgment and not by proceedings in execution. The suit must be
brought in India within three years from the date of the foreign judgment in the same manner as any other suit
filed to enforce a civil liability in India. It is unlikely that a court in India would award damages on the same basis
as a foreign court if an action is brought in India. Furthermore, it is unlikely that an Indian court would enforce
foreign judgments if it viewed the amount of damages awarded as excessive or inconsistent with public policy.
Further, any judgment or award in a foreign currency would be converted into Rupees on the date of such judgment
or award and not on the date of payment. A party seeking to enforce a foreign judgment in India is required to
obtain approval from the RBI to repatriate outside India any amount recovered, and any such amount may be
subject to income tax in accordance with applicable laws.
16
EXCHANGE RATES
Fluctuations in the exchange rate between the Rupee and foreign currencies will affect the foreign currency
equivalent of the Rupee price of the Equity Shares on the Stock Exchanges. These fluctuations will also affect the
conversion into foreign currencies of any cash dividends paid in Rupees on the Equity Shares.
The following table sets forth information with respect to the exchange rates between the Rupee and the U.S.
dollar (in ` per US$), for the periods indicated. The exchange rates are based on the reference rates released by
RBI. No representation is made that any Rupee amounts could have been, or could be, converted into U.S. dollars
at any particular rate, the rates stated below, or at all. As on January 22, 2018 the exchange rate (RBI reference
rate) was ` 63.89 to US$ 1.00. (` Per US$)
Period end Average(1) High(2) Low(3)
Fiscal:
2017 64.84 67.09 68.72 64.84
2016 66.33 65.46 68.78 62.16
Quarter ended:
December 31, 2017 63.93 64.74 65.55 63.93
September 30, 2017 65.36 64.29 65.76 63.63
Month ended:
December 31, 2017 63.93 64.24 64.54 63.93
November 30, 2017 64.43 64.86 65.52 64.41
October 31, 2017 64.77 65.08 65.55 64.76
September 30, 2017 65.36 64.44 65.76 63.87
August 31, 2017 64.02 63.97 64.24 63.63
July 31, 2017 64.08 64.46 64.82 64.08
(Source: www.rbi.org.in) (1) Average of the official rate for each working day of the relevant period. (2) Maximum of the official rate for each working day of the relevant period. (3) Minimum of the official rate for each working day of the relevant period.
Note:
1. If the RBI reference rate is not available on a particular date due to a public holiday, exchange rates of the previous
working day has been disclosed.
2. High, low and average are based on the RBI reference rates and rounded off to two decimal places.
17
DEFINITIONS AND ABBREVIATIONS
This Preliminary Placement Document uses the definitions and abbreviations set forth below which you should
consider when reading the information contained herein. References to any legislation, act or regulation shall be
to such legislation, act or regulation as amended from time to time.
Company Related Terms
Term Description
“Company”, “Issuer”,
“Majesco Limited”
Majesco Limited, formerly known as Minefields Computers Limited, a public limited
company incorporated under the Companies Act, 1956 and having its registered and
corporate office at Mastek New Development Centre, MBP-P-136, Mahape, Navi
Mumbai - 400 710, Maharashtra, India
Articles or Articles of
Association
Articles of association of our Company, as amended from time to time
Auditors/ Statutory
Auditors
The Statutory Auditors of our Company, namely M/s. Varma & Varma, Chartered
Accountants
Board of Directors or
Board
The board of directors of our Company or any duly constituted committee thereof
Corporate Office The registered office and corporate office of our Company located at Mastek New
Development Centre, MBP-P-136, Mahape, Navi Mumbai - 400 710, Maharashtra,
India
Directors The directors of our Company
Equity Shares Equity shares of our Company having a face value of ` 5 each
ESOP Scheme Employee Stock Option Scheme of Majesco Limited - Plan I
Majesco US Majesco, incorporated in April, 1992 in California, United States of America under the
name ‘Mastek Software, Inc.’. The name of the company was changed to ‘Majesco
Software, Inc.’ in 1995, ‘MajescoMastek’ in 2006 and to ‘Majesco’ in 2014
Memorandum or
Memorandum of
Association
Memorandum of association of our Company, as amended from time to time
Promoter Group Promoter group of our Company as per the definition provided in Regulation 2(1)(zb)
of the SEBI ICDR Regulations
Promoters Promoters of our Company, namely Sudhakar Ram, Ketan Mehta, Ashank Desai and
Radhakrishnan Sundar
Registered Office The registered office and corporate office of our Company located at Mastek New
Development Centre, MBP-P-136, Mahape, Navi Mumbai - 400 710, Maharashtra,
India
Subsidiaries Following subsidiaries (as per AS 21):
Indian subsidiaries:
1. Majesco Software and Solutions India Private Limited
Foreign subsidiaries:
2.Majesco US
3. Cover-All Systems, Inc.
4. Majesco Sdn Bhd
5.Majesco Canada Ltd.
6. Majesco Software and Solutions Inc.
6. Majesco Asia Pacific Pte. Ltd.
7. Majesco (UK) Ltd
8. Majesco (Thailand) Co., Ltd
“we”/ “us”/ “our” Our Company and its Subsidiaries, on a consolidated basis
Issue Related Terms
18
Term Description
Allocated/ Allocation The allocation of Equity Shares following the determination of the Issue Price to QIBs
on the basis of the Application Form submitted by them, by our Company in
consultation with the Global Coordinator and Book Running Lead Manager and in
compliance with Chapter VIII of the SEBI ICDR Regulations
Allot/ Allotment/
Allotted
Unless the context otherwise requires, the issue and allotment of Equity Shares to be
issued pursuant to the Issue
Allottees QIBs to whom Equity Shares are issued and Allotted pursuant to the Issue
Application Form The form (including any revisions thereof) pursuant to which a QIB shall submit a Bid
for the Equity Shares in the Issue
Bid(s) Indication of interest of a QIB, including all revisions and modifications thereto, as
provided in the Application Form, to subscribe for the Equity Shares
Bid/Issue Closing Date [●], 2018, which is the last date up to which the Application Forms shall be accepted
Bid/Issue Opening Date January 23, 2018
Bid/Issue Period Period between the Bid/Issue Opening Date and the Bid/Issue Closing Date, inclusive
of both days, during which prospective Bidders can submit their Bids
Bidder Any prospective investor, a QIB, who makes a Bid pursuant to the terms of the
Preliminary Placement Document and the Application Form
CAN or Confirmation
of Allocation Note
Note or advice or QIBs confirming Allocation of Equity Shares to such QIBs after
determination of the Issue Price and requesting payment for the entire applicable Issue
Price for all Equity Shares Allocated to such QIBs
Closing Date The date on which Allotment of Equity Shares pursuant to the Issue shall be made, i.e.
on or about [●], 2018
Cut-off Price The Issue Price of the Equity Shares to be issued pursuant to the Issue which shall be
finalised by our Company in consultation with the Global Coordinator and Book
Running Lead Manager
Designated Date The date of credit of Equity Shares to the QIB’s demat account, as applicable to the
respective QIBs
Escrow Agent ICICI Bank Limited
Escrow Account The account entitled “Majesco Ltd – QIP 2018 Escrow Account” with regard to any
money received towards the subscription of the Equity Shares, opened with the Escrow
Agent, subject to the terms of the Escrow Agreement
Escrow Agreement Agreement dated January 23, 2018, entered into amongst our Company, the Escrow
Agent and the Global Coordinator and Book Running Lead Manager for collection of
the Bid Amounts and for remitting refunds, if any, of the amounts collected, to the
Bidders
Floor Price The floor price of ` 532 which has been calculated in accordance with Chapter VIII of
the SEBI ICDR Regulations. In terms of the SEBI ICDR Regulations, the Issue Price
cannot be lower than the Floor Price. Our Company may offer a discount of not more
than 5.00% on the Floor Price of ` 532 in terms of Regulation 85 of the SEBI ICDR
Regulations
Global Coordinator and
Book Running Lead
Manager/ GCBRLM
Edelweiss Financial Services Limited
Issue The offer, issue and Allotment of [●] Equity Shares to QIBs pursuant to Chapter VIII
of the SEBI ICDR Regulations and the provisions of the Companies Act, 2013
Issue Price ` [●] per Equity Share
Issue Size The issue of [●] Equity Shares aggregating approximately ` [●]
Mutual Fund A mutual fund registered with SEBI under the Securities and Exchange Board of India
(Mutual Funds) Regulations, 1996
Mutual Fund Portion 10.00% of the Equity Shares proposed to be Allotted in the Issue, which is available for
Allocation to Mutual Funds
Pay-in Date The last date specified in the CAN for payment of application monies by the QIBs
Placement Agreement Agreement dated January 23, 2018 entered into between our Company and the Global
Coordinator and Book Running Lead Manager
Placement Document The placement document to be issued by our Company in accordance with Chapter VIII
of the SEBI ICDR Regulations and Section 42 of the Companies Act, 2013
Preliminary Placement This preliminary placement document dated January 23, 2018 issued in accordance with
19
Term Description
Document Chapter VIII of the SEBI ICDR Regulations, Section 42 of the Companies Act, 2013
and rules made thereunder
QIBs or Qualified
Institutional Buyers
Qualified institutional buyers as defined under Regulation 2(1)(zd) of the SEBI ICDR
Regulations or such other persons as maybe permitted by applicable laws to acquire the
Equity Shares to be issued pursuant to the Issue
QIP Qualified institutions placement under Chapter VIII of the SEBI ICDR Regulations
Relevant Date January 23, 2018, which is the date of the meeting of the Board, or any committee duly
authorised by the Board, deciding to open the Issue
Uniform Listing
Agreement(s)
The agreement(s) entered into between our Company and the Stock Exchanges in
relation to listing of the Equity Shares to be issued pursuant to the Issue on the Stock
Exchanges
Industry Related Terms
Term Description
AI Artificial intelligence
C&F Clearing and forwarding
DIT Department of Income Tax
Fax Facsimile
L&A Life and annuities
ISO Insurance Services Office
P&C Property and casualty/general insurance
PCE Private consumption expenditure
Sr. Senior
Tel. Telephone
Conventional and General Terms/Abbreviations
Term Description
` / Rupees / INR/ Rs. Indian Rupees
AGM Annual general meeting
AIF(s) Alternative investment funds, as defined and registered with SEBI under the Securities
and Exchange Board of India (Alternative Investment Funds) Regulations, 2012
AS Accounting Standards issued by the Institute of Chartered Accountants of India
ASBA Application supported by blocked amount
AY Assessment Year
BSE BSE Limited
Calendar Year Year ending on December 31
Category III Foreign
Portfolio Investor
An FPI registered as a category III foreign portfolio investor under the SEBI FPI
Regulations
CCI Competition Commission of India
CDSL Central Depository Services (India) Limited
CEO Chief executive officer
CFO Chief financial officer
CII Confederation of Indian Industry
CIN Corporate identity number
Civil Procedure Code The Code of Civil Procedure, 1908
Companies Act The Companies Act, 1956 or the Companies Act, 2013, as applicable
Companies Act, 1956 The Companies Act, 1956 and the rules made thereunder (without reference to the
provisions thereof that have ceased to have effect upon notification of the Notified
Sections)
Companies Act, 2013 The Companies Act, 2013 and the rules made thereunder, to the extent in force
pursuant to notification of the Notified Sections
Competition Act The Competition Act, 2002
CSR Corporate Social Responsibility
CRISIL Credit Rating Information Services of India Limited
Depositories Act The Depositories Act, 1996
20
Term Description
Depository A depository registered with SEBI under the Securities and Exchange Board of India
(Depositories and Participant) Regulations, 1996
Depository Participant A depository participant as defined under the Depositories Act
EBITDA Earnings before interest, tax, depreciation and amortisation
ECB External commercial borrowing
ECS Electronic clearing service
EGM Extraordinary General Meeting
Eligible FPIs FPIs that are eligible to participate in this Issue and do not include qualified foreign
investors and Category III Foreign Portfolio Investors who are not allowed to
participate in the Issue
EPS Earnings per share
FDI Foreign direct investment
FDI Policy Consolidated Foreign Direct Investment Policy notified under Circular No. D/o IPP F.
No. 5(1)/2017-FC-1, effective from August 28, 2017
FEDAI Foreign Exchange Dealers’ Association of India
FEMA The Foreign Exchange Management Act, 1999, and the regulations issued thereunder
FEMA Regulations The Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident Outside India) Regulations, 2000
FICCI Federation of Indian Chambers of Commerce and Industry
FIIs Foreign institutional investors as defined under the SEBI FPI Regulations
Financial Year or Fiscal Period of 12 months ended March 31 of that particular year, unless otherwise stated
FIPB Foreign Investment Promotion Board of the Ministry of Finance, Government of India
Form PAS-4 Form PAS-4 as prescribed under the Companies (Prospectus and Allotment of
Securities) Rules, 2014
FPI A foreign portfolio investor as defined under the SEBI FPI Regulations
FVCI Foreign venture capital investors as defined and registered with SEBI under the
Securities and Exchange Board of India (Foreign Venture Capital Investors)
Regulations, 2000
GAAP Generally accepted accounting principles
GAAR General Anti-Avoidance Rules
GDP Gross Domestic Product
GoI/Government Government of India, unless otherwise specified
GST Goods and services tax; a proposed reform to Indian tax laws relating to indirect taxes
on goods and services
HR Human resources
HUF Hindu Undivided Family
ICAI The Institute of Chartered Accountants of India
IFRS International Financial Reporting Standards of the International Accounting Standards
Board
IMF International Monetary Fund
IND-AS Indian accounting standards converged with IFRS, which has been proposed for
implementation by the ICAI
Indian GAAP Generally accepted accounting principles in India as applicable to banks
IT Information Technology
Income Tax Act The Income Tax Act, 1961
Insider Trading
Regulations
The Securities and Exchange Board of India (Prohibition of Insider Trading)
Regulations, 2015
ITAT Income Tax Appellate Tribunal
MAT Minimum alternate tax
MCA The Ministry of Corporate Affairs, Government of India
MoU Memorandum of understanding
MSEs Micro and small enterprises
NEFT National electronic fund transfer
Notified Sections Sections of the Companies Act, 2013 that have been notified by the Government of
India
NRI Non-resident Indian
21
Term Description
NSDL National Securities Depository Limited
NSE The National Stock Exchange of India Limited
PAN Permanent account number
RBI Reserve Bank of India
Regulation S Regulation S under the Securities Act
RoC Registrar of Companies, Maharashtra at Mumbai
SCR (SECC) Rules Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations)
Regulations, 2012, notified by the SEBI
SCRA Securities Contracts (Regulation) Act, 1956
SCRR Securities Contracts (Regulation) Rules, 1957
SEBI Securities and Exchange Board of India
SEBI Act The Securities and Exchange Board of India Act, 1992
SEBI FPI Regulations The Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations,
2014
SEBI ICDR Regulations The Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2009 as amended
SEBI Listing
Regulations
The Securities and Exchange Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015 as amended
SEC United States Securities and Exchange Commission
Securities Act The U.S. Securities Act of 1933, as amended
Stock Exchanges BSE and NSE
STT Securities Transaction Tax
Takeover Regulations Securities and Exchange Board of India (Substantial Acquisition of Shares and
Takeover) Regulations 2011
U.K. United Kingdom
U.S. $/U.S. dollar/USD United States Dollar, the legal currency of the United States of America
U.S. GAAP Generally accepted accounting principles in the United States of America
USA/U.S./United States The United States of America
VCF Venture Capital Fund as defined and registered with Securities and Exchange Board
of India (Venture Capital Funds) Regulations, 1996 or the Securities and Exchange
Board of India (Alternative Investment Funds) Regulations, 2012, as the case may be
22
DISCLOSURE REQUIREMENTS UNDER FORM PAS-4 PRESCRIBED UNDER THE COMPANIES ACT
The table below sets out the disclosure requirements as provided in Form PAS-4 and the relevant pages in this
Preliminary Placement Document where these disclosures, to the extent applicable, have been provided.
Sr.
No.
Disclosure Requirements Relevant Page of this
Preliminary Placement
Document
1. GENERAL INFORMATION
a. Name, address, website and other contact details of the company indicating
both registered office and corporate office.
Cover, 17, 150
b. Date of incorporation of the company. Cover, 150
c. Business carried on by the company and its subsidiaries with the details of
branches or units, if any.
88
d. Brief particulars of the management of the company. 99
e. Names, addresses, DIN and occupations of the directors. 99, 100
f. Management’s perception of risk factors. 34
g. Details of default, if any, including therein the amount involved, duration of
default and present status, in repayment of:
(i) Statutory dues; 148
(ii) Debentures and interest thereon; 148
(iii) Deposits and interest thereon; and 148
(iv) Loan from any bank or financial institution and interest thereon. 148
h. Names, designation, address and phone number, email ID of the nodal/
compliance officer of the company, if any, for the private placement offer
process.
Cover, 151
2. PARTICULARS OF THE OFFER
a. Date of passing of board resolution. 150
b. Date of passing of resolution in the general meeting, authorising the offer of
securities.
150
c. Kinds of securities offered (i.e. whether share or debenture) and class of
security.
25
d. Price at which the security is being offered including the premium, if any, along
with justification of the price.
25
e. Name and address of the valuer who performed valuation of the security
offered.
NA
f. Amount which the company intends to raise by way of securities. 25
g. Terms of raising of securities:
(i) Duration, if applicable; NA
(ii) Rate of dividend; NA
(iii) Rate of interest; NA
(iv) Mode of payment; and NA
(v) Repayment. NA
h. Proposed time schedule for which the offer letter is valid. 26
i. Purposes and objects of the offer. 54
j. Contribution being made by the promoters or directors either as part of the offer
or separately in furtherance of such objects.
54
k. Principle terms of assets charged as security, if applicable. NA
3. DISCLOSURES WITH REGARD TO INTEREST OF DIRECTORS, LITIGATION ETC
a. Any financial or other material interest of the directors, promoters or key
managerial personnel in the offer and the effect of such interest in so far as it
is different from the interests of other persons.
101, 102
b. Details of any litigation or legal action pending or taken by any Ministry or
Department of the Government or a statutory authority against any promoter
of the offeree company during the last three years immediately preceding the
year of the circulation of the offer letter and any direction issued by such
148
23
Sr.
No.
Disclosure Requirements Relevant Page of this
Preliminary Placement
Document
Ministry or Department or statutory authority upon conclusion of such
litigation or legal action shall be disclosed.
c. Remuneration of directors (during the current year and last three financial
years).
101
d. Related party transactions entered during the last three financial years
immediately preceding the year of circulation of offer letter including with
regard to loans made or, guarantees given or securities provided.
103
e. Summary of reservations or qualifications or adverse remarks of auditors in the
last five financial years immediately preceding the year of circulation of offer
letter and of their impact on the financial statements and financial position of
the company and the corrective steps taken and proposed to be taken by the
company for each of the said reservations or qualifications or adverse remark.
85
f. Details of any inquiry, inspections or investigations initiated or conducted
under the Companies Act or any previous company law in the last three years
immediately preceding the year of circulation of offer letter in the case of
company and all of its subsidiaries. Also if there were any prosecutions filed
(whether pending or not) fines imposed, compounding of offences in the last
three years immediately preceding the year of the offer letter and if so, section-
wise details thereof for the company and all of its subsidiaries.
148
g. Details of acts of material frauds committed against the company in the last
three years, if any, and if so, the action taken by the company.
148
4. FINANCIAL POSITION OF THE COMPANY
a. The capital structure of the company in the following manner in a tabular form:
(i)(a) The authorised, issued, subscribed and paid up capital (number of securities,
description and aggregate nominal value);
56
(b) Size of the present offer; and Cover, 25
(c) Paid up capital: 56
(A)After the offer; and 56
(B)After conversion of convertible instruments (if applicable); NA
(d) Share premium account (before and after the offer). 56
(ii) The details of the existing share capital of the issuer company in a tabular form,
indicating therein with regard to each allotment, the date of allotment, the
number of shares allotted, the face value of the shares allotted, the price and
the form of consideration.
56
Provided that the issuer company shall also disclose the number and price at
which each of the allotments were made in the last one year preceding the date
of the offer letter separately indicating the allotments made for considerations
other than cash and the details of the consideration in each case.
56
b. Profits of the company, before and after making provision for tax, for the three
financial years immediately preceding the date of circulation of offer letter.
31, 32
c. Dividends declared by the company in respect of the said three financial years;
interest coverage ratio for last three years (Cash profit after tax plus interest
paid/interest paid).
58
d. A summary of the financial position of the company as in the three audited
balance sheets immediately preceding the date of circulation of offer letter.
152
e. Audited Cash Flow Statement for the three years immediately preceding the
date of circulation of offer letter.
152
f. Any change in accounting policies during the last three years and their effect
on the profits and the reserves of the company.
66
5. A DECLARATION BY THE DIRECTORS THAT 154
a. The company has complied with the provisions of the Act and the rules made
thereunder.
b. The compliance with the Act and the rules does not imply that payment of
dividend or interest or repayment of debentures, if applicable, is guaranteed by
the Central Government.
c. The monies received under the offer shall be used only for the purposes and
24
Sr.
No.
Disclosure Requirements Relevant Page of this
Preliminary Placement
Document
objects indicated in the Offer letter.
I am authorised by the Securities Issue Committee of the Board of Directors of
the company vide resolution number 1 dated January 23, 2018 to sign this form
and declare that all the requirements of Companies Act, 2013 and the rules
made thereunder in respect of the subject matter of this form and matters
incidental thereto have been complied with. Whatever is stated in this form and
in the attachments thereto is true, correct and complete and no information
material to the subject matter of this form has been suppressed or concealed
and is as per the original records maintained by the promoters subscribing to
the Memorandum of Association and Articles of Association
It is further declared and verified that all the required attachments have been
completely, correctly and legibly attached to this form.
Signed:
Date:
Place:
Attachments:
Copy of board resolution
Copy of shareholders resolution
Copy of _____
Optional attachments, if any
154
25
SUMMARY OF THE ISSUE
The following is a general summary of the terms of the Issue. This summary should be read in conjunction with,
and is qualified in its entirety by, the more detailed information appearing elsewhere in this Preliminary Placement
Document, including the chapters “Risk Factors”, “Use of Proceeds”, “Placement”, “Issue Procedure” and
“Description of the Equity Shares” on pages 34, 120, 108 and 132, respectively.
Issuer Majesco Limited
Issue Price ` [●] per Equity Share
Face Value ` 5
Floor Price ` [●] per Equity Share, calculated in accordance with Regulation 85 under
Chapter VIII of the SEBI ICDR Regulations. In terms of the SEBI ICDR
Regulations, the Issue Price cannot be lower than the Floor Price.
Our Company may offer a discount of not more than 5.00% on the Floor Price in
terms of Regulation 85 of the SEBI ICDR Regulations
Issue Size [●] Equity Shares, aggregating approximately ` [●] million.
A minimum of 10.00% of the Issue Size shall be available for Allocation to
Mutual Funds only. If no Mutual Fund is agreeable to take up the minimum
portion mentioned above, such minimum portion or part thereof may be Allotted
to other eligible QIBs.
Date of Board Resolution December 14, 2017
Date of Shareholders
Resolution
January 11, 2018
Eligible Investors QIBs as defined in regulation 2(1)(zd) of the SEBI ICDR Regulations and not
excluded pursuant to Regulation 86 of the SEBI ICDR Regulations to whom
this Preliminary Placement Document and the Application Form is circulated
and who are eligible to bid and participate in the Issue and QIBs not excluded
pursuant to Regulation 86(1)(b) of the SEBI ICDR Regulations. See. The list of
QIBs to whom this Preliminary Placement Document and Application Form is
delivered shall be determined by the Global Coordinator and Book Running
Lead Manager in consultation with our Company, at its discretion. Please see
“Issue Procedure – Qualified Institutional Buyers” on page 112.
Equity Shares issued and
outstanding immediately
prior to the Issue
23,608,606 Equity Shares
Equity Shares issued and
outstanding immediately
after the Issue
[●] Equity Shares
Listing Our Company has obtained in-principle approvals both dated January 23, 2018
from BSE and NSE respectively in terms of Regulation 28 of the SEBI Listing
Regulations, for listing of the Equity Shares issued pursuant to the Issue from the
Stock Exchanges.
Our Company will make applications to each of the Stock Exchanges after
Allotment to obtain final listing and trading approval for the Equity Shares.
Lock-up Please see the sub-section titled “Lock-up” of the section titled “Placement
Agreement” for a description of restrictions on our Company and our promoters
in relation to Equity Shares.
Transferability
Restrictions
The Equity Shares to be issued pursuant to this Issue shall not be sold for a period
of one year from the date of Allotment, except on the floor of the Stock
Exchanges.
Please see “Transfer Restrictions” on page 127.
Use of Proceeds The gross proceeds from the Issue will be approximately ` [●] million. The net
proceeds from the Issue, after deducting fees, commissions and expenses of the
Issue, will be approximately ` [●] million.
Please see “Use of Proceeds” on page 54 for information regarding the use of net
26
proceeds from the Issue.
Risk Factors Please see “Risk Factors” on page 34 for a discussion of risks you should
consider before investing in the Equity Shares.
Pay-In Date Last date specified in the CAN sent to the QIBs for payment of application
money.
Approvals The Issue has been authorised by the Board of Directors on December 14, 2017
and the shareholders pursuant to special resolution in Extra-Ordinary General
Meeting held on January 11, 2018.
Closing The Allotment of the Equity Shares, expected to be made on or about [●], 2018.
Ranking of Equity
Shares
The Equity Shares to be issued pursuant to the Issue shall be subject to the
provisions of the Memorandum of Association and Articles of Association and
shall rank pari passu with the existing Equity Shares of our Company, including
rights in respect of dividends.
The shareholders of our Company (who hold Equity Shares as on the record date)
will be entitled to participate in dividends and other corporate benefits, if any,
declared by our Company after the Closing Date, in compliance with the
Companies Act, the SEBI Listing Regulations and other applicable laws and
regulations. Shareholders may attend and vote in shareholders’ meetings in
accordance with the provisions of the Companies Act. Please see “Dividends”
and “Description of the Equity Shares” on pages 58 and 132, respectively.
Security Codes for the
Equity Shares
ISIN INE898S01029
BSE Code 539289
NSE Code MAJESCO
27
SUMMARY OF BUSINESS
Overview
We are a global provider of core insurance software, consulting services and other insurance technology solutions
for business transformation for the insurance industry having presence in India, the United States, Canada, the
United Kingdom, Malaysia, Thailand, Singapore and Mexico. We offer core insurance software solutions for
property and casualty/general insurance (“P&C”), life and annuities (“L&A”) and pensions and group/employee
benefits providers, allowing them to manage policy administration, claims management and billing functions.
In addition, we offer a variety of other technology-based solutions that are designed to enable our customers to
automate and innovate business processes across the end-to-end insurance value chain and comply with policies
and regulations across their organizations. Our solutions include policy management, new business/underwriting,
rating, billing, claims management, distribution management, business analytics, predictive modelling, digital
platforms for mobile and portal use, testing services, cloud services, bureau and content services, transformation
services and consulting services. Our solutions enable customers to respond to evolving market needs and
regulatory changes, across various jurisdictions, while improving the efficiency of their core operations.
Our service offerings for can be categorized in the following broad categories:
Licensing of software products: includes licensed use of our proprietary software;
Professional services: includes consulting services, including project delivery and implementation of
our solutions services;
Cloud: includes providing software as a service (SaaS) using our proprietary software,
and managing/ hosting customer applications and our cloud (private, public or
hybrid) infrastructure;
Support services: includes services that surround and support the business transformation, digital,
data and ongoing use of our proprietary software and cloud applications;
Our revenue percentages for the six months ended September 30, 2017, Fiscal 2017 and Fiscal 2016 by business
line is as follows:
Six Months Ended
September 30, 2017
Fiscal Year Ended
March 31, 2017
Fiscal Year Ended
March 31, 2016
Property and casualty 79.5% 80.9% 77.9%
Life and annuities 18.5% 17.5% 19.2%
Others 2.0% 1.6% 2.9%
Total 100% 100% 100%
Given the long-term nature of our contracts, we believe, we have anopportunity to nurture deeper relationships
with our customers which enables us to market our portfolio of solutions with customer references for new sales.
Our customers range from some of the largest global tier one insurance carriers in the industry to startups,
greenfields, and mid-market insurers, including specialty, mutual and regional carriers. As of September 30, 2017,
we served over 160 insurance customers on a worldwide basis.
We generated total income from operations of `8,275.05 million, `7,571.53 million and `3,820.8 million, profit
of `193.94 million, `73.08 million and `56.5 million, earnings before interest, tax, depreciation and amortization
(“EBITDA”) of `422.23 million, `53.34 million and `75.8 million and adjusted EBITDA of `451.02 million,
`104.02 million and `54.6 million in Fiscal 2017, Fiscal 2016 and for the six months ended September 30, 2017.
For a reconciliation of EBITDA and adjusted EBITDA to net income, see “Management’s Discussion and
Analysis of Financial Condition and Results of Operations.
As a result of the de-merger and Cover-All merger, as of October 30, 2017, our Company holds 69.88% of the
outstanding equity shares of Majesco US, with Mastek retaining a 13.81% indirect minority interest in Majesco
US through its wholly-owned subsidiary, Mastek (UK) Ltd. The remainder is owned by employees, officers and
directors of Majesco US and unaffiliated public shareholders.
28
We operate our business primarily through our Subsidiary Majesco US.
For the six months ended September 30, 2017, Fiscal 2017 and Fiscal 2016, Majesco US generated 97.5%, 98.1%
and 98.4% of our total revenues, 0%, 87.80% and 15.0% of our net profits, respectively. Majesco US revenues
for Fiscal 2017 grew by 9.0% compared to Fiscal 2016 and its revenues for the six months ended September 30,
2017 decreased by 11.9% compared to the six months ended September 30, 2016.
Our Competitive Strengths
Our key competitive strengths include:
Well-diversified player with breadth and depth of solutions with extensive industry expertise
We are uniquely positioned to service a large variety of customers in the insurance industry. Our solutions are
designed to provide insurance carriers with the core system capabilities required to effectively manage their
business and enable agility, innovation and speed to enable their business transformation in light of current
changing market dynamics and opportunities. The depth and breadth of our solutions are designed to enable the
entire insurance value chain across all lines of business, including policy, billing, claims, distribution, digital, data
and cloud.
We have a significant presence in the P&C market, which, as of 2016, represents approximately 44.7% of
insurance global market premium volume based on a report published by Swiss Re Sigma in 2017. For Fiscal
2017, 80.9% of our consolidated revenue is from the P&C business.
We are particularly well placed to grow in the L&A market which, as of 2016, represents approximately 55.3%
of insurance global market premium volume based on a report published by Swiss Re Sigma in 2017. We are
uniquely positioned to effectively compete and grow market share in this market with our single modern solution
which supports both group and individual businesses and is designed to enable insurers to adapt and take
advantage of this rapidly changing marketplace.
In Fiscal 2017, we made a transition of our business model from on-premise to on-demand cloud driven model.
Our cloud platform provides insurers a cloud-based end-to-end solution that addresses the entire insurance value
chain, from green fields, new startups and incubators to mid-market and tier one insurers. We expect momentum
in our cloud business will remain strong as we take advantage of the shift underway in insurance industry.
Focused on driving innovation through in-house R&D and strategic partnerships
We are focused on driving innovation and adopting solutions in line with technological trends. Our culture of
innovation since our establishment has enabled us to expand the range of our offerings to customers and improve
the delivery of our products and services. We have a dedicated team of skilled individuals with technical
background and domain experience in each of our verticals with a focus on evolving technologies. These teams
follow a structured applied innovation and solutions development process and work with delivery functions to
identify the key concerns of our customers and generate solutions, ideas and concepts to address the concerns.
We have invested significantly in product innovation over the last several years, with an increase in investment
of 5.00% for Fiscal 2017 over Fiscal 2016. This has resulted in the rollout of a series of service offerings, the more
recent ones including Majesco Business Analytics, Majesco DigitalConnect, Majesco Testing Services and
Majesco Cloud Insurer, and have updated all of our core software.
We also engage with various technology partners from various key verticals to explore solutions and help us
enhance our product platform and service offerings in tune with frequently changing requirements of the insurance
industry. We have a growing partner ecosystem for systems integrators, solutions, content, infrastructure and
industry relationships, which provides our customers with strategic and operational business value through the
integration of these partners with our solutions.
We believe that our culture of innovation, and ability to identify and nurture partner relationships has enabled us
to grow and retain our customer relationships and successfully achieve process and productivity improvement for
customers. This has enabled us to continuously expand and diversify our services offering, as well as to maintain
our competitiveness.
29
We have strong long-term relationships with customers
Long-term, strong customer relationships are a key component of our success. Our license agreements with
customers typically range from fixed-year terms (which may be renewable) to perpetual terms and our support
services are usually provided under multi-year agreements which are typically renewable annually. We have
multiple points of entry with customers using our broad solution portfolio of software, consulting and services,
which provides us with multiple sales opportunities that deepen and strengthen our customer relationships. We
also conduct regular reviews with senior management of all our key clients to engage with them to provide
consistent service and to work on future opportunities. We combine our comprehensive range of product and
service offerings with industry specific experiences and insights to provide tailored solutions to our clients across
verticals and geographies.
Diverse and growing customer base
We have a broad and growing client base with clients. Our clients range from some of the largest global tier one
insurance carriers in the industry to startups, greenfields, and mid-market insurers, including specialty, mutual
and regional carriers. For Fiscal 2017, our subsidiary Majesco US had approximately 18 customers with over
US$5 billion in direct written premium, 26 customers with US$1-5 billion in direct written premium, 45 customers
with US$100 million to US$1 billion in direct written premium and 71 customers with less than $100 million in
direct written premium. We had 5 new customer wins in Fiscal 2017 and 24 “go-live” implementation with
customers in Fiscal 2017.
Seasoned management team
We have a seasoned management team with considerable experience in the IT and insurance industries. We
believe that our senior management has pioneered our growth and fostered a culture of innovation,
entrepreneurship and teamwork. Our Chief Executive Officer Mr. Ketan Mehta, has over 32 years of experience
in IT services focused on the insurance industry.
Our employees are spread globally and are instrumental in establishing and maintaining relationships either
directly or indirectly with our customers. We invest in our employees through training and development programs
under our performance oriented development plan that includes induction programs, technical training, leadership
development and executive education programs. This allows us to identify and develop future leadership, build
company allegiance and excellence in delivery through our “customer first” motto and to promote talent within
our Company.
Proven track record of growth through acquisitions
We have grown both organically and inorganically through a series of acquisitions which we have successfully
integrated in our solutions and service offering platform, enhancing the value to our customers with new
capabilities. Our acquisitions include the acquisition of Vector Insurance Services, LLC, a technology solutions
provider and third-party administrator that focuses on the North American life and annuity insurance industry;
Systems Task Group, an IP-based enterprise solutions provider to the North American P&C insurance industry;
the assets of SEG Software, LLC, a provider of policy administration systems covering individual and group life,
health & annuity insurance products; the data factory tool kit of Kognitio Limited; the insurance consulting
business of Agile Technologies LLC, a business and technology management consulting firm; and Cover-All
Technologies Inc., a provider of core insurance software and business analytics solution primarily focused on
commercial lines for the P&C insurance segment.
Our Growth Strategy
We intend to extend our leadership as a provider of core software and consulting services to the insurance industry.
The key elements of our strategy include:
Proactively innovate and extend our insurance solution leadership .
We intend to continue to enhance the business and technical capabilities of our market leading solution portfolio
for insurance carriers through continued consistent significant R&D investment in core software, cloud,
distribution, data, digital and services for innovative and scalable solutions. We have made over $17.2 million and
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$16.3 million in investments in R&D in Fiscal 2017 and Fiscal 2016, respectively, and expect to continue to make
significant R&D investments to continue our growth.
Dynamically expand cloud capabilities.
Approximately 48% of insurers are increasing their investment in cloud services (Source: SMA-Research,
Maturing Technologies Survey 2015). Organizations are adapting the cloud based infrastructure services because
of multidimensional value of cloud services, including agility, scalability, cost benefits and growth opportunities.
Our pre-configured, pre-integrated Majesco Cloud Insurer platform is designed to offer an insurance platform to
rapidly adapt to change and seize opportunities in the insurance industry. Being a pay-as-you-grow enterprise
platform, it is an affordable launchpad for broad range of insurers to migrate from on-premise to cloud based
model.
We plan to offer more comprehensive cloud based solutions designed to enable insurers’ agility, innovation and
speed at a lower total cost of ownership. We believe this service offering will be particularly attractive to
greenfields, start-ups and incubators. We already have over 30 customers to our cloud platform and more
experience than most competitors which is putting us in a unique position to continue to grow in this segment.
Enhance our client centric business model
We intend to continue to enhance our client centric business model that is designed to enable long term customers’
relationships, provide a single point of accountability for outcomes and offer deeper customer relationships with
cross sell opportunities across our solution portfolio, creating customer “stickiness.” We intend to build upon our
established customer relationships and track record of successful implementations to sell additional solutions to
existing customers. We have multiple points of entry with new customers using our broad solution portfolio of
software, consulting and services to meet each customers’ initial needs. In Fiscal 2017, out of our base of 97 P&C
customers, only 19 used all three of our policy, billing and claims solutions leaving a large addressable opportunity
to cross-sell to our customers.
Grow through acquisitions.
We intend to continue to extend value through acquisitions that have accretive value and diversify or strengthen
our solution offerings or expand our customer base. We will continue to review and pursue acquisitions that we
believe contribute to the depth and breadth of our solutions portfolio or our client base. We are currently reviewing
acquisition opportunities but have not entered into any binding commitments at this time and cannot give any
assurances that we will consummate any acquisitions in the short term. Any acquisition which we may
consummate in future is likely to be financed through our internal accruals and/or proceeds of this Offering and/or
debt and/or future equity dilution. We may also proactively raise equity to create corpus for acquisitions.
Expand our customer base and increase market awareness and thought leadership with our brand and
solutions.
We intend to continue to aggressively pursue new customers by specifically targeting key market segments and
key accounts, expanding our sales and marketing organizations, leveraging current customers as references and
strengthening our geographic presence.
We also intend to continue to proactively strengthen our brand and reputation, enhance market awareness of our
solutions, and thought leadership market position as a strategic partner for the insurance industry.
Deepen and expand our partner ecosystem.
We will continue to seek to collaborate and extend our capabilities and solution business value through growing
our partner ecosystem for systems integrators, solutions, content, infrastructure and industry relationships. The
partner ecosystem provides our customers with strategic and operational business value through the integration
of these solutions with Majesco solutions, providing our customers competitive edge and opportunities.
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SELECTED FINANCIAL INFORMATION
The following selected financial information is extracted from and should be read in conjunction with, the audited
consolidated financial statements of our Company and notes thereto as at and for Fiscal 2017 and Fiscal 2016
each prepared in accordance with Indian GAAP and included elsewhere in this Preliminary Placement Document.
You should refer to “Management's Discussion and Analysis of Financial Condition and Results of
Operations”, on page 60, for further discussion and analysis of the Financial Statements.
The financial information included in this Preliminary Placement Document does not reflect our Company’s
results of operations, financial position and cash flows for the future and its past operating results are no
guarantee of its future operating performance.
Consolidated Balance Sheet (in ` million)
Particulars As at March 31,
2017
As at March
31, 2016
EQUITY AND LIABILITIES
Shareholders’ funds
Share capital 116.82 115.26
Reserves and surplus 2,762.54 2,644.09
Minority interest 751.93 722.81
Non-current liabilities
Long-term borrowings 555.56 458.51
Deferred tax liabilities - -
Other long-term liabilities 281.64 332.17
Long-term provisions 210.82 187.20
Current liabilities
Short-term borrowings 166.06 460.52
Trade payables 142.91 180.63
Other current liabilities 1,377.00 1,547.29
Short-term provisions 84.45 88.35
Total 6,449.73 6,736.83
ASSETS
Non-current assets
Fixed assets
Tangible assets 348.91 325.85
Intangible assets 275.56 337.50
Goodwill on consolidation 1,879.76 1,924.84
Capital work in progress 17.33 5.33
Non-current investments 23.12 24.00
Deferred tax assets 404.48 380.14
Long-term loans and advances 127.09 104.48
Other non-current assets 3.38 2.97
Current assets
Current investments 171.15 119.64
Trade receivables 830.05 1,519.50
Cash and bank balances 1,580.86 1,152.34
Short-term loans and advances 232.30 239.25
Other current assets 555.74 600.99
Total 6,449.73 6,736.83
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Consolidated Statement of Profit and Loss
(in ` millions except per share amounts)
Particulars For Fiscal
2017
For Fiscal
2016
Revenue
Revenue from operations 8,275.05 7,571.53
Other income 89.96 90.81
Total revenue 8,365.01 7,662.34
Expenses
Employee benefits expenses 5,451.98 5,055.72
Finance costs 55.56 42.82
Depreciation and amortization expenses 260.71 178.49
Other expenses 2,374.23 2,416.71
Total expenses 8,142.48 7,693.74
Loss before exceptional items and tax 222.53 (31.40)
Exceptional items 26.61 45.76
Loss before tax 195.92 (77.16)
Tax expense / (credits) :
Current tax 31.37 72.04
Deferred tax (credit) (26.23) (151.74)
Income tax refund / write back for earlier years (3.16) (70.54)
Profit / (loss) for the year 193.94 73.08
Minority interest 51.21 4.20
Profit / (loss) for the year attributable to the shareholders of the Company 142.73 68.88
Earnings Per Share (EPS)
Equity share of par value `5 each
Basic (`) 6.14 3.02
Diluted (`) 5.78 2.80
Consolidated Cash Flow Statement (in ` millions except per share amounts)
Particulars For Fiscal
2017
For Fiscal
2016
Cash flows from operating activities
Loss before exceptional item and tax 222.53 (31.40)
Adjustments for :
Interest income on fixed deposits (56.11) (32.22)
Profit on sale of current investments (11.16) (53.64)
Profit on sale of tangible assets (net) (0.44) (0.20)
Employee stock compensation expenses 2.18 4.92
Finance costs 55.56 42.82
Depreciation and amortization 264.78 178.49
Provision for doubtful debts 55.63 16.00
Provision for customer claim - 22.97
Unrealised foreign exchange loss 7.43 0.21
Operating profit before working capital changes 540.40 147.95
Increase in trade receivables 561.56 (986.23)
Increase in loans and advances and other assets 37.50 (669.47)
Increase in trade payables, other liabilities and provisions (184.98) 1,405.43
Cash used in operations 954.48 (102.32)
33
Particulars For Fiscal
2017
For Fiscal
2016
Income taxes paid, net (51.14) (1.67)
Net cash used in operating activities before exceptional items 903.34 (103.99)
Exceptional items (26.61) (45.76)
Net cash used in operating activities 876.73 (149.75)
Cash flows from investing activities
Proceeds from sale of tangible assets 6.93 1.02
Purchase of fixed assets (246.70) (376.92)
Capital advances - (4.14)
Investment in fixed deposits (44.00) (740.00)
Increase in other deposit 16.49 (6.09)
Interest income on fixed deposits 56.11 32.22
Payment for acquisition of Mastek Asia Pacific Pte. Limited - (18.03)
Sale / (Purchase) of current investment (net) (40.34) (66.00)
Net cash used in investing activities (251.51) (1,177.94)
Cash flows from financing activities
Proceeds from shares on account of exercise of ESOP 35.84 27.39
Proceeds from working capital loan (net) (184.50) 619.84
Interest paid on loans and on finance lease (55.56) (42.81)
Net cash generated from financing activities (204.22) 604.42
Effect of changes in exchange rates for cash and cash equivalents (19.99) (25.62)
Net (decrease) / increase in cash and cash equivalents during the year 401.01 (748.89)
Cash and cash equivalents at the beginning of the year 386.06 0.19
Cash and cash equivalents transferred pursuant to the scheme of arrangement - 930.63
Cash and cash equivalents in subsidiaries on date of acquisition during the year - 204.13
Cash and cash equivalents at the end of the year 787.07 386.06
34
RISK FACTORS
Except where the context requires otherwise, references in these Risk Factors to “we” or “us” are to Majesco
Limited, and our subsidiaries on a worldwide consolidated basis, references to “Majesco Limited” are only to
Majesco Limited, and references to “Majesco US” are only to our U.S. subsidiary Majesco and its subsidiaries
on a worldwide consolidated basis.
An investment in equity shares involves a high degree of risk. You should carefully consider each of the following
risk factors together with all other information set forth in this Preliminary Placement Document before making
an investment in the Equity Shares. The risks and uncertainties described below are not the only risks that we
currently face. Additional risks and uncertainties not presently known to us or that we currently believe to be
immaterial may also adversely affect our business, prospects, results of operations, cash flows and financial
condition.
If any or some combination of the following risks, or other risks that are not currently known or believed to be
adverse, actually occur, our business, financial condition and results of operations could suffer, the trading price
of, and the value of your investment in, our Equity Shares could decline and you may lose all or part of your
investment. In making an investment decision with respect to this Issue, you must rely on your own examination
of our business, company and the terms of this Issue, including the merits and risks involved.
Risks Related to Our Business
We may fail to adequately protect our proprietary technology, which would allow competitors or others to take
advantage of our research and development efforts.
We rely upon trade secrets, proprietary know-how, and continuing technological innovation to develop new
services and solutions and to remain competitive. We rely on a combination of copyright, patent and trademark
laws, as well as non-disclosure agreements and other contractual provisions to establish, maintain and protect our
trade secrets and proprietary know how. If our competitors learn of our proprietary technology or processes, they
may use this information to produce services and solutions that are equivalent or superior to our services and
solutions, which could materially adversely affect our business, operations and financial position. We may be
unable to detect the unauthorised use of, or take appropriate steps to enforce, our intellectual property rights in
India or abroad. In addition, any breach in the obligations of our employees and consultants with respect to our
confidential information could materially adversely affect our business, operations and financial position, and any
remedies available to us may be insufficient to compensate us for our damages. Although our employees and
consultants are bound by non-disclosure obligations pursuant to their employment contracts, some obligations
which extend beyond the term of the contract, we cannot provide assurance that our know-how or other
confidential or proprietary information will be protected once such employment contracts are terminated. Even in
the absence of such breaches, our trade secrets and proprietary know-how may otherwise become known to our
competitors, or be independently discovered by our competitors, which could adversely affect our competitive
position. Failure to protect our proprietary technology or processes could harm our reputation and affect our ability
to compete effectively. Further, defending our intellectual property rights may require significant financial and
managerial resources, the expenditure of which may materially adversely affect our business, results of operations,
financial condition and prospects. The laws protecting intellectual property rights vary by territory. Successfully
obtaining intellectual property rights protection in one jurisdiction may not necessarily provide protection in
another jurisdiction and we may have to seek such protection in multiple jurisdictions where we and our customers
operate. The process for obtaining intellectual property rights protection in certain jurisdictions can be lengthy
and may entail substantial costs.
Our business will suffer if we fail to anticipate and develop new services and enhance existing services in order
to keep pace with rapid changes in technology and the industries on which we focus. If we are unable to
develop, introduce and market new and enhanced versions of our products, we may be put at a competitive
disadvantage.
The industry in which we function is characterized by rapid technological changes, evolving industry standards,
changing and increasingly sophisticated client preferences, and frequent new product and service introductions
that could result in short product life cycles and product obsolescence. Our success depends upon our ability to
anticipate, design, develop, test, market, license and support new products, services, and enhancements of current
products and services on a timely basis in response to both competitive threats and evolving industry requirements.
35
We may not be successful in anticipating or responding to these advances on a timely basis, or at all. If we do
respond, the services or technologies we develop may not be successful in the marketplace. We may also be
unsuccessful in stimulating customer demand for new and upgraded services, or seamlessly managing new service
introductions or transitions. Our failure to address the demands of the rapidly evolving environment, particularly
with respect to emerging technologies, and technological obsolescence, could have a material adverse effect on
our business, results of operations and financial condition. In addition, our success also depends on our ability to
proactively manage our portfolio of technology alliances. In addition, our products, services, and enhancements
must remain compatible with standard platforms and file formats. Often, we must integrate software licensed or
acquired from third parties with our proprietary products to create or improve our products. If we are unable to
successfully integrate third party software to develop new products and services, enhance existing products and
services, or complete the development of new products and services which we license or acquire from third parties,
our operating results will be materially adversely affected.
We plan to continue our investment in product development in future periods. It is critical to our success for us to
anticipate changes in technology, industry standards and customer requirements and to successfully introduce
new, enhanced and competitive products to meet our customers’ and prospective customers’ needs on a timely
basis. However, we cannot assure you that revenues will be sufficient to support the future product development
that is required for us to be competitive. Although we may be able to release new products in addition to
enhancements to existing products, we cannot assure you that our new or upgraded products will be accepted by
the market, will not be delayed or canceled, will not contain errors or “bugs” that could affect the performance of
the products or cause damage to users’ data, or will not be rendered obsolete by the introduction of new products
or technological developments by others. There can be no assurance that our current and future competitors will
not be able to develop services or expertise comparable or superior to those we have developed or to adapt more
quickly than us to new technologies, evolving industry standards or customer requirements. If we fail to develop
products that are competitive in technology and price and fail to meet customer needs, our market share will
decline and our business and results of operations could be harmed.
Our operating results are influenced by the effectiveness of our brand marketing and advertising programs.
Our revenues are influenced by brand marketing and advertising. If our marketing and advertising programs are
unsuccessful, the results of our operations could be materially and adversely affected. In addition, increased
spending by our competitors on advertising and promotional activities or an increase in the cost of advertising in
the markets in which we operate, could adversely affect our results of operations and financial condition.
Moreover, a material decrease in our funds earmarked for advertising or an ineffective advertising campaign
relative to that of our competitors, could also adversely affect our could have a material adverse effect on our
business, results of operations, financial condition and prospects.
We depend on a small number of large customers and the loss of one or more major customers could have a
material adverse effect on our business, financial condition and results of operations.
For Fiscal 2017, our top customer contributed 7.48% of total revenues and our top five customers, in aggregate,
contributed approximately 27.12% of total revenue. For Fiscal 2016, our top customer contributed 10.19% of total
revenues and our top five customers, in aggregate, contributed approximately 26.54% of total revenue. For Fiscal
2015, our top customer contributed 8.68% and our top five customers generated approximately 31.71 % of total
revenues. We expect that our top five customers will continue to account for a significant portion of our revenue
for the foreseeable future. In a given fiscal, a single client may contribute significantly to our total income and
then may not contribute significantly or at all in subsequent periods. We may not be successful in winning
significant business each year from our existing or future clients as the award of project is dependent on various
factors. We have had in the past large customers terminate their relationship with us and it is possible that any of
our large customers could decide to terminate their relationship with us in the future. The loss of one or more of
our top five customers, or a substantial decrease in demand by any of those customers for our services and
solutions, could have a material adverse effect on our business, results of operations and financial condition.
Furthermore, we do not have long term arrangements with our customers to purchase our products and services
in the future, at the current prices or at all.
Additionally, our large customers have substantial negotiating leverage, which may require that we agree to terms
and conditions that result in increased cost of sales, decreased revenues and lower average selling prices and gross
margins, all of which could harm our operating results. While we internally consider all such factors prior to
entering into these contracts, we cannot assure you that we will be able to continue to enter into similar such
contracts in the future, which are not more onerous than the contracts we enter into currently.
36
Our international sales and operations subject us to additional risks that can adversely affect our results of
operations.
We derive a significant portion of our revenues from our business operations outside of India. Our international
sales and operations are primarily undertaken through our Subsidiaries and branch offices. For the six months
ended September 30, 2017, Fiscal 2017 and Fiscal 2016, our business operations outside India contributed
97.48%, 98.11%, and 98.36% of our revenue from operations, respectively. Compliance with international laws
and regulations that apply to our international operations may increase our cost of doing business in such foreign
jurisdictions. These laws and regulations include local laws which may include stricter data privacy requirements,
labour relations laws, tax laws, intellectual property laws, anti-competition regulations, import, foreign currency
and trade restrictions. Violations of these laws and regulations could result in fines, criminal sanctions against us,
our officers or our employees, prohibitions on the conduct of our business, as well as default under our contracts
with customers. Compliance with these laws requires a significant amount of management attention and effort,
which may divert management’s attention from managing our business operations and growth strategy, and
increase our expenses as we engage professionals to assist us with our compliance efforts. Our success depends,
in part, on our ability to anticipate and manage such risks.
We are also subject to a variety of other risks and challenges in managing operations in various countries,
including, but not limited to:
common local business behaviour that are in direct conflict with our business ethics, practices and conduct
policies;
general economic and political conditions in each country or region;
customers’ attitude which may differ in each country which require varied customer-handling procedures;
language barriers and difficulties in communication;
restrictions on doing business in one or more of our target international markets;
longer payment cycles and difficulties in collecting accounts receivable;
overlapping tax regimes and foreign exchange currency risks;
our ability to repatriate funds held by our Subsidiaries to India; and
reduced protection for intellectual property rights in some countries.
We may face the risk that our competitors and the established players in such geographies may (i) enjoy better
brand visibility and recognition; (ii) may be more experienced in such markets; (iii) may have better relationships
with channel partners and customers; (iv) may gain early access to information regarding attractive marketing
opportunities; and (v) may be better placed to launch software products or services with other advantages of being
a first mover.
Our information systems, like those of other software and technology companies, are vulnerable to the threat
of cybersecurity and data privacy risks.
Our business involves storage, management, and transmission of our proprietary information and that of our
customers. Third parties may identify and exploit product and service vulnerabilities, penetrate or bypass our
security measures, and gain unauthorised access to our or our customers’, partners’ and suppliers’ proprietary
information, networks and systems, any of which could lead to the compromise of personal information or the
confidential information or our data or that of our customers. The methods used to obtain unauthorized access or
disable or degrade services and systems are continuously changing, and may be difficult to successfully anticipate
or detect for long periods of time. Moreover, software or applications we develop or obtain from third parties may
contain defects in design or manufacture or other problems that could unexpectedly compromise information
security.
Although we employ control procedures and security systems to protect the data we store, manage and transmit
for our customers, we cannot guarantee that these measures will be sufficient to detect or prevent interceptions,
break-ins, security breaches, the introduction of viruses or malicious code, or other disruptions that may jeopardize
the security of information stored in and transmitted by our products. Breaches of our security could result in
misappropriation of personal information, suspension of hosting operations or interruptions in our services.
Because techniques used to obtain unauthorized network access or to sabotage systems change frequently and
generally are not recognized until launched against a target, we may be unable to anticipate these techniques or
implement adequate preventive measures. Our systems are also exposed to computer viruses, denial of service
37
attacks and bulk unsolicited commercial email, or spam. Being subject to these events and items could cause a
loss of service and data to customers, even if the resulting disruption is temporary, further resulting in material
adverse effect on our business and prospects.
If our products or systems experience data security breaches or there is unauthorized access to or release of
our customers’ data, we may lose current or future customers and our reputation and business may be harmed
and we may incur liabilities to repair or replace our systems or in connection with litigation or regulatory
enforcement actions that may result from such breaches.
High-profile security breaches have increased in recent years, and these risks will increase as we continue to grow
our cloud offerings and store and process increasingly large amounts of data, including our customers’ confidential
information and data and other external data. If our security measures are breached as a result of a third-party
action, employee error or otherwise, and as a result customers’ information becomes available to unauthorized
parties, we could suffer significant damage to our brand and reputation and may lose revenues as a result. These
types of security incidents could also lead to breach of contracts with customers, lawsuits, regulatory
investigations and claims and increased legal liability, including costs related to customer notification and fraud
monitoring, all of which could materially adversely affect our business and financial condition. This could lead to
the loss of current and potential customers. If we experience any breaches of our network security due to
unauthorized access, sabotage, or human error, we may be required to expend significant capital and other
resources to remedy, protect against or alleviate these and related problems. We also may not be able to remedy
these problems in a timely manner, or at all.
Even the perception that the privacy of personal information is not satisfactorily protected or does not meet
regulatory requirements or that our systems are unsecure or unstable could inhibit sales of our products or services,
and could limit adoption of our products and services. The property and business interruption insurance we carry
may not provide coverage adequate to compensate us fully for losses that may occur or litigation that may be
instituted against us in these circumstances. We could be required to make significant expenditures to repair our
systems in the event that they are damaged or destroyed, or if the delivery of our services to our customers is
disrupted, and our business and results of operations could be harmed.
Our inability or failure to comply with existing laws, the adoption of new laws or regulations regarding the use of
personal information that require us to change the way we conduct our business or an investigation of our privacy
practices could increase the costs of operating our business.
Certain of our software products may be deployed through cloud-based implementations, and if such
implementations are compromised by data security breaches or other disruptions, our reputation could be
harmed, and we could lose customers or be subject to significant liabilities.
Although our software products typically are deployed on our customers’ premises, our products may be deployed
in our customers’ cloud-based environments, in which our products and associated services are made available
using an Internet-based infrastructure. In cloud deployments, the infrastructure of third-party service providers
used by our customers may be vulnerable to hacking incidents, other security breaches, computer viruses,
telecommunications failures, power loss, other system failures and similar disruptions.
Any of these occurrences, whether intentional or accidental, could lead to interruptions, delays or cessation of
operation of the servers of third-party service providers’ used by our customers, and to the unauthorized use or
access of our software and proprietary information and sensitive or confidential data stored or transmitted by our
products. The inability of service providers used by our customers to provide continuous access to their hosted
services, and to secure their hosted services and associated customer information from unauthorized use, access
or disclosure, could cause us to lose customers and to incur significant liability, and could harm our reputation,
business, financial condition and results of operations.
We face intense and growing competition. If we are unable to compete successfully, our business will be
seriously harmed through loss of customers or increased negative pricing pressure.
The market for our services and solutions is extremely competitive and is subject to rapid technological changes.
Our competitors vary in size and in the variety of services and solutions offered.
We compete with both single product large vendors as well as vendors who are present across more than one
product suite (P&C, L&A and group/employee benefits providers). Some of our current and potential direct
38
competitors have longer operating histories, significantly greater financial, technical, marketing and other
resources than we do, greater brand recognition and, we believe, a larger base of customers. In addition,
competitors may operate more successfully or form alliances to acquire significant market share. These direct
competitors may be able to adapt more quickly to new or emerging technologies and changes in customer
requirements. They may also be able to devote more resources to the promotion, sale and development of their
services and solutions than us and there can be no assurance that our current and future competitors will not be
able to develop services and solutions comparable or superior to those offered by us at more competitive prices.
As a result, in the future, we may suffer from an inability to offer competitive services and solutions or be subject
to negative pricing pressure that would adversely affect our ability to generate revenue and adversely affect our
operating results. In addition, we may be required to incur additional marketing and branding expenses to retain
our competitive position. A loss in our competitive position could result in lower revenues or profitability, which
could adversely impact our ability to realise our revenue and profitability forecasts.
We expect competition to increase and intensify in the future as the pace of technological change and adaptation
quickens and as more companies enter our markets. We could lose market share and revenue if our current or
prospective competitors:
introduce new competitive products or services making our technology comparatively less advanced;
add new functionality to existing products and services;
introduce competitive pricing; or
form strategic alliances or consolidate with other companies.
Our business will be adversely affected if we cannot successfully retain key members of our management team
or retain, hire, train and manage other key employees, particularly in the sales and customer service areas.
Our continued success is largely dependent on the personal efforts and abilities of our executive officers and senior
management, including our Board of Directors and Senior Management and Majesco US’s President and Chief
Executive Officer and its executive management team. Our success also depends on our continued ability to
attract, retain, and motivate key employees throughout our business. In particular, we are substantially dependent
on our skilled technical employees and our sales and customer service employees. Competition for skilled
technical, sales and customer service professionals is intense and our competitors often attempt to solicit our key
employees and may be able to offer them employment benefits and opportunities that we cannot. There can be no
assurance that we will be able to continue to attract, integrate or retain additional highly qualified personnel in the
future. In addition, our ability to achieve significant growth in revenue will depend, in large part, on our success
in effectively training sufficient numbers of technical, sales and customer service personnel. New employees
require significant training before they achieve full productivity. Our recent and planned hires may not be as
productive as anticipated, and we may be unable to hire sufficient numbers of qualified individuals. If we are not
successful in retaining our existing employees, or hiring, training and integrating new employees, or if our current
or future employees perform poorly, growth in the sales of our services may not materialize and our business will
suffer.
Our business requires statutory clearances, approvals, licenses, registrations and permits for our operations,
and the failure to obtain or renew any such statutory clearances, approvals, licenses, registrations or permits
for our operations could materially and adversely affect our business.
We may be required to obtain approvals, licenses, registrations and permits for operating our businesses. If we
fail to obtain or renew any applicable approvals, licenses, registrations and permits in a timely manner, our ability
to undertake our businesses may be adversely impacted, which could adversely affect results of operations and
profitability. Furthermore, our government approvals and licenses may be subject to numerous conditions, some
of which could be onerous. There can be no assurance that we will be able to apply for any approvals, licenses,
registrations or permits in a timely manner, or at all and there can be no assurance that the relevant authorities will
issue or renew any such approvals, licenses, registrations or permits in the time frames anticipated by us. Further,
under such circumstances, the relevant authorities may initiate penal action against us, restrain our operations,
impose fines/penalties or initiate legal proceedings for our inability to renew/ obtain approvals in a timely manner
or at all.
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Further, we cannot assure that the approvals, licenses, registrations and permits issued to us would not be
suspended or revoked in the event of noncompliance or alleged non‐compliance with any terms or conditions
thereof, or pursuant to any regulatory action. Any failure to renew the approvals that have expired or apply for
and obtain the required approvals, licenses, registrations or permits, or any suspension or revocation of any of the
approvals, licenses, registrations and permits that have been or may be issued to us, may impede our operations.
Risks associated with potential acquisitions and expansion activities or divestitures may disrupt our business
and adversely affect our operating results.
As part of our growth strategy, we routinely consider acquisitions or divestitures and have in the past
consummated several acquisitions. Acquisitions and divestitures involve numerous risks, including identifying
attractive target acquisitions, undisclosed risks affecting the target, difficulties integrating acquired businesses,
the assumption of unknown liabilities, potential adverse effects on existing business relationships with current
customers and suppliers, the diversion of our management’s attention from other business concerns, and decreased
geographic or customer diversification.
We cannot provide assurance that any acquisitions or divestitures will perform as planned or prove to be beneficial
to our operations and cash flow. Any such failure could seriously harm our financial condition, results of
operations and cash flows.
We cannot predict the frequency, size or timing of our acquisitions, as this will depend on the availability of
prospective target opportunities at valuation levels we find attractive and the competition for such opportunities
from other parties. There can be no assurance that our acquisitions will have the anticipated positive results,
including results related to: the total cost of integration; the retention of key personnel; the time required to
complete the integration; the amount of longer-term cost savings; continued growth; or the overall performance
of the acquired company or combined entity. We also may encounter difficulties in obtaining required regulatory
approvals and unexpected contingent liabilities can arise from the businesses we acquire. Further, the asset quality
or other financial characteristics of a business or assets we may acquire may deteriorate after an acquisition
agreement is signed or after an acquisition closes, which could result in impairment or other expenses and charges
which would reduce our operating results. Integration of an acquired business can be complex and costly.
If we are not able to integrate successfully past or future acquisitions, there is a risk that results of operations could
be adversely affected. To the extent that we grow through acquisitions, there is a risk that we will not be able to
adequately or profitably manage this growth. In addition, we may sell or restructure portions of our business. Any
divestitures or restructuring may result in significant expenses and write-offs, which would have a material
adverse effect on our business, results of operations and financial condition, and may involve additional risks,
including difficulties in obtaining any required regulatory approvals, the diversion of management’s attention
from other business concerns, the disruption of our business and the potential loss of key employees. We may not
be successful in addressing these or any other significant risks encountered in connection with any acquisition or
divestitures we might make.
Adverse changes to our relationships with key partners could adversely affect our revenues and results of
operations.
We have alliances with companies whose capabilities complement our own. A significant portion of our service
offerings are based on technology, content, infrastructure or software provided by our partners. The priorities and
objectives of our partners may differ from ours. As most of our partnership relationships are non-exclusive, our
partners are not prohibited from competing with us or aligning more closely with our competitors.
Further, our partners could experience reduced demand for their technology, infrastructure or software, including
in response to changes in technology, which could lessen related demand for our services. If we do not obtain the
expected benefits from our relationships for any reason, we may be less competitive, our ability to offer attractive
service offerings to our clients may be negatively affected, and our revenues and results of operations could be
adversely affected.
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Moreover, if such technology, content, infrastructure or software provided by our key partners were to become
unavailable for any reason, we might experience delays or increased costs in continuing the production of our
existing products or the development of our new software products and servicing of existing customers. The loss
of the license to use, or the inability by key partners to support, maintain, or enhance any of such product or
service offering, could result in increased costs, lost revenues or delays until equivalent product is internally
developed or licensed from another third party and integrated with our products and service offerings. Such
increased costs, lost revenues or delays could adversely affect our business and operations.
In order to execute our business plan successfully, we must maintain existing relationship with our customers
and establish new relationships with additional businesses. If we are unable to diversify and extend our
customer base, our ability to grow our business may be compromised, which would have a material adverse
effect on our financial condition and results of operations. We resell products and services of third parties that
may require us to pay for such products and services even if our customers fail to pay us for the products and
services, which may have a negative impact on our cash flow and operating results.
In order to provide resale services or products, we contract with third-party service providers. These services
require us to enter into fixed term contracts for services with third party suppliers of products and services. If we
experience the loss of a customer who has purchased a resale product or service, we may remain obligated to
continue to pay our suppliers for the term of the underlying contracts. The payment of these obligations without
a corresponding payment from customers will reduce our financial resources and may have a material adverse
effect on our financial performance, cash flow and operating results.
Our implementation cycle is lengthy and variable, depends upon factors outside our control, and could cause
us to expend significant time and resources prior to earning associated revenues. If we cannot collect our
receivables or if payment is delayed, our business may be adversely affected by our inability to generate cash
flow, provide working capital or continue our business operations.
The implementation and testing of our products by our customers takes several months or longer and unexpected
implementation delays and difficulties can occur. Implementing our products typically involves integration with
our customers’ systems, as well as adding their data to our system. This can be complex, time-consuming and
expensive for our customers and can result in delays in the implementation and deployment of our products. The
lengthy and variable implementation cycle may also have a negative impact on the timing of our revenues, causing
our revenues and results of operations to vary significantly from period to period.
Our business depends on our ability to successfully obtain payment from our customers of the amounts they owe
us for products received from us and any work performed by us. The timely collection of our receivables allows
us to generate cash flow, provide working capital and continue our business operations. Our clients may fail to
pay or delay the payment of invoices for a number of reasons, including financial difficulties resulting from
macroeconomic conditions, or lack of an approved budget. An extended delay or default in payment relating to a
significant account will have a material and adverse effect on the aging schedule and turnover days of our accounts
receivable. If we are unable to timely collect our receivables from our clients for any reason, our business and
financial condition could be adversely affected.
Our sales cycle is lengthy and variable, depends upon many factors outside our control, and could cause us to
expend significant time and resources prior to earning associated revenues.
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The typical sales cycle for our products and services is lengthy and unpredictable, requires pre-purchase evaluation
by a significant number of employees in our customers’ organizations, and often involves a significant operational
decision by our customers. Our sales efforts involve educating our customers about the use and benefits of our
products, including the technical capabilities of our products and the potential cost savings achievable by
organizations deploying our products. Customers typically undertake a significant evaluation process, which
frequently involves not only our products, but also those of our competitors and can result in a lengthy sales cycle.
Moreover, a purchase decision by a potential customer typically requires the approval of several senior decision
makers, including the boards of directors of our customers. Our sales cycle for new customers is typically one to
two years and can extend even longer in some cases. We spend substantial time, effort and money in our sales
efforts without any assurance that our efforts will produce any sales. In addition, we sometimes commit to include
specific functions in our base product offering at the request of a customer or group of customers and are unable
to recognize license revenues until the specific functions have been added to our products. Providing this
additional functionality may be time consuming and may involve factors that are outside of our control. The
lengthy and variable sales cycle may also have a negative impact on the timing of our revenues, causing our
revenues and results of operations to vary significantly from period to period.
Further, in weaker economic environments, IT spending by customers is reduced. It may take several months, or
even several quarters, for marketing opportunities to materialise. For example, if a customer’s decision to use our
product is delayed or if the implementation of these products or implementation of a service takes longer than
originally anticipated, the date on which we are able to recognise revenues from these products or services will
be delayed. Such delays and fluctuations could cause our revenues and results of operation to fluctuate
significantly across time periods, and we may not be able to adjust our costs quickly enough to offset such lower
revenues, potentially adversely impacting our business, operating results and financial condition.
Our business depends on customers renewing and expanding their license and maintenance contracts for our
products. A decline in our customer renewals and expansions could harm our future results of operations.
Our customers have no obligation to renew their term licenses after their license period expires, and these licenses
may not be renewed on the same or more favorable terms. Moreover, under certain circumstances, our customers
have the right to cancel their license agreements before they expire. We have limited historical data with respect
to rates of customer license renewals, upgrades and expansions so we may not accurately predict future trends in
customer renewals. In addition, our term and perpetual license customers have no obligation to renew their
maintenance arrangements after the expiration of the initial contractual period. Our customers’ renewal rates may
fluctuate or decline because of several factors, including their satisfaction or dissatisfaction with our products and
services, the prices of our products and services, the prices of products and services offered by our competitors or
reductions in our customers’ spending levels due to the macroeconomic environment or other factors. In addition,
in some cases, our customers have a right to exercise a perpetual buyout of their term licenses at the end of the
initial contract term. If our customers do not renew their term licenses for our solutions or renew on less favorable
terms, our revenues may decline or grow more slowly than expected and our profitability may be harmed.
Our product development cycles are lengthy, and we may incur significant expenses before we generate
revenues, if any, from new products.
Development of our products are costly, technically challenging, complex and require rigorous testing, leading to
lengthy development cycles for introduction of new products. Moreover, development projects can be technically
challenging and expensive. The nature of these development cycles may cause us to experience delays between
the time we incur expenses associated with research and development and the time we generate revenues, if any,
from such investment. Commercial success depends on many factors, including, but not limited to, the degree of
innovation of the software products and services developed through our research and development efforts,
sufficient support from our channel partners, and effective distribution and marketing. If we expend a significant
amount of resources on research and development and our efforts do not lead to the successful introduction or
improvement of products that are competitive in the marketplace, this could materially and adversely affect our
business and results of operations. Additionally, anticipated customer demand for a product we are developing
could decrease after the development cycle has commenced. Such decreased customer demand may cause us to
fall short of our sales targets, and we may nonetheless be unable to avoid substantial costs associated with the
product’s development. If we are unable to complete product development cycles successfully and in a timely
fashion and generate revenues from such future products, the growth of our business may be harmed.
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We must continue to dedicate a significant amount of resources to our research and development efforts in order
to maintain our competitive position. However, significant revenues from new software product and service
investments may not be achieved for several years, or at all. Moreover, new software products and services may
not be profitable, and even if they are profitable, operating margins for new software products and services may
not be in line with the margins we have experienced for our existing or historical software products and services.
We do, from time to time, work on different exploratory concepts/ prototypes, which may be suitably altered,
rescheduled or terminated, the impact of which may not be ascertainable or quantifiable.
Failure to meet customer expectations on the implementation of our products could result in negative publicity
and reduced sales, both of which would significantly harm our business, results of operations, financial
condition and growth prospects.
We provide our customers with upfront estimates regarding the duration, budget and costs associated with the
implementation of our products. Failing to meet these upfront estimates and the expectations of our customers for
the implementation of our products could result in a loss of customers and negative publicity regarding us and our
products and services, which could adversely affect our ability to attract new customers and sell additional
products and services to existing customers. Such failure could result from our product capabilities or service
engagements by us, our system integrator partners or our customers’ IT employees. The consequences could
include, and have included: monetary credits for current or future service engagements, reduced fees for additional
product sales, and a customer’s refusal to pay their contractually-obligated license, maintenance or service fees.
In addition, time-consuming implementations may also increase the amount of services personnel we must allocate
to each customer, thereby increasing our costs and adversely affecting our business, results of operations and
financial condition.
We may be subject to significant liability claims if our core system software fails and the limitation of liability
provided in our license agreements may not protect us, which may adversely impact our financial condition.
The license and support of our core system software creates the risk of significant liability claims against us. Our
license agreements with our customers contain provisions designed to limit our exposure to potential liability
claims. It is possible, however, that the limitation of liability provisions contained in such license agreements may
not be enforced as a result of international, federal, state and local laws or ordinances or unfavorable judicial
decisions. Breach of warranty or damage liability or injunctive relief resulting from such claims could have a
material and adverse impact on our results of operations and financial condition.
We are dependent on the reliability and performance of our internally developed systems and operations. Any
difficulties in maintaining these systems, whether due to human error or otherwise, may result in service
interruptions, decreased service quality for our customers, a loss of customers or increased expenditures.
Our revenue and profitability depend on the reliability and performance of our services and solutions. We have
contractual obligations to provide service level credits to almost all of our application services provider (“ASP”)
customers against future invoices in the event that certain service disruptions occur. Furthermore, customers may
terminate their ASP agreements with us as a result of significant service interruptions, or our inability, whether
actual or perceived, to provide our services and solutions at the contractually required levels or at any time. If our
services are unavailable, or customers are dissatisfied with our performance, we could lose customers, our revenue
and profitability would decrease and our business operations or financial position could be harmed.
In addition, the software and workflow processes that underlie our ability to deliver our services and solutions
have been developed primarily internally, which may result in us not passing on the liability to third party service
providers or partners. Malfunctions in the software we use or human error could result in our inability to provide
services or cause unforeseen technical problems. If we incur significant financial commitments to our customers
in connection with our failure to meet service level commitment obligations, we may incur significant liability
and our liability insurance and revenue reserves may not be adequate. In addition, any loss of services, equipment
damage or inability to meet our service level commitment obligations could reduce the confidence of our
customers and could consequently impair our ability to obtain and retain customers, which would adversely affect
both our ability to generate revenue and our operating results.
We operate in a price sensitive market and we are subject to pressures from customers to decrease our fees for
the services and solutions we provide. Any reduction in price would likely reduce our margins and could
adversely affect our operating results.
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The competitive market in which we conduct our business could require us to reduce our prices. If our competitors
offer discounts on certain products or services in an effort to recapture or gain market share or to sell other
products, we may be required to lower our prices or offer other favorable terms to compete successfully. Any of
these changes would likely reduce our margins and could adversely affect our operating results. Some of our
competitors may bundle products and services that compete with us for promotional purposes or as a long-term
pricing strategy or provide guarantees of prices and product implementations. We may also face increasing
competition from open source software initiatives in which competitors may provide software and intellectual
property for free. Existing or new competitors could gain sales opportunities or customers at our expense. In
addition, many of the services and solutions that we provide and market are not unique to us and our customers
and target customers may not distinguish our services and solutions from those of our competitors. All of these
factors could, over time, limit or reduce the prices that we can charge for our services and solutions. If we cannot
offset price reductions with a corresponding increase in the number of sales or with lower spending, then the
reduced revenue resulting from lower prices would adversely affect our margins and operating results.
If economic or other factors negatively affect the insurance industry, our customers and target customers may
become unwilling or unable to purchase our services and solutions, which could cause our revenue to decline
and impair our ability to operate profitably.
Most of our existing and target customers operate in the insurance industry. Because our products and services
heavily depend upon one sector, if a material portion of the insurance businesses that we service, or are looking
to service, experience economic hardship or any developments that make the insurance industry dependent on
technologies different than those provided by us, these customers may be unwilling or unable to expend resources
on the services and solutions we provide, which would negatively affect the overall demand for our services and
could cause pronounced effects on our business, results of operations and financial condition. Any slowdown or
adverse change in demand in insurance products of our customers on account of various factors including
cyclicality in demand and general economic conditions, could adversely impact our business, results of operations
and financial conditions.
If we are unable to quickly react to changes in insurance laws and similar regulation in the jurisdictions in
which we operate and update our products on a frequent basis, our customer base (as well as end-user base),
revenue and profitability will be adversely affected. Such updates requires significant investment, which may
come at a cost.
In order for us to maintain and grow our customer base (and well as our customers’ end-user base) and maintain
and increase revenues and profit, we must maintain familiarity with legal and regulatory changes in the
jurisdictions in which we operate and update our existing products frequently. Frequent and timely product
updates require significant investment in research and development and in personnel experienced in legal and
regulatory matters as well as technical personnel. To maintain such a level of investment, we may need to raise
additional debt or equity capital, which may be costly, or require a reduction in other areas of our budget. Our
inability to continually update our products as needed due to regulatory changes could have an adverse effect on
our financial condition and results of operations and reduce our ability to compete.
Any significant future indebtedness and any conditions and restrictions imposed by such financing agreements
could restrict our ability to conduct our business and operations in the manner we desire.
We may incur additional indebtedness to fund our growth, including to fund acquisitions. Any significant
indebtedness in the future could have important consequences on our cash flows to fund working capital, capital
expenditures, acquisitions and other general corporate requirements. In addition, fluctuations in market interest
rates may affect the cost of our borrowings. Any conditions and restrictions imposed by such financing agreements
could restrict our ability to conduct our business and operations in the manner we desire. In addition, failure to
meet any conditions or obtain consents required under such financing arrangements could have adverse
consequences on our business and operations.
Litigation could result in substantial costs to us and our insurance may not cover these costs.
There is a risk that our services and solutions may not perform up to expectations. While in certain circumstances
we attempt to contractually limit our liability for damages arising from our provision of services, there can be no
assurance that they will be enforceable in all circumstances or in all jurisdictions. Furthermore, litigation,
regardless of contractual limitations, could result in substantial cost to our divert management’s attention and
44
resources from our operations and result in negative publicity that our ongoing marketing efforts and therefore
our ability to maintain and grow our customer base. Although we have general liability insurance in place, there
is no assurance that this insurance will cover these claims or that these claims will not exceed the insurance limit
under our current policies.
Our global operations are subject to complex risks, some of which might be beyond our control.
We have offices and operations in various countries around the world and provide services and solutions to clients
globally. For Fiscal 2017, approximately 88.38% of our revenues were attributable to the North American region,
approximately 6.75% were attributable to the European region, and approximately 4.87% were attributable to the
rest of the world, primarily the Asia-Pacific region. If we are unable to manage the risks of our global operations,
including regulatory, economic, political and other uncertainties, fluctuations in foreign exchange and inflation
rates, international hostilities, terrorism, natural disasters and multiple legal and regulatory systems, our results of
operations could be adversely affected.
In order to execute our business plan successfully, we must maintain existing relationships with our customers
and establish new relationships with additional businesses. If we are unable to diversify and extend our customer
base, our ability to grow our business may be compromised, which would have a material adverse effect on our
financial condition and results of operations.
Our international sales and operations subject us to additional risks that can adversely affect our business,
results of operations and financial condition.
Our current international operations and our plans to expand our international operations subject us to a variety of
risks, including:
increased management, travel, infrastructure and legal compliance costs associated with having multiple
international operations;
longer payment cycles and difficulties in enforcing contracts and collecting accounts receivable;
the need to localize our products and licensing programs for international customers;
lack of familiarity with and unexpected changes in foreign regulatory requirements;
increased exposure to fluctuations in currency exchange rates;
the burdens of complying with a wide variety of foreign laws and legal standards;
compliance with anticorruption laws, including the U.S. Foreign Corrupt Practices Act of 1977, particularly
in emerging market countries;
import and export license requirements, tariffs, taxes and other trade barriers;
increased financial accounting and reporting burdens and complexities;
weaker protection of intellectual property rights in some countries;
multiple and possibly overlapping tax regimes; and
political, social and economic instability abroad, terrorist attacks and security concerns in general.
As we continue to expand our business globally, our success will depend, in large part, on our ability to anticipate
and effectively manage these and other risks associated with our international operations. Any of these risks could
harm our international operations and reduce our international sales, adversely affecting our business, results of
operations, financial condition and growth prospects.
We are subject to regulatory, tax, economic, political and other uncertainties in many of the countries in which
we operate.
We have significant facilities in the U.S., India, Malaysia, Singapore and Thailand. Wages in these countries have
historically increased at a faster rate than in the other countries in which we operate. If this trend continues in the
future, it would result in increased costs for our skilled professionals and thereby potentially reduce our operating
margins. Also, there is no assurance that, in future periods, competition for skilled professionals will not drive
salaries higher in those countries, thereby resulting in increased costs for our technical professionals and reduced
operating margins.
Certain of these countries have also recently experienced civil unrest and terrorism and have been involved in
conflicts with neighboring countries. These events could materially adversely affect our operations in these
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countries. In addition, companies may decline to contract with us for services, even where these countries are not
involved, because of more generalized concerns about relying on a service provider utilizing international
resources that may be viewed as less stable than those provided in the other countries in which we operate.
In addition, these countries have in the past experienced many of the problems that commonly confront the
economies of developing countries, including high inflation, erratic gross domestic product growth and shortages
of foreign exchange. Government actions concerning the economy in these countries could have a material adverse
effect on private sector entities like us. In the past, certain of these governments have provided significant tax
incentives and relaxed certain regulatory restrictions in order to encourage foreign investment in specified sectors
of the economy, including the software development services industry. Programs that have benefited us include,
among others, tax holidays, liberalized import and export duties and preferential rules on foreign investment and
repatriation. Notwithstanding these benefits, as noted above, changes in government leadership or changes in
policies in these countries that result in the elimination of any of the benefits realized by us or the imposition of
new taxes applicable to such operations could have a material adverse effect on our business, results of operations
and financial condition.
Our operating results may be adversely affected by fluctuations in the Indian rupee, U.S. dollar and other
foreign currency exchange rates and restrictions on the deployment of cash across our global operations.
Although we report our operating results in Indian rupees, a large portion of our revenues and expenses are
denominated in other currencies, including the U.S. dollar. Fluctuations in foreign currency exchange rates can
have a number of adverse effects on us. Because our consolidated financial statements are presented in Indian
rupees, we must translate revenues, expenses and income, as well as assets and liabilities, into Indian rupees at
exchange rates in effect during or at the end of each reporting period. Therefore, changes in the value of the Indian
Rupee against other currencies, such as the U.S. dollar, will affect our revenues, income from operations, other
income (expense), net and the value of balance sheet items originally denominated in other currencies. There is
no guarantee that our financial results will not be adversely affected by currency exchange rate fluctuations or that
any efforts by us to engage in currency hedging activities will be effective. In addition, in some countries we could
be subject to strict restrictions on the movement of cash and the exchange of foreign currencies, which could limit
our ability to use these funds across our global operations. Finally, as we continue to leverage our global delivery
model, more of our expenses are incurred in currencies other than those in which we bill for the related services.
An increase in the value of certain currencies, such as the Indian rupee, against the U.S. dollar could increase costs
for delivery of services at offshore sites by increasing labor and other costs that are denominated in local currency.
Our shareholders may have difficulty effecting service of process or enforcing judgments obtained in India
against our foreign subsidiaries or against some of our officers, directors or executive management or gaining
access to our assets located outside India.
Several of our operating subsidiaries are located outside India, including the United States, Singapore, Thailand,
Malaysia, the United Kingdom and Canada, and a number of our officers, directors and executive management
reside abroad. Many of our assets are located in countries outside India. As a result, you may be unable to effect
service of process upon our affiliates who reside outside India except in their jurisdiction of residence. In addition,
you may be unable to enforce outside of the jurisdiction of these affiliates’ residence judgments obtained against
these individuals or entities in courts of India, including judgments predicated solely upon the securities laws of
India. You may also have difficulty gaining access to assets of us or our affiliates located outside India to the
extent necessary to satisfy a judgment against us or one of our affiliates. In particular, should you seek to enforce
a judgment of a court in India against us or one of our affiliates, directors or officers in a jurisdiction outside India,
you may be unable to obtain recognition or enforcement of some or all of the amount of damages or other remedies
awarded by the court in India. You may also be required to comply with laws or regulations applicable to relevant
jurisdiction governing the repatriation of any money damages recovered from a court in such jurisdiction to India
or another country.
Our growth may be hindered by immigration restrictions.
Our future success continues to depend on our ability to attract and retain employees with technical and project
management skills, including those from developing countries, especially India. The ability of foreign nationals
to work in the United States and Europe, where a significant proportion of our operations are located, depends on
their ability and our ability to obtain the necessary visas and work permits.
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Immigration and work permit laws and regulations in the United States, the United Kingdom, and other countries
are subject to legislative and administrative changes as well as changes in the application of standards and
enforcement. Immigration and work permit laws and regulations can be significantly affected by political forces
and levels of economic activity. Our international expansion strategy and our business, results of operations, and
financial condition may be materially adversely affected if changes in immigration and work permit laws and
regulations or the administration or enforcement of such laws or regulations impair our ability to staff projects
with professionals who are not citizens of the country where the work is to be performed.
We do not own the “Majesco” trademark and logo.
The “Majesco” trademark is registered in favour of our Subsidiary, Majesco US. Although we have not entered
into a written agreement with Majesco US governing the terms and conditions of the use of the trademark, we
have been granted an informal license to use the “Majesco” trademark and logo If we have to discontinue the use
of the “Majesco” trademark and logo there may be a material and adverse effect our reputation, business, financial
condition, results of operation and prospects.
We may not be able to enforce or protect our intellectual property rights, which may harm our ability to compete
and harm our business.
Our future success will depend, in part, on our ability to protect our proprietary methodologies and other valuable
intellectual property. We presently hold no issued patents.
Our ability to enforce our software license agreements, service agreements, and other intellectual property rights
is subject to general litigation risks, as well as uncertainty as to the enforceability of our intellectual property rights
in various countries. To the extent that we seek to enforce our rights, we could be subject to claims that an
intellectual property right is invalid, otherwise not enforceable, or is licensed to the party against whom we are
pursuing a claim. In addition, our assertion of intellectual property rights may result in the other party seeking to
assert alleged intellectual property rights or assert other claims against us, which could harm our business. If we
are not successful in defending such claims in litigation, we may not be able to sell or license a particular service
or solution due to an injunction, or we may have to pay damages that could, in turn, harm our results of operations.
In addition, governments may adopt regulations, or courts may render decisions, requiring compulsory licensing
of intellectual property to others, or governments may require that products meet specified standards that serve to
favor local companies. Our inability to enforce our intellectual property rights under these circumstances may
harm our competitive position and our business.
We generally agree in our agreements with our customers to place source code for our proprietary software in
escrow. In most of those cases, the escrowed source code may be made available to such customers in the event
that we were to file for bankruptcy or materially fail to support our products in the future. Release of our source
code upon any such event may increase the likelihood of misappropriation or other misuse of our software;
however, such customers would still be obligated to comply with the terms of our license agreements with them,
which restricts the use of the software.
Our services or solutions could infringe upon the intellectual property rights of others and we may be subject
to claims of infringement of third-party intellectual property rights.
We cannot be sure that our services and solutions, or the solutions of others that we offer to our clients, do not
infringe on the intellectual property rights of others. Third parties may assert against us or our customers claims
alleging infringement of patent, copyright, trademark, or other intellectual property rights to technologies or
services that are important to our business. Infringement claims could harm our reputation, cost us money and
prevent us from offering some services or solutions. In our contracts, we generally agree to indemnify our clients
for certain expenses or liabilities resulting from potential infringement of the intellectual property rights of third
parties. In some instances, the amount of our liability under these indemnities could be substantial. Any claims
that our products, services or processes infringe the intellectual property rights of others, regardless of the merit
or resolution of such claims, may result in significant costs in defending and resolving such claims, and may divert
the efforts and attention of our management and technical personnel from our business. In addition, as a result of
such intellectual property infringement claims, we could be required or otherwise decide that it is appropriate to:
pay third-party infringement claims;
discontinue using, licensing, or selling particular products subject to infringement claims;
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discontinue using the technology or processes subject to infringement claims;
develop other technology not subject to infringement claims, which could be costly or may not be possible;
and/or
license technology from the third party claiming infringement, which license may not be available on
commercially reasonable terms.
The occurrence of any of the foregoing could result in unexpected expenses or require us to recognize an
impairment of our assets, which would reduce the value of our assets and increase expenses. In addition, if we
alter or discontinue our offering of affected items or services, our revenue could be affected. If a claim of
infringement were successful against us or our clients, an injunction might be ordered against our client or our
own services or operations, causing further damages.
We expect that the risk of infringement claims against us will increase if our competitors are able to obtain patents
or other intellectual property rights for software products and methods, technological solutions, and processes.
We may be subject to intellectual property infringement claims from certain individuals or companies who have
acquired patent portfolios for the primary purpose of asserting such claims against other companies. The risk of
infringement claims against us may also increase as we continue to develop and license our intellectual property
to our clients and other third parties. Any infringement claim or litigation against us could have a material adverse
effect on our business, results of operations and financial condition.
Some of our products may incorporate open source software, which may expose us to potential claims or
litigation.
Some of our products may incorporate software licensed under so-called “open source” licenses, including, but
not limited to, the GNU General Public License and the GNU Lesser General Public License. We use our
methodology to ensure that our proprietary software is not combined with, and does not incorporate, open source
software in ways that would require our proprietary software to be subject to an open source license. However,
few courts have interpreted open source licenses, and the manner in which these licenses may be interpreted and
enforced is therefore subject to some uncertainty. The usage of open source software may subject us to claims
from others seeking to enforce the terms of an open source license, including by demanding release of the open
source software, derivative works or our proprietary source code that was developed using such software. Such
claims could also result in litigation, and may require us to devote additional research and development resources
to change our products, any of which could reduce or diminish the value of our products and have a negative effect
on our business and operating.
We may not pay any cash dividends on our equity shares in the future. Our ability to pay dividends in the future
will depend upon future earnings, financial condition, cash flows, working capital requirements, and capital
expenditures and other factors.
Declaration and payment of any dividend on our equity shares, if any, is subject to the discretion of our Board of
Directors and will depend upon our future earnings, financial condition, cash flows, working capital requirements,
capital expenditures, restrictions in our credit facilities and other factors. There can be no assurance as to whether
we will pay a dividend in the future and if so the level of such future dividends. Accordingly, it is likely that
investors may have to rely on sales of their equity shares after price appreciation, which may never occur, as the
only way to realize any future gains on their investment.
We have entered into, and will continue to enter into, related party transactions.
We have entered into and may in the course of our business continue to enter into transactions specified in the
financial results contained in the Preliminary Placement Document with related parties that include our Promoters
and companies forming part of our Group Companies. For further details in relation to our related party
transactions, please refer to “Financial Statements” on page 152. While we believe that all such transactions have
been conducted on an arm’s length basis, there can be no assurance that we could not have achieved more
favourable terms had such transactions not been entered into with related parties. Furthermore, it is likely that we
may enter into related party transactions in the future. The Companies Act, 2013 has brought into effect significant
changes to the Indian company law framework, including specific compliance requirements such as obtaining
prior approval from audit committee, the board of directors and shareholders for certain related party transactions.
There can be no assurance that such transactions, individually or in the aggregate, will not have a material adverse
effect on our financial condition and results of operations.
48
We do not own our registered office and certain office premises from which we operate.
Our registered office was originally leased by Mastek under a 99 year lease from the Maharashtra Industrial
Development Corporation (“MIDC”) and pursuant to the Scheme of Amalgamation, the lease for those premises
was to be transferred to our Company. The applications for transfer of the said lease to MIDC have been made
and we are waiting for approval from MIDC. We cannot assure you the time that it will take for the transfer to be
effected in the name of our Company or if such transfer will be effected at all and we will lease these premises in
the future, and be able to continue with the uninterrupted use of these premises, which may impair our operations
and adversely affect our financial condition.
Some of our other office premises are owned by third parties. We cannot assure you that we will own, or have the
right to occupy, these premises in the future, or that we will be able to continue with the uninterrupted use of these
premises, which may impair our operations and adversely affect our financial condition. For further details of our
premises, please refer to “Our Business – Properties” on page 95.
Our Company has issued Equity Shares in the last 12 months at a price which may be lower than the Offer
Price.
Our Company has issued Equity Shares in the last 12 months, including in connection with exercise of options
under the Existing Employee Stock Option Scheme, which may be at a price lower than the Offer Price. For
further details, please see “Capital Structure” on page 56. Our Company may continue to issue Equity Shares,
including under the ESOP Scheme, at a price below the market price of Equity Shares at the time of issuance.
Companies in India (based on notified thresholds), including our Company, are required to prepare financial
statements under Ind-AS (which is India's convergence to IFRS). The transition to Ind-AS in India is recent
and such transition may have an impact on our Company. Indian corporate and other disclosure and
accounting standards differ from those observed in other jurisdictions such as U.S. GAAP and IFRS. Further,
all income tax assessments in India will also be required to follow the Income Computation Disclosure
Standards.
We have historically prepared our annual and interim financial statements under Indian GAAP prior to April 1,
2017. Public companies in India, including us, will now be required to prepare annual and interim financial
statements under Ind-AS in accordance with the roadmap announced on January 2, 2015 by the MCA, in
consultation with the National Advisory Committee on Accounting Standards for the conversion of Ind-AS with
IFRS. On February 16, 2015, the MCA notified the public of the Companies (Indian Accounting Standards) Rules,
2015, which have come into effect from April 1, 2016. We have adopted Ind-AS with effect from April 1, 2017 .
Our Consolidated Financial Statements for Fiscal 2017, 2016 and 2015 included in this Preliminary Placement
Document have been prepared in accordance with Indian GAAP, while the Limited Review Financial Statements
as of and for the three and nine months ended December 31, 2017 has been prepared in accordance with Ind-AS.
Accounting principles under Ind-AS vary in many respects from accounting principles under Indian GAAP.
Significant differences exist between Indian GAAP and other accounting principles, such as U.S. GAAP, which
may be material to investors’ assessments of our financial condition.
Our financial statements are prepared in accordance with Indian GAAP, while Majesco US’s financial statements
are prepared in accordance with U.S. GAAP, not Indian GAAP. We have not attempted to quantify the impact of
the differences between Indian GAAP and U.S. GAAP on the financial data included in this Preliminary
Placement Document, nor do we provide a reconciliation of our financial statements to those of either Indian
GAAP or U.S. GAAP. U.S. GAAP differs in significant respects from Indian GAAP. Accordingly, the degree to
which the Indian GAAP financial statements included in this Preliminary Placement Document will provide
meaningful information is entirely dependent on the reader’s level of familiarity with Indian accounting practices.
Any reliance by persons not familiar with Indian accounting practices on the financial disclosures presented in
this Preliminary Placement Document should accordingly be limited.
We have contingent liabilities, and our profitability could be adversely affected if any of these contingent
liabilities materialise.
49
The contingent liabilities of our Company as at September 30, 2017 and March 31, 2017, are as mentioned in the
table below. (in ` million)
Particulars As at September 30, 2017 As at March 31, 2017
Stand by documentary credit (SBDC) given to HSBC India on behalf
of Majesco, USA, subsidiary of the Company
652.85 648.50
Our results of operations and cash flow would be impacted if the abovementioned guarantee is enforced.
The exit by the UK from the European Union has and could further impact global financial markets which
could in turn adversely affect the trading prices of our Equity Shares.
The exit by the UK from the European Union (“EU”) may impact the trading prices of our Equity Shares. As a
result of the referendum held in the UK on June 23, 2016, which resulted in a vote in favour of the exit from the
EU, the global financial markets have experienced significant volatility and may continue to experience volatility.
In addition, the UK and member countries in the EU may face increased economic and financial volatility. Such
economic and financial volatility may further impact global financial markets, which may adversely affect the
trading prices of our Equity Shares.
We had negative cash flows from our investing activities in Fiscal 2017.
We had negative cash flows from our investing activities in the last Fiscal. The table below summarises our cash
flows for Fiscal 2017, on a consolidated basis. (` in million)
Fiscal 2017
Net cash (used in) generated from operating activities 876.73
Net cash (used in) investing activities (251.51)
Net cash (used in) / generated from financing activities (204.21)
Net increase / (decrease) in cash and cash equivalents 401.01
Our Company had interest coverage ratio of 12.25 and 8.00 in Fiscal 2017 and Fiscal 2016, respectively.
Any negative cash flows in future may adversely affect our business. If we continue to have negative interest
coverage ratio, it may affect our ability to raise finance from banks or otherwise.
Risks Related to the Equity Shares
The trading price of our Equity Shares may be subject to volatility and you may not be able to sell your Equity
Shares at or above the Issue Price.
The trading prices of publicly traded securities may be highly volatile. Factors affecting the trading price of our
Equity Shares include:
variations in our operating results;
announcements of new products, strategic alliances or agreements by us or by our competitors;
increases and decreases in our customer base;
recruitment or departure of key personnel;
favorable or unfavorable reports by a section of the media concerning the insurance and technology industries
in general, or in relation to our business and operations;
misinformation campaigns by any disgruntled employees and management, whether presently on our rolls or
not;
changes in the estimates of our operating results or changes in recommendations by any securities analysts
that elect to research and report on our Equity Shares;
market conditions affecting the financial sector generally, or the insurance and technology industries in
particular, and the economy as a whole; and
adoption or modification of regulations, policies, procedures or programs applicable to our business.
In addition, if the Stock Markets experience a loss of investor confidence, the trading price of our Equity Shares
could decline for reasons unrelated to our business, financial condition or operating results. The trading price of
our Equity Shares might also decline in reaction to events that affect other companies in our industry even if these
50
events do not directly affect us. Each of these factors, among others, could adversely affect the trading price of
our Equity Shares.
There may be restrictions on daily movements in the price of the Equity Shares, which may adversely affect a
shareholder’s ability to sell, or the price at which it can sell, Equity Shares at a particular point in time.
We may be subject to a daily circuit breaker imposed by all stock exchanges in India, which may not allow
transactions beyond certain volatility in the price of the Equity Shares. This circuit breaker operates independently
of the index based marketwide circuit breakers generally imposed by SEBI on Indian stock exchanges. The
percentage limit on our circuit breaker may be set by the stock exchanges based on the historical volatility in the
price and trading volume of the Equity Shares. The stock exchanges may not inform us of the percentage limit of
the circuit breaker from time to time, and may change it without our knowledge. This circuit breaker effectively
limits the upward and downward movements in the price of the Equity Shares. As a result of this circuit breaker,
there can be no assurance regarding the ability of shareholders to sell the Equity Shares or the price at which
shareholders may be able to sell their Equity Shares.
Investors may be subject to Indian taxes arising out of capital gains on the sale of our Equity Shares.
Capital gains arising from the sale of our Equity Shares are generally taxable in India. Any gain realized on the
sale of our Equity Shares on a stock exchange held for more than 12 months will not be subject to capital gains
tax in India if securities transaction tax (“STT”), has been paid on the transaction. STT will be levied on and
collected by an Indian stock exchange on which our Equity Shares are sold. Any gain realized on the sale of our
Equity Shares held for more than 12 months by an Indian resident, which are sold other than on a recognized stock
exchange and as a result of which no STT has been paid, will be subject to capital gains tax in India. Further, any
gain realized on the sale of our Equity Shares held for a period of 12 months or less will be subject to capital gains
tax in India. Capital gains arising from the sale of our Equity Shares will be exempt from taxation in India in cases
where an exemption is provided under a treaty between India and the country of which the seller is a resident.
Generally, Indian tax treaties do not limit India’s ability to impose tax on capital gains. As a result, residents of
other countries may be liable for tax in India as well as in their own jurisdictions on gains arising from a sale of
our Equity Shares. However, capital gains on the sale of our Equity Shares purchased in the Issue by residents of
certain countries will not be taxable in India by virtue of the provisions contained in the taxation treaties between
India and such countries.
Foreign investors are subject to foreign investment restrictions under Indian laws that limit our ability to attract
foreign investors, which may adversely affect the trading price of our Equity Shares.
Under the foreign exchange regulations currently in force in India, transfers of shares between non-residents and
residents are freely permitted (subject to certain restrictions) if they comply with the pricing guidelines and
reporting requirements specified by the RBI. If the transfer of shares, which are sought to be transferred, is not in
compliance with such pricing guidelines or reporting requirements or falls under any of the exceptions referred to
above, then the prior approval of the RBI will be required. Additionally, shareholders who seek to convert the
Rupee proceeds from a sale of shares in India into foreign currency and repatriate that foreign currency from India
will require a no objection/tax clearance certificate from the income tax authority. We cannot assure investors that
any required approval from the RBI or any other Indian government agency can be obtained on any particular
terms, or at all.
An investor will not be able to sell any of the Equity Shares subscribed in this Issue other than on a recognized
Indian stock exchange for a period of 12 months from the date of this Issue of the Equity Shares. The Equity
Shares are subject to resale restrictions under U.S. federal and state securities laws.
Pursuant to SEBI Regulations, for a period of 12 months from the date of this Issue, investors subscribing to the
Equity Shares in this Issue may only sell their Equity Shares on NSE or BSE and may not enter into any off-
market trading in respect of these Equity Shares. We cannot assure you that these restrictions will not have an
adverse impact on the price or liquidity of the Equity Shares.
The Equity Shares have not been and will not be registered under the Securities Act or the securities laws of any
state of the United States. The Equity Shares are being offered and sold in the Issue only outside the United States
in accordance with Regulation S. Accordingly, purchasers of the Equity Shares in the Issue may not offer, sell,
pledge or otherwise transfer the Equity Shares in the United States except in an offshore transaction complying
51
with Rule 903 or Rule 904 of Regulation S or pursuant to any other available exemption from registration under
the Securities Act and in accordance with all applicable securities laws of the states of the United States.
Any future issuance of Equity Shares may dilute prospective investors’ shareholding and sales of our Equity
Shares by our Promoters or other major shareholders may adversely affect the trading price of the Equity
Shares.
Any future issuance of Equity Shares by us, such as a primary offering or pursuant to a preferential allotment,
may dilute your shareholding in us, adversely affect the trading price of our Equity Shares and could affect our
ability to raise capital through an issuance of our securities. In addition, any perception by investors that such
issuances or sales might occur could also affect the trading price of our Equity Shares. Additionally, the disposal
of Equity Shares by any of our significant shareholders or our promoters, any future issuance of Equity Shares by
any of our significant shareholders or Promoters, any future issuance of Equity Shares by us or the perception that
such issuances or sales may occur may significantly affect the trading price of the Equity Shares. We cannot assure
you that we will not issue Equity Shares or that such shareholders will not dispose of, pledge or encumber their
Equity Shares in the future.
We have broad discretion in the use of our cash and cash equivalents, including the net proceeds of this offering
and, despite our efforts, we may use them in a manner that does not increase the value of your investment.
We currently anticipate that the net proceeds from the sale of our Equity Shares will be used for inorganic growth,
to capitalize on the opportunities, as and when available for acquisitions of businesses, investment in subsidiaries
including overseas subsidiaries and step-down subsidiaries, repayment of debt and interest thereon of the
Company or its subsidiaries, including overseas subsidiaries and step-down subsidiaries, through investment in
subsidiaries or otherwise, working capital, and such other corporate purposes as may be permitted under applicable
laws and as may be specified in the appropriate approvals.
However, we have not determined the specific allocation of the net proceeds among these potential uses. We have
broad discretion in the use of our cash and cash equivalents, including the net proceeds of this offering, and
investors must rely on the judgment of our management regarding the use of our cash and cash equivalents. Our
management may not use cash and cash equivalents in ways that ultimately increase the value of your investment.
Our failure to use our cash and cash equivalents effectively could result in financial losses that could have a
material adverse effect on our business and cause the price of our Equity Shares to decline. Pending their use, we
may invest our cash and cash equivalents in short-term or long-term, investment-grade, interest-bearing securities.
These investments may not yield favorable returns. If we do not invest or apply our cash and cash equivalents in
ways that enhance shareholder value, we may fail to achieve expected financial results, which could cause the
price of our common stock to decline.
There is no guarantee that our Equity Shares will be listed, or continue to be listed, on the Indian stock
exchanges in a timely manner, or at all, and prospective investors will not be able to immediately sell their
Equity Shares on a Stock Exchange.
In accordance with Indian law and practice, final approval for listing and trading of our Equity Shares will not be
applied for or granted until after our Equity Shares have been issued and allotted. Such approval will require the
submission of all other relevant documents authorizing the issuance of our Equity Shares. Accordingly, there
could be a failure or delay in listing our Equity Shares on the NSE and BSE, which would adversely affect your
ability to sell our Equity Shares.
52
MARKET PRICE INFORMATION
As on the date of this Preliminary Placement Document, 23,608,606 Equity Shares were issued and outstanding
and are fully paid up.
(i) The following tables set forth the reported high, low, average market prices and the trading volumes of the
Equity Shares on the Stock Exchanges on the dates on which such high and low prices were recorded and the
total trading volumes for Fiscal 2017 and Fiscal 2016 (August 19, 2015, being the date of listing):
Fiscal High
(`) Date of
high
Number of
Equity
Shares
traded on
the date of
high
Total value
of Equity
Shares
traded on
date of high
(` million)
Low
(`)
Date of
low
Number of
Equity
Shares
traded on
the date
of low
Total value
of Equity
Shares
traded on
date of low
(` million)
Averag
e price
for the
year
(`)
Total Volume of
Equity Shares traded
in the Period
Number Amount
(` million)
BSE
2016* 757.50 January
5, 2016
180,901 135.84 299.50 September
8, 2015
38,135 11.40 492.10 10,067,913
5,536.71
2017 622.50 April 21,
2016
107,011 68.00 333.20 February
15, 2017
22,549 7.67 460.83 5,902,003 2,864.97
NSE
2016* 759.05
January
5, 2016
813,860 612.24 301.15 September
16, 2015
31,185 9.47 492.32 34,928,728
19,844.33
2017 622.05 April 21,
2016
547,785
348.00 332.35 February
15, 2017
72,640 24.45 460.78 23,641,866
11,579.33
* For a period from August 19, 2015 to March 31, 2016, with August 19, 2015 being the date of listing on BSE and NSE
(Source: www.bseindia.com and www.nseindia.com)
Notes:
1. High, low and average prices are based on the daily closing prices. 2. Average price for the year is based on the average of daily closing prices.
3. In case of two days with the same closing price, the date with the higher volume has been chosen.
(ii) The following tables set forth the reported high, low and average market prices and the trading volumes of
the Equity Shares on the Stock Exchanges on the dates on which such high and low prices were recorded
during each of the last six months, preceeding the date of filing of this Preliminary Placement Document:
BSE
Month, year High
(`)
Date of
high
Number of
Equity
Shares
traded on
the date of
high
Total value
of Equity
Shares
traded on
date of high
(` million)
Low
(`)
Date of
low
Number
of Equity
Shares
traded on
the date
of low
Total value
of Equity
Shares
traded on
date of low
(` million)
Average
price
for the
period
(`)
July, 2017 385.50 July 19,
2017
2,77,665 106.93 303.80 July 7,
2017
7,712 2.35 346.68
August, 2017 424.75 August 31,
2017
31,665 13.40 340.00 August 10,
2017
24,568 8.64 370.91
September, 2017 463.40 September
14, 2017
23,594 10.92 396.70 September
27, 2017
16,621 6.75 433.28
October, 2017 562.00 October 16,
2017
1,57,080 90.23 419.20 October 3,
2017
38,510 16.44 508.43
November, 2017 542.05 November
29, 2017
33,381 18.00 493.00 November
20, 2017
8,161 4.06 518.52
December, 2017 556.20 December 1,
2017
1,01,702 57.59 499.30 December
14, 2017
17,216 8.75 521.80
(Source: www.bseindia.com)
53
NSE
Month, year High
(`)
Date of
high
Number of
Equity
Shares
traded on
the date of
high
Total value
of Equity
Shares
traded on
date of high
(` million)
Low
(`)
Date of
low
Number
of Equity
Shares
traded on
the date
of low
Total value
of Equity
Shares
traded on
date of low
(` million)
Average
price
for the
period
(`)
July, 2017 385.90 July 19,
2017
19,52,461
754.81 304.15 July 7,
2017
43,138 13.17 346.85
August, 2017 425.35 August 31,
2017
3,23,168
136.96 339.45 August 10,
2017
1,27,132 44.77 370.58
September, 2017 464.45
September
14, 2017
1,38,271
64.01 396.15 September
27, 2017
77,408
31.46 433.70
October, 2017 560.50 October 16,
2017
7,47,347
428.85 420.95 October 3,
2017
93,821
40.06 510.82
November, 2017 540.55 November
29, 2017
3,26,440
175.98 493.60 November
20, 2017
41,365
20.56 519.33
December, 2017 555.90 December 1,
2017
5,90,440
333.94 499.95 December
14, 2017
1,03,171
52.44 522.07
(Source: www.nseindia.com)
Notes:
1. High, low and average prices are based on the daily closing prices.
2. Average price for the year is based on the average of daily closing prices.
3. In case of two days with the same closing price, the date with the higher volume has been chosen.
(iii) The following table set forth the details of the number of Equity Shares traded and the turnover during Fiscal
2016 and Fiscal 2017 and the last six months on the Stock Exchanges:
Period Number of Equity Shares traded Turnover (in ` million)
BSE NSE BSE NSE
Fiscal 2016* 10,067,913 34,928,728 5,536.71 19,844.33
Fiscal 2017 5,902,003 23,641,866 2,864.97 11,579.33
July, 2017 1,261,096 8,509,593 456.33 3,070.18
August, 2017 744,423 4,103,207 282.23 1,572.52
September, 2017 742,314 3,639,819 326.20 1,602.67
October, 2017 1,111,747 7,108,199 582.87 3,755.35
November, 2017 539,511 3,348,783 283.01 1,768.01
December, 2017 315,834 2,203,613 170.03 1,183.62
* For a period from August 19, 2015 to March 31, 2016, with August 19, 2015 being the date of listing on BSE and NSE
(Source: www.bseindia.com and www.nseindia.com)
(iv) The following table sets forth the market price on the Stock Exchanges on December 15, 2017 the first working
day following the approval of the Board for the Issue:
Open High Low Close Number of Equity Shares traded Volume
(` million)
BSE 510.00 519.55 503.55 512.55 8,958 4.58
NSE 505.00 519.50 505.00 511.90 1,01,806 51.14
(Source: www.bseindia.com and www.nseindia.com)
54
USE OF PROCEEDS
The gross proceeds from the Issue will be approximately ` [●] million.
The net proceeds from the Issue, after deducting fees, commissions and expenses of the Issue, will be
approximately ` [●] million (the “Net Proceeds”).
The Company has been pursuing growth, both organically and through acquisitions. This would require sufficient
resources including funds to be available and to be allocated, from time to time. Subject to compliance with
applicable laws and regulations, we intend to use the Net Proceeds of the Issue for:
a. inorganic growth, to capitalize on the opportunities in digital, data and new solutions extending core with
new technologies and capabilities, and simplified core for global and adjacent markets, including through
overseas subsidiaries and step-down subsidiaries.
b. Investment in subsidiaries by way of private placement or rights issue, including in the overseas subsidiaries
and step-down subsidiaries for the purposes of acquisitions and / or repayment or pre-payment of debt and
interest thereon by the subsidiaries including overseas subsidiaries and step-down subsidiaries. Such
repayment or pre-payment of the loan facilities will reduce our consolidated debt to equity ratio and the
finance costs.
c. Working capital and such other corporate purposes as may be permitted under the applicable laws.
Our main objects clause and objects incidental or ancillary to the main objects clause of our Memorandum of
Association enables us to undertake the objects contemplated by us in this Issue.
As permissible under applicable laws, our management will have flexibility in deploying the Net Proceeds
received by our Company from the Issue which shall be in the best interest of our Company. Neither our Promoters
nor the Directors are making any contribution either as part of the Issue or separately in furtherance of the objects
of the Issue. Further, neither our Promoters nor our Directors shall receive any proceeds from the Issue, whether
directly or indirectly.
Pending utilisation for the purposes described above, our Company intends to temporarily invest funds in
creditworthy instruments, including money market, mutual funds and fixed deposits. Any modification/ change
in the investment policy would be at the discretion of the Board from time to time and in accordance with
applicable laws.
Since the Net Proceeds of the Issue are proposed to be utilised towards the purposes set forth above, and not being
used for any specific project implementation, the following disclosure requirement are not applicable: (i) break-
up of cost of the project, (ii) means of financing such project, and (iii) proposed deployment status of the proceeds
at each stage of the project.
Neither our Promoters nor our Directors are making any contribution either as part of the Issue or separately in
furtherance of the objects of the Issue. Further, neither our Promoters nor our Directors shall receive any proceeds
from the Issue, whether directly or indirectly.
55
CAPITALISATION STATEMENT
The following table sets forth our capitalisation (on a consolidated basis) as at March 31, 2017 and as of September
30, 2017 (based on our consolidated unaudited financial results ) and as adjusted to give effect to the Issue.
You should read this table together with the chapter “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” on page 60 and our financial statements and the related notes thereto
contained in “Financial Statements” on page 152.
(` in million)
As of March 31, 2017
(Audited – Indian GAAP)
As of September 30, 2017
(Unaudited – Ind-AS)
Unadjusted As adjusted for
the Issue(1)
Unadjusted As adjusted for
the Issue(1)(2)
Shareholders’ Funds (Equity)
Share capital 116.82 [●] 117.70 [●]
Reserves and surplus 2,762.54 [●] 2,989.36 [●]
Total Shareholders’ funds (A) 2,879.36 [●] 3,107.06 [●]
Debt
Long term borrowings 555.56 [●] 552.30 [●]
Short term borrowings 166.06 [●] 597.80 [●]
Other borrowings (Current maturities of
long term borrowings)
108.08 [●] 217.71 [●]
Total Debt (B) 829.70 [●] 1,367.81 [●]
(I) Total capitalisation (A+B)
3,709.06 [●] 4,474.87 [●]
(II) Debt/Equity Ratio 0.29 0.44 1. Adjusted to post issue share capital and securities premium account. To be filled in at the Placement Document Stage. 2. The adjustments do not reflect the impact of exercise of ESOPs post September 30, 2017
56
CAPITAL STRUCTURE
The Share Capital of our Company as at the date of this Preliminary Placement Document is set forth below: (In `, except share data)
Aggregate value
at face value
A AUTHORISED SHARE CAPITAL
50,000,000 Equity Shares 250,000,000.00
B ISSUED, SUBSCRIBED AND PAID-UP CAPITAL BEFORE THE ISSUE
23,608,606 Equity Shares 118,043,030.00
C PRESENT ISSUE IN TERMS OF THIS PRELIMINARY PLACEMENT DOCUMENT
Up to [●] Equity Shares(1) [●]
D PAID-UP CAPITAL AFTER THE ISSUE
[●] Equity Shares [●]
E SECURITIES PREMIUM ACCOUNT
Before the Issue 91,187,579.00
After the Issue [●]
(1) The Issue has been authorised by the Board of Directors on December 14, 2017and the shareholders pursuant to their
resolution adopted in Extra-Ordinary General Meeting held on January 11, 2018.
Equity Share Capital History of our Company
The history of the equity share capital of our Company is provided in the following table:
Date of Allotment No. of Equity
Shares
allotted
Face
value
(In `)
Issue price
per equity
share (In `)
Cumulative
number of
equity shares
Nature of
Allotment
Consideration
(cash/other
than cash)
June 27, 2013 10,000 10.00 10.00 10,000 Initial subscription Cash
November 21,
2014
40,000 10.00 10.00 50,000 Rights issue Cash
As per the Scheme of Arrangement, upon the Scheme becoming effective from the Appointed date (i.e. April 1, 2014), the
issued, subscribed and paid-up capital of the Company consisting of 50,000 Equity shares of ` 10 each aggregating to
`500,000 were cancelled.
June 18, 2015 22,812,795 5.00 5.00 22,812,795 Allotment pursuant
to the Scheme of
Arrangement
Other than
cash(1)
November 26, 2015 43,416 5.00 158.82 22,856,211 Allotment pursuant
to exercise of
options granted
under the ESOP
Scheme(2)
Cash
January 7, 2016 118,876 5.00 90.72 22,975,087 Cash
February 2, 2016 46,903 5.00 99.74 23,021,990 Cash
March 28, 2016 30,411 5.00 140.98 23,052,401 Cash
May 18, 2016 92,555 5.00 81.06 23,144,956 Cash
June 23, 2016 36,007 5.00 104.21 23,180,963 Cash
August 10, 2016 67,437 5.00 107.77 23,248,400 Cash
October 7, 2016 59,379 5.00 128.22 23,307,779 Cash
November 1, 2016 5,598 5.00 222.15 23,313,377 Cash
December 30, 2016 18,871 5,00 163.67 23,332,248 Cash
February 1, 2017 8,973 5.00 128.22 23,341,221 Cash
March 17, 2017 21,814 5.00 87.73 23,363,035 Cash
May 9, 2017 45,136 5.00 92.71 23,408,171 Cash
June 29, 2017 61,547 5.00 84.74 23,469,718 Cash
August 3, 2017 63,381 5.00 166.57 23,533,099 Cash
October 6, 2017 37,418 5.00 106.23 23,570,517 Cash
November 7, 2017 23,419 5.00 233.34 23,593,936 Cash
January 11, 2018 14,670 5.00 172.64 23,608,606 Cash (1) Issued pursuant to the Scheme of Arrangement order as approved by the Bombay High Court by way of their order dated
April 30, 2015 and High Court of Gujarat by way of their order dated April 30, 2015. For details of the Scheme of
Arrangement please refer to “- Scheme of Arrangement” on page 56.
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(2) Issued pursuant to ESOP Scheme which was regularised pursuant to the Scheme of Arrangement order as approved by the
Bombay High Court by way of their order dated April 30, 2015 and High Court of Gujarat by way of their order dated
April 30, 2015.
For details relating to the ESOP Scheme issued by the Company, please refer to “- ESOP Scheme” below.
Scheme of Arrangement
Pursuant to a Scheme of Arrangement under section 391 to 394 read with Section 100 to 103 and other applicable
provision of the Companies Act, 1956 and other applicable provision of the Companies Act, 2013, the Board of
Directors of Mastek Limited (“Mastek”), at its meeting held on September 15, 2014, had approved the demerger
of the Insurance Products and Services business of Mastek, into our Company (then known as Minefields
Computers Limited), followed by transfer of the offshore insurance operations business of Mastek in India to
Majesco Software and Solution India Private Limited (“MSSIPL”) a wholly owned subsidiary of Majesco
Software and Solution Inc. (“MSSUS”) a step down subsidiary of our Company, retaining the domestic operations
with our Company.
The appointed date of the scheme was April 1, 2014 and the appointed date for transfer of the offshore insurance
operation business transfer was November 1, 2014, Mastek obtained necessary approvals for the scheme under
clause 24(f) of the listing agreement with BSE and NSE from SEBI on December 9, 2014. The scheme has also
been approved by the High Court of Bombay and High Court of Gujarat, both on April 30, 2015, and on filing the
ROC the said Scheme became effective from June 1, 2015. As specified in the Scheme of Arrangement, Mastek
shareholders have been issued one Equity Share of ` 5 each in our Company for every share held in Mastek, while
retaining their existing Mastek share. Existing 50,000 equity shares of `10 each of the Company were cancelled
on June 1, 2015 when the Scheme became effective.
The shares of the Company were listed on August 19, 2015 on BSE and NSE, where Mastek is listed. The
demerger has resulted in the transfer of the assets, liabilities, other reserves and surplus, employee stock options
outstanding account and hedging reserve account relation to our Company from Mastek.
ESOP Scheme
Pursuant to Clause 16 A of Scheme of Arrangement our Company formulated the ESOP Scheme by adopting the
existing stock option schemes of Mastek. The shareholders of Mastek approved the Scheme of Arrangement in
the court convened meeting held on March 5, 2015, and the shareholders of our Company approved the scheme
of arrangement through consent letters.
Pursuant to the ESOP Scheme, our Company is authorised to grant up to 8,000,000 stock options to the employees,
each option representing one Equity Share. The exercise price is to be determined by the Nomination and
Remuneration Committee and such price may be the face value of the share from time to time or may be the
market price or any other price as may be decided by the Nomination and Remuneration Committee and will be
governed by the Securities and Exchange Board of India (Share based employee benefits) Regulations, 2014. The
vesting period of the Options shall be a minimum of one year from the date of grant and may be extended up to
four years from the date of grant.
As on January 15, 2018 the total number of options that have been granted but not vested are 840,150 and vested
but not exercised are 1,294,543.
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DIVIDENDS
Dividend Policy
As of the date of this Preliminary Placement Document, the Company has not adopted any dividend policy.
Dividend Paid (in ` million)
Particulars H1 Fiscal 2018 Fiscal 2017 Fiscal 2016 Fiscal 2015
Equity Share Capital 117.67 116.82 115.26 0.50
Dividend on Equity Share capital 23.53 # - - -
Dividend Declared Rate (In %) 20.00% - - - #The Board of Directors of the Company in their meeting held on August 3, 2017 declared a special dividend of 20% (i.e.
` 1 per shares) amounting to ` 23.53 million. The declared dividend paid to those share holders whose names appear in
the Register of Members of the Company on August 18, 2017.
Special Dividend declared on August 3, 2017 will be regularised in forthcoming Annual General Meeting.
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INTEREST COVERAGE RATIO
The interest coverage ratio for last three years (Cash profit after tax plus interest paid/interest paid) is:
Fiscal 2017 Fiscal 2016 Fiscal 2015
Interest coverage ratio 12.25 8.00
-
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This discussion of our financial condition and results of operations should be read together with the financial
statements and notes contained elsewhere in this Preliminary Placement Document, including the audited
consolidated financial statements of our Company for Fiscal 2017 and 2016 and the audited standalone financial
statements of our Company for Fiscal 2017 and Fiscal 2016, including the notes thereto and reports thereon, the
Consolidated unaudited financial results of our Company for the six months ended September 30, 2017 and the
Consolidated unaudited financial results of our Company for the six months ended September 30, 2016, the
audited consolidated financial statements of our US subsidiary Majesco US for Fiscal 2017, Fiscal 2016 and
Fiscal 2015, including the notes thereto and reports thereon and the unaudited consolidated financial statements
of our US subsidiary Majesco US for the six months ended September 30, 2017 and September 30, 2016.
The consolidated financial statements of our Company included in the Preliminary Placement Document are
prepared in accordance with Indian generally accepted accounting principles (“Indian GAAP”) for periods prior
to April 1, 2017. For periods starting April 1, 2017, the consolidated financial statements of our Company
included in the Preliminary Placement Document are prepared in accordance with Ind AS which is different from
Indian GAAP. The consolidated financial statements of our US subsidiary Majesco US are prepared in
accordance with United States generally accepted accounting principles (“US GAAP”), which differ from Indian
GAAP. See “Certain Conventions, Presentation of Financial, Industry and Market Data, Currency of
Presentation and Exchange Rates” and “Risk Factors” on page no. 10 and 34, respectively.
All currency amounts reported for our Company in this MD&A are in Indian Rupees (“Rs” or “`”), and all
currency amounts reported for our US subsidiary Majesco US are in U.S. dollars (“US$”). All amounts in U.S.
dollars are in thousands. See “Exchange Rates” in this Preliminary Placement Document for further details on
the exchange rates between those two currencies.
Certain statements in this section and other sections are forward-looking. While we believe these statements are
accurate, our business is dependent on many factors, some of which are discussed in “Risk Factors” in this
Preliminary Placement Document. Many of these factors are beyond our control and any of these and other
factors could cause actual results to differ materially from the forward-looking statements made in this
Preliminary Placement Document. Please refer to the sections “Forward-Looking Statements” and “Risk
Factors” for further information regarding these factors.
Overview
We are a global provider of core insurance software, consulting services and other insurance technology solutions
for business transformation for the insurance industry having a presence in India, the United States, Canada, the
United Kingdom, Malaysia, Thailand, Singapore and Mexico. We offer core insurance software solutions for
property and casualty/general insurance (“P&C”), life and annuities (“L&A”) and pensions and group/employee
benefits providers, allowing them to manage policy administration, claims management and billing functions.
In addition, we offer a variety of other technology-based solutions that are designed to enable our customers to
automate and innovate business processes across the end-to-end insurance value chain and comply with policies
and regulations across their organizations. Our solutions include policy management, new business/underwriting,
rating, billing, claims management, distribution management, business analytics, predictive modelling, digital
platforms for mobile and portal use, testing services, cloud services, bureau and content services, transformation
services and consulting services. Our solutions enable customers to respond to evolving market needs and
regulatory changes across various jurisdictions, while improving the efficiency of their core operations.
Our service offerings include (i) licensing of our proprietary software products (ii) professional services which
includes consulting services, including project delivery and implementation of our solutions services (iii) cloud
services which includes providing software as a service (SaaS) using our proprietary software and managing/
hosting customer applications and our cloud (private, public or hybrid) infrastructure and (iv) support services
that support the business transformation, digital, data and ongoing use of our proprietary software and cloud
applications.
Given the long-term nature of our contracts, we believe, we have anopportunity to nurture deeper relationships
with our customers which enables us to market our portfolio of solutions with customer references for new sales.
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Our customers range from some of the largest global tier one insurance carriers in the industry to startups,
greenfields, and mid-market insurers, including specialty, mutual and regional carriers. As of September 30, 2017,
we served over 160 insurance customers on a worldwide basis. We operate our business primarily through our
Subsidiary, Majesco US.
Use of Non-GAAP Financial Measures
In evaluating our business, we consider and use EBITDA as a supplemental measure of operating performance.
We define EBITDA as earnings before interest, taxes, depreciation and amortization. We present EBITDA
because we believe it is frequently used by securities analysts, investors and other interested parties as a measure
of financial performance.
References to Adjusted EBITDA for our Company means EBITDA before one-time non-recurring exceptional
costs related to the de-merger from Mastek Limited and an expense charge with regard to stock based
compensation.
References to Adjusted EBITDA for our US subsidiary Majesco US means EBITDA before one-time non-
recurring exceptional costs related to its merger with Cover-All and the listing of its common stock on the NYSE
American in connection with the merger, an expense charge with regard to stock based compensation and an
exceptional provision for reversal of accrued revenue in respect of a project in the India-Asia Pacific geography
which could potentially be terminated by a client.
The terms EBITDA and Adjusted EBITDA are not defined under Indian GAAP or US GAAP and are not a
measure of operating income, operating performance or liquidity presented in accordance with Indian GAAP or
US GAAP. EBITDA and Adjusted EBITDA have limitations as an analytical tool, and when assessing our
operating performance, investors should not consider EBITDA or Adjusted EBITDA in isolation, or as a
substitute for net income (loss) or other consolidated income statement data prepared in accordance with Indian
GAAP or US GAAP. Among other things, EBITDA and Adjusted EBITDA do not reflect our actual cash
expenditures. Other companies may calculate similar measures differently than us, limiting their usefulness as
comparative tools. We compensate for these limitations by relying on Indian GAAP or US GAAP results and
using EBITDA and Adjusted EBITDA only supplementally. Reconciliation of net income to EBITDA and
Adjusted EBITDA has been compiled for the six months ended September 30, 2017 and 2016 under Ind AS
and for Fiscal 2017 and Fiscal 2016 under Indian GAAP for our Company. Please see “Results of Operations
– Our Company- Fiscal 2017 Compared to Fiscal 2016” and “—Six Months Ended September 30, 2017
Compared to Six Months Ended September 30, 2016.” Reconciliation of US GAAP net income to EBITDA
and Adjusted EBITDA has been compiled for the six months ended September 30, 2017 and 2016 and for
Fiscal 2017, Fiscal 2016 and Fiscal 2015 for Majesco US. Please see “Results of Operations – Majesco US
– Fiscal 2017 Compared to Fiscal 2016,” “—Fiscal 2016 Compared to Fiscal 2015” and “—Six Months Ended
September 30, 2017 Compared to Six Months Ended September 30, 2016.”
Agile Asset Acquisition
On January 1, 2015, we acquired through Majesco US, substantially all of the insurance consulting business of
Agile Technologies LLC (“Agile”), a business and technology management consulting firm. We estimate the total
consideration for the Agile asset acquisition will amount to approximately US$8,500, with a total maximum of
US$9,200 possible depending on earn-out payments. Of the estimated approximately US$8,500 total
consideration, (1) US$1,000 was paid in connection with the execution of the acquisition agreement and US$2,000
was paid in connection with the closing of the acquisition with available cash on hand, (2) approximately US$390
will be paid in cash as deferred payments over three years to certain former Agile employees who became
employees of Majesco US in connection with the acquisition and (3) up to US$5,100 will be paid by way of earn-
out over three years based on the satisfaction of certain time milestones and performance targets, with maximum
potential aggregate earn-out payments of up to US$5,800 if performance targets are exceeded. We funded the
consideration for this acquisition and all related costs to date using available cash on hand. We subsequently
refinanced a portion of the consideration for this acquisition and related costs through borrowings of
approximately US$3,000 under a term loan.
Through this acquisition, we acquired the insurance-focused IT consulting business of Agile, as well as business
process optimization capabilities and additional technology services including data architecture strategy and
services. In connection with this acquisition, over 55 insurance technology professionals and other personnel
formerly employed or engaged by Agile became our employees or independent contractors. This acquisition also
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resulted in the addition of approximately 20 customers to our customer base. In connection with this acquisition,
we assumed office leases under which Agile was lessee in New Jersey, Georgia and Ohio, and acquired certain
trademarks, service marks, domain names and business process framework of Agile.
On January 26, 2016, Majesco US amended the asset purchase and sale agreement with Agile and its members to
amend the terms and conditions of the earn-out. The amendment added in the calculation of revenue for purposes
of determining the earn-out for 2015 five percent of the initial order book revenue of Majesco US software
(intellectual property) deals closed by the Agile Division and 40% of revenue and EBITDA for Data Center of
Excellence projects that have been signed in calendar year 2015. For determining the earn-out for 2016 and 2017,
the amendment provides that the earn-out performance metrics will be determined at the Majesco US level and
not the Agile Division level and will be based only on revenue and EBITDA goals of Majesco US as reported in
Majesco US’s consolidated financial statements. The amendment also provides that 50% of the earn-out in the
amount of US$58 will be fixed with the remainder of the earn-out (the “Variable Earn-Out”) payable to Agile
on a percentage basis as calculated below only if Majesco US achieves 90% of corporate revenue and EBITDA
goals for 2016 and 2017. No Variable Earn-Out will be payable for achieving less than 90% of the corporate
revenue and EBITDA goals for 2016 and 2017, respectively, and any additional earn-out will not exceed 20% of
the Variable Earn-Out. For revenue and EBITDA between 90% and 120% of Majesco US’s revenue and
EBITDA goals, Majesco US will pay Agile a Variable Earn-Out calculated on a percentage basis. The
amendment also adjusts the earn-out periods determination over a period of three years with the first year
commencing on January 1, 2015 and ending on December 31, 2015; the second year commencing on April 1,
2016 and ending on March 31, 2017; and the third year commencing on April 1, 2017 and ending on March 31,
2018. We paid approximately US$1,100 and US$1,500 as earn-out to Agile in Fiscal 2017 and Fiscal 2016,
respectively.
Cover-All Merger
On June 26, 2015, Cover-All Technologies Inc. (“Cover-All”), a provider of core insurance software and business
analytics solution primarily focused on commercial lines for the property and casualty insurance industry listed
on the NYSE MKT (now NYSE American), merged into our US subsidiary Majesco US, with Majesco US as the
surviving corporation, in a stock-for-stock transaction. In the merger, each share of Cover-All common stock
issued and outstanding immediately prior to the effective time of the merger (other than treasury shares) was
automatically cancelled and extinguished and converted into the right to receive 0.21641 shares of common stock
of Majesco US. This exchange ratio resulted in holders of issued and outstanding Cover-All common stock and
outstanding options and restricted stock units and other equity awards of Cover-All holding in the aggregate
approximately 16.5% of the total capitalization of the combined company immediately following consummation
of the merger.
Cover-All’s customers include insurance companies, agents, brokers and MGAs throughout the United States
and Puerto Rico. Cover-All’s software solutions and services are designed to enable customers to introduce new
products quickly, expand their distribution channels, reduce costs and improve service to their customers. Cover-
All’s business analytics solution enables customers to leverage their information assets for real time business
insights and for better risk selection, pricing and financial reporting. In 2013, Cover-All announced the general
availability of Cover-All Dev Studio, a visual configuration platform for building new and maintaining existing
pre-built commercial insurance products for Cover-All Policy. In 2011, Cover-All expanded its portfolio of
insurance solutions by acquiring the assets of a recognized claims solution provider, Ho’ike Services, Inc. (doing
business as BlueWave Technology).
We always look at additional acquisitions to complement our service offerings and growth strategy. Our success,
in the near term, will depend, in large part, on our ability to: (a) successfully integrate our acquisitions into our
business, (b) build up momentum for new sales, (c) cross-sell to existing customers and (d) exceed customer
satisfaction through our state of the art products and solutions.
Significant Factors Affecting Results of Operations
The business of our Company is subject to various risks and uncertainties, including those discussed in the section
titled “Risk Factors”.
Our results of operations have been influenced and will continue to be influenced by several factors, including,
but not limited to, the following:
63
our ability to achieve increased market penetration for our product and service offerings and obtain new
customers;
our ability to raise future capital as needed to fund our growth and innovation plans;
growth prospects of the P&C and L&A insurance industry;
the strength and potential of our technology platform and our ability to innovate and anticipate future
customer needs;
our ability to protect our intellectual property rights;
our ability to compete successfully against other providers and products;
our dependence on certain key customers and the risk of loss of these customers;
the unauthorized disclosure of sensitive or confidential customer data and cybersecurity risks;
the risk of telecommunications or technology disruptions
our ability to identify and complete acquisitions, manage growth and successfully integrate acquisitions;
our financial condition, financing requirements and cash flow;
market expectations regarding our potential growth and ability to implement our short and long-term
strategies;
the risk of loss of strategic relationships;
the success of our research and development investments;
changes in economic conditions, political conditions and trade protection measures and licensing
requirements in India and in the foreign jurisdictions in which we operate;
changes in laws or regulations affecting the insurance industry in particular;
changes in tax laws, including to the transfer pricing regime;
restrictions and changes in laws on immigration;
our inability to achieve sustained profitability;
our ability to obtain, use or successfully integrate third-party licensed technology;
our ability and cost of retaining and recruiting key personnel or the risk of loss of such key personnel;
the risk that our customers internally develop new inventions and competitive products; and
the impact of new accounting standards and changes we may need to make in anticipation or as a result of
these standards.
Inflation
Although we cannot accurately determine the amounts attributable thereto, our net revenues and results of
operations have been affected by inflation experienced in the Indian, US and other economies in which we
operate through increased costs of employee compensation and other operational expenses during Fiscal 2017,
Fiscal 2016 and Fiscal 2015 and during the six months ended September 30, 2017 and September 30, 2016. To
the extent permitted by the marketplace for our products and services, we attempt to recover increases in costs
64
by periodically increasing prices. However, there can be no assurance that we will be able to fully offset such
higher costs through price increases. Our inability or failure to do so could harm our business, financial condition
and results of operations.
Currency Fluctuations
We are affected by fluctuations in currency exchange rates with respect to our contracts. The consolidated
financial statements of our Company are prepared in Indian rupees. The Indian rupee is our functional currency.
However, the US dollar, the pound sterling, the Malaysian ringgit, the Thai baht, the Singapore dollar and the
Canadian dollar are the functional currencies for our foreign subsidiaries in the United States, United Kingdom,
Malaysia, Thailand, Singapore and Canada, respectively. We translate foreign currencies into Indian rupees as
follows:
both monetary and non-monetary foreign currency assets and liabilities, including contingent liabilities are
translated at closing exchange rates as of the balance sheet date;
income and expenditure of our foreign operations are translated at annual closing average exchange rates; and
all resulting exchange differences on translation are taken directly to reserves under foreign currency
translation reserve until disposal of the investment in subsidiaries.
Foreign currency transactions are accounted at the exchange rates prevailing on the date of the transaction or at
an average rate that approximates the actual rate at the date of the transaction. Gains and losses resulting from the
settlement of foreign currency monetary items and from the translation of monetary assets and liabilities
denominated in foreign currencies are recognized in our Profit and Loss Statement.
We hedge a substantial portion of our foreign currency exposure. We use foreign currency forward contracts to
hedge risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted
transactions, we designate these hedging instruments as cash flow hedges.
Presentation of Financial Information
The consolidated financial statements of our Company presented in this Preliminary Placement Document
represent (i) periods prior to the de-merger from Mastek Limited in June 2015 where our Company was then
known as Minefields Computers Private Limited and (ii) periods following the de-merger from Mastek Limited.
The historical financial statements of our Company for Fiscal 2015 prior to the de-merger reflect very limited
operations.
We operate primarily through our US subsidiary Majesco US. Prior to the de-merger, Majesco US was wholly-
owned by Mastek Limited. In connection with the de-merger, all of Mastek Limited’s offshore insurance
operations businesses were contributed or transferred to Majesco US. We own 69.88% of the equity shares of
Majesco US as of October 30, 2017. For Fiscal 2017, Majesco US generated 98.1 % of our total revenues, 87.80
% of our net profits and 127.8% of our EBITDA. For Fiscal 2016, Majesco US generated 98.4% of our total
revenues, 15.0% of our net profits and 223.0% of our EBITDA.
As a result, for purposes of historical comparison and to facilitate a better understanding of our trends and
performance, we are also separately presenting in this MD&A the historical financial statements of our US
subsidiary Majesco US.
The consolidated and combined financial statements of our US subsidiary Majesco US presented in this
Preliminary Placement Document represent (i) periods as of and prior to March 31, 2015 when Majesco US was
a wholly-owned subsidiary of Mastek Limited (referred to as “Combined Financial Statements”) and (ii) the
period subsequent to June 1, 2015 when Majesco US obtained a controlling ownership in certain entities formerly
wholly-owned by Mastek Limited (referred to as “Consolidated Financial Statements”).
Critical Accounting Policies
Preparing financial statements requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by
management’s application of accounting policies. Critical accounting policies for us include revenue recognition,
intangible assets, software development costs, and goodwill.
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Critical Accounting Policies of Our Company
Revenue Recognition
We derive revenues primarily from information technology and related services and from the licensing of
software. Revenues for software development and related services are either on a fixed price, fixed time frame or
on a time and material basis. Revenue is recognized in accordance with the terms of the contracts with customers
as the service is performed by the proportionate completion method and when it is reasonably certain that the
ultimate collection will be made.
Time and Material Contracts – Revenues on time and material contracts are recognized as the related services
are rendered and related costs are incurred. Revenues from the end of last billing to the balance sheet date are
recognized as unbilled revenues.
Fixed Price Contracts – Revenues on fixed price and fixed time bound contracts are recognized over the life of
the contract measured by the proportion that contract costs incurred for work performed up to the reporting date
bear to the estimated total contract costs. The cumulative impact of any revision in estimates of the percentage of
work completed is reflected in the period in which the change becomes known.
Provisions for estimated losses on such contracts are made during the period in which a loss becomes probable
and can be reasonably estimated. When the uncertainty, relating to the collectability arises subsequent to the
rendering of the service, a separate provision is made to reflect the uncertainty and the amount of revenue
originally recorded is not adjusted.
Revenues from maintenance contracts are recognized on a straight line basis over the period of the contract.
Revenues from sale of software are recognized upon delivery of products to the customer, when the significant
risks and rewards of ownership are transferred to the buyer and the ultimate collection is reasonably certain.
Unbilled revenue included in “Other current assets” represents amounts in respect of services performed in
accordance with contract terms, not yet billed to customers at year end. Unearned revenue included in “Other
current liabilities” represents amounts received/billed in excess of the value of work performed in accordance with
the terms of the contracts with customers.
Goodwill and Other Intangible Assets
Intangible assets are recorded at the consideration paid for the acquisition of such assets and are carried at cost of
acquisition less accumulated amortization and impairment, if any. Goodwill comprises the excess of purchase
consideration over the parent’s portion of equity of the subsidiary at the date on which investments in the
subsidiary is made. Goodwill arising on consolidation is not amortized but is tested for impairment, Intangible
assets are amortized on a straight line method over their estimated useful lives as follows:
Assets Useful Life
Goodwill 3-5 years
Computer software 1-5 years
Expenditure on research is recognized as an expense when it is incurred. Development costs of products are also
charged to the Profit and Loss Statement unless all the criteria for capitalization as set out in paragraph 44 of
Auditing Standard 26 – “Intangible Assets” have been met.
Impairment of Long-Lived Assets
At each balance sheet date we assess whether there is any indication that an asset may be impaired. If any such
indication exists, management estimates the recoverable amount. The recoverable amount is the higher of an
asset’s net selling price and value in use. Value in use is the present value of estimated future cash flows
expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. If the
carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognized in the P rofit
and Loss Statement to the extent the carrying amount exceeds the recoverable amount. An assessment is also
done at each balance sheet date as to whether there is any indication that an impairment loss recognized for an
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asset in a prior accounting period may no longer exist or may have decreased.
Changes in Accounting Policies
There has been no change in accounting policies during the preceding three Fiscals i.e. as of March 31, 2017,
March 31, 2016 and March 31, 2015.
Critical Accounting Policies of Majesco US
Revenue Recognition
Revenues are recognized by our US subsidiary Majesco US when all of the following general revenue recognition
criteria are met:
Persuasive evidence of an arrangement exists. Evidence of an arrangement consists of a written contract
signed by both the customer and management prior to the end of the reporting period.
Delivery or performance has occurred. The software product has met the milestones contained in the
software development contract, professional services are rendered, and any customer acceptance provisions
have been satisfied.
Fees are fixed or determinable. Fees from customer arrangements are generally at a contractually fixed price
or based upon agreed upon time and material rates.
Collectability is probable. Collectability is assessed on a customer-by-customer basis, based primarily on
creditworthiness as determined by credit checks and analysis, as well as customer payment history. If it is
determined prior to revenue recognition that collection of an arrangement fee is not probable, revenues are
deferred until collection becomes probable or cash is collected, assuming all other revenue recognition criteria
are satisfied.
Some license revenues are recognized upon delivery, provided that collection is determined to be probable and no
significant obligations remain. Some license revenues are not accounted separately from software services
revenues as professional services are essential to the software functionality and include significant modification
or customization to or development of the underlying software code. Since these software arrangements do not
qualify as a separate unit of accounting, the software license revenues are recognized using the percentage of
completion method. When contracts contain multiple software and software-related elements (for example,
software license, and maintenance and professional services) wherein Vendor-Specific Objective Evidence
(“VSOE”) exists for all undelivered elements, Majesco US accounts for the delivered elements in accordance with
the “Residual Method.” VSOE of fair value for post-contract customer support services is established by a stated
renewal rates charged in stand-alone sales. VSOE of fair value of hosting services is based upon stand-alone sales
of those services. Revenue from support services is recognized ratably over the life of the contract. Revenue from
professional consulting services is recognized when the service is provided.
Time and Material Contracts — Professional services revenue consists primarily of revenue received for
assisting with the development, implementation of our software, on-site support, and other professional
consulting services. In determining whether professional services revenue should be accounted, Majesco US
reviews the nature of its software products; whether they are ready for use by the customer upon receipt; the
nature of Majesco US’s implementation services, which typically do involve significant customization to or
development of the underlying software code; and whether milestones or acceptance criteria exist that affect the
realization of the services rendered. Substantially all of our professional services arrangements are billed on a
time and materials basis and, accordingly, are recognized as the services are performed. If there is significant
uncertainty about the project completion or receipt of payment for professional services, revenue is deferred until
the uncertainty is sufficiently resolved. Payments received in advance of rendering professional services are
deferred and recognized when the related services are performed. Work performed and expenses incurred in
advance of invoicing are recorded as unbilled receivables. These amounts are billed in the subsequent month.
Fixed Price Contracts — For arrangements that do not qualify for separate accounting for the license and
professional services revenues, including arrangements that involve significant modification or customization
of the software, that include milestones or customer specific acceptance criteria that may affect collection of the
67
software license fees or where payment for the software license is tied to the performance of professional
services, software license revenue is generally recognized together with the professional services revenue using
the percentage-of-completion method. Under the percentage-of completion method, revenue recognized is equal
to the ratio of costs expended to date to the anticipated total contract costs, based on current estimates of costs to
complete the project. If there are milestones or acceptance provisions associated with the contract, the revenue
recognized will not exceed the most recent milestone achieved or acceptance obtained. If the total estimated costs
to complete a project exceed the total contract amount, indicating a loss, the entire anticipated loss would be
recognized in the current period.
Majesco US also enters into multiple element revenue arrangements in which a customer may purchase a
combination of a software license, hosting services, maintenance, and professional services. For multiple
element arrangements that contain non-software related elements, for example Majesco US’s hosting services,
Majesco US allocates revenue to each element based upon VSOE of the undelivered elements and accounts for
the delivered elements in accordance with the “Residual Method.” VSOE of fair value for the hosting,
maintenance, and other post-contract customer support services (“PCS”) is established by a stated renewal rate
charged in stand-alone renewals of each type of PCS.
Revenue is shown net of applicable service tax, sales tax, value added tax and other applicable taxes. Majesco US
has accounted for reimbursements received for out of pocket expenses incurred as revenues in the combined
statement of operations.
Goodwill and Other Intangible Assets
Goodwill represents the cost of the acquired businesses in excess of the estimated fair value of assets acquired,
identifiable intangible assets and liabilities assumed. Goodwill is not amortized but is tested for impairment at
the reporting unit level at least annually or as circumstances warrant. If impairment is indicated and carrying
value of the goodwill of a reporting unit exceeds the implied fair value of that goodwill, then goodwill is written-
down. There are no indefinite-lived intangible assets.
Intangible assets other than goodwill are amortized over their estimated useful lives on a straight line basis. The
estimated useful life of an identifiable intangible asset is based on a number of factors, including the effects of
obsolescence, demand, competition, the level of maintenance expenditures required to obtain the expected
future cash flows from the asset and other economic factors (such as the stability of the industry, known
technological advances, etc.).
The estimated useful lives of intangible assets are as follows:
Assets Useful Life
Non-compete agreements 3 years
Leasehold benefit 7 years
Internal-use Software 1 – 5 years
Customer Contracts 1 year
Customer Relationships 6 years
Impairment of Long-Lived Assets and Intangible Assets
We review long-lived assets and certain identifiable intangible assets subject to amortization for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
During this review, we re-evaluate the significant assumptions used in determining the original cost and estimated
lives of long-lived assets. Although the assumptions may vary from asset to asset, they generally include operating
results, changes in the use of the asset, cash flows and other indicators of value. Management then determines
whether the remaining useful life continues to be appropriate or whether there has been an impairment of long-
lived assets based primarily upon whether expected future undiscounted cash flows are sufficient to support the
assets’ recovery. If impairment exists, we adjust the carrying value of the asset to fair value, generally determined
by a discounted cash flow analysis.
Property and Equipment
Property and equipment are stated at actual cost less accumulated depreciation. Depreciation is computed using
the straight-line method over the estimated useful lives. The cost and the accumulated depreciation for premises
68
and equipment sold, retired or otherwise disposed of are removed from the stated values and the resulting gains
and losses are included in the combined Statement of Operations. Maintenance and repairs are charged to
combined Statement of Operations when incurred. Advance paid towards acquisition of long-lived assets and cost
of assets not put to use before the balance sheet date are disclosed under the caption “capital work in progress”.
The estimated useful lives of tangible assets are as follows:
Assets Useful Life
Owned Buildings 25 – 30 years
Leasehold Improvements 5 years or over the primary period of lease whichever is less
Computers 2 years
Plant and Equipment 2–5 years
Furniture and Fixtures 5 years
Vehicles 5 years
Office Equipment 2–5 years
Segmental Reporting
Our segmental reporting comprises business and geographic segmentation.
Revenue by Geography
The following tables set forth our revenues for the six months ended September 30, 2017 and September 30, 2016
prepared in accordance with Ind AS by geography based on the location of the customer: (in ` million except percentages)
Six Months Ended
September 30, 2017
Percentage of
Total Revenues
Six Months Ended
September 30, 2016
Percentage of
Total Revenues
North America 3,386.8 88.6% 3,796.9 88.1%
United Kingdom 190.6 5.0% 314.3 7.3%
Others 243.4 6.4% 199.8 4.6%
Total Revenues 3,820.8 100% 4,311.0 100%
The following tables set forth our revenues for Fiscal 2017 and for Fiscal 2016 (unaudited) prepared in accordance
with Indian GAAP by geography based on the location of the customer: (in ` million except percentages)
Fiscal 2017 Percentage of
Total Revenues
Fiscal 2016 Percentage of
Total Revenues
North America 7,313.54 88.4% 6,614.90 87.4%
United Kingdom 558.59 6.8% 586.47 7.7%
Others 402.92 4.8% 370.16 4.9%
Total Revenues 8,275.05 100% 7,571.53 100%
Revenue by Business Line
The following tables set forth our revenue percentage for the six months ended September 30, 2017 and September
30, 2016 prepared in accordance with Ind AS by business line: (in ` million except percentages)
Six Months Ended
September 30, 2017
Percentage of
Total Revenues
Six Months Ended
September 30, 2016
Percentage of
Total Revenues
Property and casualty 3,036.93 79.5% 3,461.70 80.3%
Life and annuities 708.76 18.5% 771.65 17.9%
Others 75.08 2.0% 77.60 1.8%
Total 3,820.77 100% 4,310.95 100%
The following tables set forth our revenue percentage for Fiscal 2017 and Fiscal 2016 (unaudited) prepared in
accordance with Indian GAAP by business line: (in ` million except percentages)
Fiscal 2017 Percentage of
Total Revenues
Fiscal 2016 Percentage of
Total Revenues
Property and casualty 6,700.11 80.9% 5,898.98 77.9%
Life and annuities 1,446.18 17.5% 1,456.04 19.2%
69
Others 128.76 1.6% 216.51 2.9%
Total 8,275.05 100% 7,571.53 100%
Revenue by Service Offering
The following tables set forth our revenue percentage for the six months ended September 30, 2017 and September
30, 2016 prepared in accordance with Ind AS by service offering: (in ` million except percentages)
Six Months Ended
September 30, 2017
Percentage of
Total Revenues
Six Months Ended
September 30, 2016
Percentage of
Total Revenues
Service Offering:
License 48.35 1.3% 137.95 3.2%
Professional services 2,085.57 54.6% 2,672.79 62.0%
Cloud 1,081.26 28.3% 827.70 19.2%
Support services 605.59 15.8% 672.51 15.6%
Total 3,820.77 100% 4,310.95 100%
The following tables set forth our revenue percentage for Fiscal 2017 and Fiscal 2016 (unaudited) prepared in
accordance with Indian GAAP by business line: (in ` million except percentages)
Fiscal 2017 Percentage of
Total Revenues
Fiscal 2016 Percentage of
Total Revenues
Service Offering:
License 231.88 2.8% 608.65 8.0%
Professional services 5,235.56 63.3% 4,572.45 60.5%
Cloud 1,589.42 19.2% 1,327.46 17.5%
Support services 1,218.19 14.7% 1,062.97 14.0%
Total 8,275.05 100% 7,571.53 100%
Results of Operations - Our Company
Prior to the de-merger from Mastek Limited, our Company (then known as Minefields Computers Private Limited)
had very limited operations. As a result, there is no meaningful presentation of comparable consolidated statement
of operations data of our Company for Fiscal 2015. Therefore, in this section no comparison of consolidated
statement of operations data is provided for our Company for Fiscal 2016 compared to Fiscal 2015.
Fiscal 2017 Compared to Fiscal 2016
The following tables summarize our Company’s consolidated statements of operations for Fiscal 2017 and Fiscal
2016 prepared in accordance with Indian GAAP, including, in each case, as a percentage of total income: (in ` million except percentages)
Fiscal 2017 Percentage of
Total Income
Fiscal 2016 Percentage of
Total Income
Income
Revenue from operations 8,275.05 98.92% 7,571.53 98.81%
Other income 89.96 1.08% 90.81 1.19%
Total Income 8,365.01 7,662.34
Expenses:
Employee benefit expenses 5,451.98 65.18% 5,055.72 65.98%
Travelling and conveyance expenses 488.20 5.84% 569.60 7.43%
Finance costs 55.56 0.66% 42.82 0.56%
Depreciation and amortization expenses 260.71 3.12% 178.49 2.33%
Other expenses 1,886.03 22.55% 1,847.11 24.11%
Total expenses 8,142.48 97.34% 7,693.74 100.41%
Profit/(Loss) before other exceptional items
and tax
222.53 2.66% (31.40) (0.41)%
Exceptional items (loss) 26.61 0.32% 45.76 0.60%
Profit/ (Loss) before Tax 195.92 2.34% (77.16) (1.01)%
Tax expense/(credits) 1.98 0.02% (150.24) (1.97)%
Profit/ (Loss) after tax 193.94 2.32% 73.08 0.95%
Minority interest 51.21 0.61% 4.20 0.05%
Net profit / (loss) 142.73 1.71% 68.88 0.90%
Earnings Per Share (EPS)
Equity Share of par value `5
70
Fiscal 2017 Percentage of
Total Income
Fiscal 2016 Percentage of
Total Income
Basic (`) 6.14 3.02
Diluted (`) 5.78 2,80
The following is a reconciliation of Indian GAAP net income to EBITDA and Adjusted EBIDA for Fiscal 2017
and Fiscal 2016: (in ` million)
Fiscal 2017 Fiscal 2016
Net Income (loss) 193.94 73.08
Add:
Provision (benefit) for income taxes 1.98 (150.24)
Depreciation and amortization 260.71 178.49
Finance costs 55.56 42.82
Less:
Other income (expenses), net 89.96 90.81
EBITDA 422.23 53.34
Add:
Exceptional items - restructuring and demerger expenses 26.61 45.76
Stock based compensation 2.18 4.92
Adjusted EBITDA 451.02 104.02
Revenue (excluding other income) 8,275.05 7,571.53
Adjusted EBITDA as a % of revenue 5.5% 1.4%
Components of Income and Expenses
The components of our income and expenses are as set forth below:
Income
Our revenue comprises revenue from operations and other income.
Revenue from operations
We generate revenue from our operations through time-and-materials contracts and fixed-price contracts by
providing information technology services to our customers including licensing of our proprietary software, cloud
services and support services that surround and support the business transformation, digital, data and ongoing use
of our proprietary software and cloud applications.
Other income
Our other income primarily consists of income from fixed deposits, profit on open forward contracts, profit on
sale of current investments, profits on sale of tangible assets and miscellaneous income.
Expenses
Our expenses attributable to operations include employee benefit expenses, finance costs, depreciation and
amortisation, and other expenses.
Employee benefit expenses
Employee benefit expenses comprise salaries of fee-earning employees (including overseas staff expenses), staff
welfare, contributions to provident and other funds and employee stock option expenses.
Finance costs
Finance costs comprise interest paid on working capital, term loans, finance lease and other finance charges.
Depreciation and amortisation
Tangible and intangible assets are amortised over periods corresponding to their estimated useful lives.
71
Other Expenses
Other expenses include, among other things, travelling and conveyance, consultancy and sub-contracting charges,
professional fees, hardware and software expenses, repairs and maintenance, rent, advertisement and publicity,
communication expenses and taxes.
Fiscal 2017 Compared to Fiscal 2016
Income
Our total revenue increased by 9.17% to `8,365.01 million for Fiscal 2017 from ` 7,662.34 million for Fiscal
2016, primarily due to the addition of the Cover-All business and revenues from expanding relationships with
P&C customers through upsell and cross-sell opportunities.
Revenue from operations
Our revenue from operations increased by 9.29% to `8,275.05 million for Fiscal 2017 from `7,571.53 million for
Fiscal 2016,primarily as a result of growth of our revenues from addition of the Cover-All business and revenues
from expanding relationships with P&C customers through upsell and cross-sell opportunities.
Other Income
Our other income decreased to `89.96 million for Fiscal 2017 from `90.81 million for Fiscal 2016. This was
primarily due to increase in interest income on fixed deposits, share of profits on open forward contracts and
reduction in profit on sale of current investments.
Expenses
Our expenses increased by 5.83% to `8,142.48 million for Fiscal 2017 from `7,693.74 million for Fiscal 2016, in
line with the growth of our operations.
Employee benefit expenses
Our employee benefit expenses increased by 7.84% to `5,451.98 million for Fiscal 2017 (which represented
65.18% of our total revenue for such period) from `5,055.72 million for Fiscal 2016 (which represented 65.98%
of our total revenue for such period). This was primarily as a result of an increase in salary, wages and performance
incentives from` 4,960.91 million for Fiscal 2017 from `4,592.48 million for Fiscal 2016 which was attributable
to a 8.02% increase in mainly in addition of Cover-All business, annual increase of employees compensation and
depreciation of the Rupee against the US dollar.
Finance costs
Our finance costs increased by 29.75% to `55.56 million for Fiscal 2017 from `42.82 million for Fiscal 2016.
This was primarily due to increase in interest on working capital facility and increase in interest on term loan.
Depreciation and amortization expenses
Depreciation and amortization increased by 46.06% to `260.71 million for Fiscal 2017 from `178.49 million for
Fiscal 2016, which was primarily attributable to an increase in provision for depreciation in our tangible and
intangible assets.
Profit before tax
As a result of the foregoing factors, our profit before tax was `222.53 million for Fiscal 2017 (which represented
2.66% of our total income for such period) and `(31.40) million for Fiscal 2016 (which represented (0.41)% of
our total income for such period).
Net profit after tax
72
As a result of the foregoing factors, our net profit after tax was `193.94 million for Fiscal 2017 and `73.08 million
for Fiscal 2016.
Six Months ended September 30, 2017 Compared to September 30, 2016
The following tables summarize our Company’s consolidated statements of operations for the six months ended
September 30, 2017 and September 30, 2016 prepared in accordance with Ind AS, including, in each case, as a
percentage of total income: (in ` million except percentages)
Six Months
Ended September
30, 2017
Percentage of
income from
operations
Six Months Ended
September 30,
2016
Percentage of
income from
operations
(Unaudited) (Unaudited)
Income
Revenue from operations 3,820.8 4,311.0
Other income 43.4 44.5
Total income 3,864.2 4,355.5
Expenses
Employee benefits expense 2,712.1 71.0% 3,031.9 70.3%
Finance cost 20.7 0.5% 46.8 1.1%
Depreciation and amortization expense 96.8 2.5% 77.4 1.8%
Other expenses 1,139.1 29.8% 1,182.4 27.4%
Total expenses 3,968.7 103.9% 4,338.5 100.6%
Profit / (loss) before exceptional Items (104.5) (2.7)% 17.0 0.4%
Exceptional items, net - gain / (loss) 106.2 2.8% - 0.0%
Profit / (loss) before tax 1.7 0.0% 17.0 0.4%
Total tax (54.8) -1.4% (7.4) -0.2%
Net profit / (loss) 56.5 1.5% 24.4 0.6%
Other comprehensive income - -
A. (i) Items that will not be reclassified to
profit or loss (2.8) 13.9
(ii) Income tax relating to items that will
not be reclassified to profit or loss 0.8 (4.7)
B. (i) Items that will be reclassified to
profit or loss 39.2 (45.4)
(ii) Income tax relating to items that will
be reclassified to profit or loss 2.7 (1.1)
Total other comprehensive income , net
of tax 39.9 (37.3)
Total comprehensive income 96.4 (12.9)
Profit / (loss) attributable to: - -
Owners of the company 74.6 20.1
Non-Controlling Interest (18.1) 4.3
Other comprehensive income
attributable to: - -
Owners of the company 27.8 (26.0)
Non-Controlling Interest 12.1 (11.3)
Total comprehensive Income attributable
to: - -
Owners of the company 102.4 (5.9)
Non-Controlling Interest (6.0) (7.0)
The following is a reconciliation of net income to EBITDA and Adjusted EBITDA for the six months ended
September 30, 2017 and September 30, 2016 prepared in accordance with Ind AS: (in ` million)
Six Months Ended
September 30, 2017
Six Months Ended
September 30, 2016
Net Income (loss) 56.5 24.4
Add:
Provision (benefit) for income taxes (54.8) (7.4)
Depreciation and amortization 96.8 77.4
Finance costs 20.7 46.8
73
Six Months Ended
September 30, 2017
Six Months Ended
September 30, 2016
Less:
Other income (expenses), net 43.4 44.5
EBITDA 75.8 96.7
Add:
Exceptional items - sales of investment property (106.2) -
Stock based compensation 85.0 88.9
Adjusted EBITDA 54.6 185.6
Revenue (excluding other income) 3,820.8 4,311.0
Adjusted EBITDA as a % of revenue 1.4% 4.3%
Six Months Ended September 30, 2017 Compared to Six Months Ended September 30, 2016
Income
Our total revenue decreased by 11.3% to ` 3,864.2 million for the six months ended September 30, 2017 from ` 4,355.5 million for the six months ended September 30, 2016, primarily due to subscription based Cloud programs
with lower implementation revenues replacing a number of on-premise P&C programs moving from
implementation to support mode.
Revenue from operations
Our revenue from operations decreased by 11.4% to `3,820.8 million for the six months ended September 30,
2017 from `4,311.0 million for the six months ended September 30, 2016, primarily as a result of subscription
based Cloud programs with lower implementation revenues replacing a number of on-premise P&C programs
moving from implementation to support mode.
Other Income
Our other income decreased to `43.4 million for the six months ended September 30, 2017 from `44.5 million for
the six months ended September 30, 2016. This was primarily due to decrease in share of profit on open forward
contracts.
Expenses
Our expenses decreased by 8.5% to `3,968.7 million for the six months ended September 30, 2017 from `4,338.5
million for the six months ended September 30, 2016.
Employee benefit expenses
Our employee benefit expenses decreased by 10.5% to `2,712.1 million for the six months ended September 30,
2017 (which represented 70.2% of our total revenue for such period) from `3,031.9 million for the six months
ended September 30, 2016 (which represented 69.6% of our total revenue for such period). This was primarily as
a result decrease of incentive expenses, expenses on defined benefit plans and appreciation of the Rupee against
the US dollar in the half year ended September 30, 2017.
Finance costs
Our finance costs decreased by 55.8% to `20.7 million for the six months ended September 30, 2017 from `46.8
million for the six months ended September 30, 2016. This was primarily due to decrease in interest expenses on
working capital facility and interest on finance leases.
Depreciation and amortization expenses
Depreciation and amortization increased by 25.1% to `96.8 million for the six months ended September 30, 2017
from `77.4 million for the six months ended September 30, 2016, which was primarily attributable to an increase
in provision for depreciation in our tangible and intangible assets.
Profit before tax
74
As a result of the foregoing factors, our profit before tax was `1.7 million for the six months ended September 30,
2017 (which represented 0.04% of our total income for such period) and `17.0 million for the six months ended
September 30, 2016 (which represented 0.4% of our total income for such period).
Net profit after tax
As a result of the foregoing factors, our net profit after tax was `56.5 million for the six months ended September
30, 2017 and `24.4 million for the six months ended September 30, 2016.
Majesco US
The following table summarizes our US subsidiary Majesco US’s consolidated statements of operations for the
six months ended September 30, 2017 and September 30, 2016 and Fiscal 2017, Fiscal 2016 and Fiscal 2015,
including as a percentage of revenues:
Statement of Operations Data (U.S. dollar amounts in thousands)
September 30,
2017
% September 30,
2016
% March 31,
2017
% March 31,
2016
% March 31,
2015
%
Total revenues (in US$) 58,269 63,600 121,768 113,302 79,282
Total cost of revenues 32,754 56% 33,391 53% 63,461 52% 62,832 55% 48,776 62%
Total gross profit 25,515 30,209 58,307 50,470 30,506
Operating expenses:
Research and
development expenses
8,135 14% 9,060 14% 17,236 14% 16,267 14% 10,344 13%
Selling, general and
administrative expenses
20,745 36% 21,313 34% 41,310 34% 38,204 34% 21,000 26%
Restructuring costs - - - 465 1,120
Total operating expenses: 28,880 30,373 58,546 54,936 32,464
Income (loss) from
operations
(3,365) (164) (239) (4,466) (1,958)
Interest income 13 18 41 24 185
Interest expense (267) (342) (612) (596) (200)
Other income (expenses),
net
(44) 14 (15) 289 1,181
Income (loss) before
provision for income taxes
(3,663) (474) (825) (4,749) (792)
Income taxes (benefit) (1,297) (141) 97 (1,187) (141)
Net income (loss) (2,366) (4)% (333) (1)% (922) (0.76)% (3,562) (3)% 651) (1)%
Fiscal 2017 Compared to Fiscal 2016 (in US$ thousands)
Revenues
Revenues for Fiscal 2017 were $121,768 compared to $113,302 for Fiscal 2016, reflecting an increase of 7.47%.
This increase was mainly due to the addition of the Cover-All business and revenues from expanding relationships
with P&C customers through upsell and cross-sell opportunities.
Gross Profit
Gross profit was $58,307 for Fiscal 2017 compared with $50,470 for Fiscal 2016. This represents an increase of
15.5%. The increase in gross profit is primarily due to the combination of a higher revenue base and improved
operating efficiencies. As a percentage of revenues, cost of sales decreased to 52% for fiscal 2017 from 55% for
Fiscal 2016.
Salaries and consultant fees in the cost of revenues were $47,857 for Fiscal 2017 compared to $43,904 for Fiscal
2016. This represents an increase of 9% in salaries and consultant fees related to the growth in Majesco US’s
revenues. We had 2,010 and 2,232 technical and technical support employees as of March 31, 2017 and 2016,
respectively. As a percentage of revenues, salaries and consultant fees is 39% for Fiscal 2017 and 2016.
75
Operating Expenses
Operating expenses were $58,546 for Fiscal 2017 compared to $54,936 for Fiscal 2016. This represents an
increase of 6.6%. As a percentage of revenues, however, operating expenses decreased to 48.1% from 48.5%. The
increase in operating expenses was primarily due to planned increase of the selling, general and administrative
expenses of $3,106 offset by a decrease in restructuring costs of $465 due to the consummation of the Majesco
de-merger and an increase in research and development costs of $969.
Income from Operations
Income/(Loss) from operations was $(239) for Fiscal 2017 compared to $(4,466) for Fiscal 2016. As a percentage
of revenues, net income/(loss) from operations was (0.2%) for Fiscal 2017 compared to net income (loss) of
(3.9%) for Fiscal 2016.
Other Income
Other income/(loss) (net) was $(15) for Fiscal 2017 compared to $289 for Fiscal 2016. The loss was primarily
due to an exchange loss on account of a change in the currency exchange rate and a one time provision made in
Majesco UK Limited for other finance charges of $184.
Tax provision
Tax charge was $97 for Fiscal 2017 compared to a tax benefit of $1,187 for Fiscal 2016. The main reason for the
increase in tax provision is the increase in taxable profit in Majesco US’s foreign subsidiaries having an effective
tax rate higher than the losses incurred in US subsidiaries where the effective rate is lower. Our effective tax rate
for Fiscal 2017 was (11.7%) as compared to 24.9% for Fiscal 2016.
Net Income
Net income/(loss) was $(922) for Fiscal 2017 compared to net income/(loss) of $(3,562) for Fiscal 2016. Net
income/(loss) per share, basic and diluted, was $(0.02) and $(0.02), respectively, for Fiscal 2017 compared to net
income/(loss) per share, basic and diluted, of $(0.10) and $(0.10), respectively, for Fiscal 2016.
Adjusted EBITDA
Adjusted EBITDA, a non-GAAP metric, was $6,059 for Fiscal 2017 compared to $589 for Fiscal 2016.
The following is reconciliation of U.S. GAAP net income to EBITDA and Adjusted EBITDA for Fiscal 2017 and
Fiscal 2016: (U.S. dollars; in thousands)
Fiscal
2017 2016
Net income/(loss) (922) (3,562)
Add:
Provision/(benefit) for income taxes 97 (1,187)
Depreciation and amortization 4,720 3,842
Interest expense 612 596
Less:
Interest income (41) (24)
Other income (expenses), net 15 (289)
EBITDA 4,481 (624)
Add:
Restructuring costs - 465
Stock based compensation 1,578 748
Adjusted EBITDA 6,059 589
Revenue 121,768 113,302
Adjusted EBITDA as a % of revenue 4.98% 0.52%
Fiscal 2016 Compared to Fiscal 2015 (in US$ thousands)
76
Revenues
Revenues for Fiscal 2016 were US$113,302 compared to US$79,282 for Fiscal 2015, reflecting an increase of
43%. This increase was mainly due to the addition of revenue from Cover-All Systems Inc. of US$17,636 and an
increase in revenue in Majesco US of US$13,413. The increase in revenue in Majesco US was primarily due to
the Agile asset acquisition.
Gross Profit
Gross profit was US$50,470 for Fiscal 2016 compared with US$30,506 for Fiscal 2015. This represents an
increase of 65%. The increase in gross profit is due to an increase in revenue while managing better costs of
revenues. As a percentage of revenues, cost of sales decreased to 55% for Fiscal 2016 from 62% for Fiscal 2015.
Salaries and consultant fees in the cost of revenues were US$43,904 for Fiscal 2016 compared to US$35,119 for
Fiscal 2015. This represents an increase of 25% in salaries and consultant fees related to the growth in our
revenues. Majesco US had 2,232 and 1,711 technical and technical support employees as of March 31, 2016 and
2015, respectively. As a percentage of revenues, salaries and consultant fees decreased from 44.1% for Fiscal
2015 to 39% for Fiscal 2016.
Operating Expenses
Operating expenses were US$54,936 for Fiscal 2016 compared to US$32,464 for Fiscal 2015. This represents an
increase of 69%. As a percentage of revenues however, operating expenses increased to 48% from 41%. The
increase in operating expenses was primarily due to an increase in general and administrative expenses of
US$17,204 offset by a decrease in restructuring costs of US$655 due to the consummation of the de-merger
and an increase in research and development costs of US$5,923.
The historical financial statements include expense allocations from Mastek Limited for certain corporate support
services, which are recorded within costs of revenue and operating expenses in the Statements of Operations.
Management believes that the basis used for the allocations is reasonable and reflects the portion of such costs
attributed to the Majesco US operations; however, the amounts may not be representative of the costs necessary
to operate as a separate stand-alone company. Management is unable to determine what all such costs would have
been had Majesco US been independent. Upon the completion of the Cover-All merger, Majesco US started
performing these functions using its own resources or purchased services.
Income from Operations
Income/(loss) from operations was US$(4,466) for Fiscal 2016 compared to US$(1,958) for Fiscal 2015. As a
percentage of revenues, net income/(loss) from operations was (3.9%) for Fiscal 2016 compared to net
income/(loss) of (2.5%) for Fiscal 2015.
Other Income
Other income (net) was US$(283) for Fiscal 2016 compared to US$1,166 for Fiscal 2015. The decrease was
primarily due to a reduction of interest income of US$161, an increase of interest expense of US$396, a reduction
in profit on the sale of current investments of US$578, a reduction in income from subletting of US$62 and a one-
time insurance claim received in March 2015 of US$152.
Tax provision
Tax benefit was US$1,187 for Fiscal 2016 compared to a US$141 for Fiscal 2015. The main reason for the
decrease in tax provision is the decrease in taxable profits during Fiscal 2016. The effective tax rate for Fiscal
2016 was (24.9%) as compared to (17.8%) for Fiscal 2015. This was primarily due to the recognition of a deferred
tax asset of US$2,227 in Fiscal 2016, out of which US$1,922 is on account of carry forwarded income-tax losses
as compared to the recognition of a deferred tax asset of US$1,840 on carry forwarded income-tax losses for
Fiscal 2015. The deferred tax asset was created on losses pertaining primarily to the North American operations
and it is more likely than not that these would reverse in subsequent years. The credit of deferred tax was partially
offset by provision for current tax.
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Net Income
Net income/(loss) was US$(3,562) for Fiscal 2016 compared to net income/(loss) of US$(651) for Fiscal 2015.
Net income/(loss) per share, basic and diluted, was US$(0.10) and US$(0.10), respectively, for Fiscal 2016
compared to net income/(loss) per share, basic and diluted, of US$(0.02) and US$(0.02) , respectively, for Fiscal
2015.
Adjusted EBITDA
The following is a reconciliation of U.S. GAAP net income to EBITDA and Adjusted EBITDA for Fiscal 2016
and Fiscal 2015: (U.S. dollars; in thousands)
Fiscal
2016 2015
Net income/(loss) (3,562) (651)
Add:
Provision/(benefit) for income taxes (1,187) (141)
Depreciation and amortization 3,842 2,425
Interest expense 596 200
Less:
Interest income 24 185
Other income (expenses), net 289 1,181
EBITDA (624) 467
Add:
Restructuring costs 465 1,120
Stock based compensation 748 248
Reversal of accrued revenue 0 1,410
Adjusted EBITDA 589 3,245
Revenue 113,302 79,282
Adjusted EBITDA as a % of revenue 0.52% 4.1%
Six Months Ended September 30, 2017 Compared to Six Months Ended September 30, 2016 (in US$ thousands)
Revenues
Revenues for the six months ended September 30, 2017 were $58,269 compared to $63,600 for the six months
ended September 30, 2016, reflecting a decrease of 8.38%. The decrease during such period were due to
subscription based Cloud programs with lower implementation revenues replacing a number of on-premise P&C
programs moving from implementation to support mode.
Gross Profit
Gross profit was $25,515 for the six months ended September 30, 2017 compared with $30,209 for the six months
ended September 30, 2016, a decrease of 15.53%. The drop in margin has been primarily due to the decline in
revenue and ramp up of resources to support future revenue growth. Gross profit percentage for the six months
ended September 30, 2017 decreased to 43.79% from 47.5% for the six months ended September 30, 2016.
Salaries and consultant fees were approximately $17,987 for the six months ended September 30, 2017 compared
to $19,742 for the six months ended September 30, 2016. This represents a decrease of 8.89% in salaries and
consultant fees. As a percentage of revenues, salaries and consultant fees decreased from 31.04% for the six
months ended September 30, 2016 to 30.87% for the six months ended September 30, 2017.
Operating Expenses
Operating expenses were $28,880 for the six months ended September 30, 2017 compared to $30,373 for the six
months ended September 30, 2016. The decrease in operating expenses was primarily due to a decrease in selling,
general and administrative expenses of $568 and a decrease in research and development costs of $925. The
decline in R&D expenses has been primarily due to the lower cost post consolidation of the Policy Management
Platforms. As a percentage of revenues, operating expenses increased to 49.56% for the six months ended
September 30, 2017 from 48% for the six months ended September 30, 2016.
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Income/(Loss) from Operations
Income/(Loss) from operations was $(3,365) for the six months ended September 30, 2017 compared to $(164)
for the six months ended September 30, 2016. As a percentage of revenues, net loss from operations was 5.77%
for the six months ended September 30, 2017 compared to net loss of 0.3% for the six months ended September
30, 2016.
Other Income
Other income (expense), net was ($44) for the six months ended September 30, 2017 compared to $14 for the six
months ended September 30, 2016. The decrease is mainly due to a currency exchange loss in the six months
ended September 30, 2017.
Tax provision
We recognized income tax benefit of $(1,297) for the six months ended September 30, 2017 and recognized
income tax benefit of $(141) for the six months ended September 30, 2016. For the six months ended September
2017, the deferred tax benefit primarily relates to the Company recognizing an increase in deferred tax assets from
the future realization of net operating loss carryforwards and the reduction of deferred tax liabilities related to the
amortization of intangible assets.
The effective tax rate of 35% for the six months ended September 30, 2017 differs from the statutory US federal
income tax rate of 39.3% mainly due to the impact of different tax jurisdictions.
Net Loss
Net loss was $(2,366) for the six months ended September 30, 2017 compared to net loss of $(333) for the six
months ended September 30, 2016. Net loss per share, basic and diluted, was ($0.06) and ($0.06) respectively, for
the six months ended September 30 2017 compared to net loss per share, basic and diluted, of $(0.01) and $(0.01),
respectively, for the six months ended September 30, 2016.
Adjusted EBITDA
Adjusted EBITDA, a non-GAAP metric, was US$623 for the six months ended September 30, 2017 compared to
$2,707 for the six months ended September 30, 2016.
The following is an unaudited reconciliation of U.S. GAAP net income to EBITDA and Adjusted EBITDA for
the six months ended September 30, 2017 and the six months ended September 30, 2016:
Six Months Ended
September 30, 2017 September 30, 2016
Net income/(loss) (2,366) (333)
Provision/(benefit) for income taxes (1,297) (141)
Depreciation and amortization 2,555 2,237
Interest expense 267 342
Less:
Interest income (13) (18)
Other income (expenses), net 45 (14)
EBITDA (809) 2,073
Add:
Stock-based compensation 1,432 634
Adjusted EBITDA 623 2,707
Revenue 58,269 63,600
Adjusted EBITDA as a % of Revenue 1.07% 4.26%
Liquidity and Capital Resources
Cash Flows
Cash and Bank Balances and short term investments position of our Company was `1,752.01 million, `1,271.98
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million, and `1,769.30 million at March 31, 2017, March 31, 2016 and September 30, 2017, respectively.
Net cash generated /(used) provided by operating activities of our Company was `876.73 million for Fiscal 2017,
`(149.75) million for Fiscal 2016 and `416.19 million for the six months ended September 30, 2017. We had
accounts receivable of `830.05 million, `1,519.50 million and `1,064.50 million at March 31, 2017, March 31,
2016 and September 30, 2017, respectively. We had revenues in excess of billings of `537.04 million, `540.40
million and `669.00 million at March 31, 2017, March 31, 2016 and September 30, 2017, respectively. Accounts
payable and accrued expenses, and current portions of lease obligations amounted to `396.86 million, `477.02
million and `493.40 million at March 31, 2017, March 31, 2016 and September 30, 2017, respectively. The
average days sales outstanding at March 31, 2017 were 37 days, at March 31, 2016 were 84 days and September
30, 2017 were 49 days. The days sales outstanding have been calculated by taking into consideration the
combined balances of accounts receivable and unbilled accounts receivable.
Net cash used by investing activities of our Company amounted to `251.51 million for Fiscal 2017. Net cash used
by investing activities included the purchase of plant, property & equipment and intangible assets aggregating to
`246.70 million and payment of nil purchase consideration for the acquisition of our Singapore affiliate. Net cash
used by investing activities of our Company amounted to `1,177.94 million for Fiscal 2016. Net cash used by
investing activities included the purchase of plant, property & equipment and intangible assets aggregating to
`376.92 million and payment of purchase consideration of `18.04 million for the acquisition of our Singapore
affiliate. Net cash used by investing activities of our Company amounted to `426.87 million for the six months
ended September 30, 2017. Net cash used by investing activities included `82.64 million for the purchase of plant,
property and equipment and intangible assets.
Purchase (net of sale) of investments in mutual funds of our Company was `40.35 million for Fiscal 2017, `66.00
million for Fiscal 2016 and `524.64 million for the six months ended September 30, 2017. Restricted cash was
`784.00 million for Fiscal 2017, `740.00 million for Fiscal 2016 and `50.00 million for the six months ended
September 30, 2017.
Net cash (used)/generated by financing activities of our Company was `(204.21) million for Fiscal 2017. The use
in cash was on account of borrowings (net of repayments) of `(184.50) million. Net cash (used)/generated by
financing activities of our Company was `604.41 million for Fiscal 2016. The use in cash was on account of
borrowings (net of repayments) of `619.84 million. Net cash generated by financing activities of our Company
was `348.67 million for the six months ended September 30, 2017. The details of our borrowings are described
below.
Capital Expenditures
We operate in multiple geographical regions of the world through our various subsidiaries. We typically fund the
cash requirements for our operations through license, services, and support agreements. As of March 31, 2017,
March 31, 2016 and September 30, 2017, we had approximately `1,752.01 million, `1,271.98 million and
`1,769.30 million of cash, bank balances and marketable securities, respectively.
As a growing company, we have on-going capital expenditure needs based on our short term and long term
business plans. We intend to use the net proceeds from this Issue for inorganic growth through acquisitions,
investments in our subsidiaries, repayment of indebtedness, working capital and other permitted corporate
purposes. See “Use of Proceeds.” We believe that our current cash balances, anticipated cash flows from
operations and the net proceeds from this Issue will be sufficient to meet our normal operating needs for at
least the next twelve months. Cash flow projections include anticipated sales of new licenses, the exact timing
of which cannot be predicted with absolute certainty and can be influenced by factors outside our control. We
anticipate generating future working capital through sales to new customers and continued sales and services to
our existing customers.
Our future liquidity and capital resource requirements will depend on many factors, including, but not limited to,
the following trends and uncertainties we face:
Our ability to generate cash is subject to general economic, financial, competitive and other factors beyond
our control.
Our need to invest resources in product development in order to continue to enhance our current products,
develop new products, attract and retain customers and keep pace with competitive product introductions and
technological developments.
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We experience competition in our industry and continuing technological changes.
Insurance companies typically are slow in making decisions and have numerous bureaucratic and institutional
obstacles, which can make our efforts to attain new customers difficult.
We compete on the basis of insurance knowledge, products, services, price, technological advances and
system functionality and performance.
Financing Arrangements (in US$ thousands)
On March 25, 2011, our US subsidiary Majesco US entered into a secured revolving working capital line of credit
facility with ICICI Bank Limited (“ICICI”) under which the maximum borrowing limit was US$5,000. The
interest rate on the credit facility at March 31, 2016 was three-month LIBOR plus 350 basis points and increased
to three-month LIBOR plus 375 basis points with the second extension of this facility described below. The credit
facility was guaranteed by Mastek Limited subject to the terms and conditions set forth in the guarantee. The
credit facility initially matured on November 11, 2015.
On November 20, 2015, Majesco US extended this line of credit to February 11, 2016. The facility was further
extended to May 9, 2016 and again extended to May 15, 2017. Majesco US paid a processing fee of US$12.5 in
connection with the second extension and a processing fee of US$50.83 in connection with the third extension.
In connection with these extensions of the Majesco US line of credit, Mastek Limited also extended its guarantee
of such line of credit. Majesco US agreed to pay a fee and indemnify Mastek Limited against any payments
made by Mastek Limited in connection with this guarantee.
On January 20, 2017, Majesco US paid in full the balance under this facility with proceeds from a new $10,000
receivables purchase facility with HSBC Bank USA, National Association (“HSBC”) described below, and this
facility was terminated. On repayment of this facility, the guarantee by Mastek Limited of this facility was also
terminated and Majesco US’s liability to Mastek Limited regarding this guarantee also ceased to exist. The interest
rate on the credit facility was 4.75% at January 20, 2017.
Financing Arrangements (Indian Subsidiaries)
On June 30, 2015, Majesco Software and Solutions India Pvt. Ltd. (“MSSIPL”), a subsidiary of Majesco US,
entered into a secured Pre Shipment in Foreign Currency and Past Shipment in Foreign Currency (“PCFC”)
facility with YES Bank under which MSSIPL may request 3 months pre-export advances and advances against
export collection bills. The maximum borrowing limit was initially `300 million. The interest rate on this PCFC
facility was initially LIBOR plus 275 basis points. The interest rate on this PCFC facility is determined at the time
of each advance. This PCFC facility is secured by a first pari passu charge over the current assets of MSSIPL.
Excess outstanding beyond `100 million is to be backed by 100% goodwill fixed deposit receipts in MSSIPL or
our Company. On September 27, 2016, MSSIPL extended this PCFC facility to June 17, 2017.
On September 13, 2017, MSSIPL entered into an addendum facility letter (the “2017 Addendum”) to its
addendum facility letter dated September 27, 2016 with respect to the PCFC facility dated June 30, 2015. The
2017 Addendum further extended the maturity date of the PCFC facility to May 22, 2018 and reduced the
maximum borrowing limit from `300 million to `130 million. In addition, the 2017 Addendum also amended the
interest rate of the PCFC facility to LIBOR plus 150 basis points plus 2%. The interest rate of the PCFC facilitiy
is determined at the time of each advance. As of March 31, 2017, MSSIPL had US$1,957 of borrowings
outstanding under this PCFC facility and as of September 30, 2017, there was no outstanding balance against
this loan. As of September 30, 2017, MSSIPL was in compliance with the terms of this PCFC facility.
On May 9, 2017, MSSIPL and Standard Chartered Bank entered into an Export Invoice Financing Facility,
Working Capital Overdraft Facility, Short Term Loans Facility, Bonds and Guarantees Facility and Pre Shipment
Financing Under Export Orders Facility (the “Combined Facility”) pursuant to which Standard Chartered Bank
agreed to a Combined Facility of up to 200 million Indian rupees. The Export Invoice Financing Facility is for
the financing of MSSIPL’s sale of goods, as evidenced by MSSIPL’s invoice to the customer. Each amount drawn
is required to be repaid within 90 days. The interest on this facility is based on the marginal cost of funds based
lending rate (“MCLR”) plus a margin to be agreed with Standard Chartered Bank at the time of each drawdown.
The MCLR is to be determined on the date of each disbursement and be effective until repayment. Interest will
accrue from the utilization date to the date of repayment or payment of that utilization. The Working Capital
Overdraft Facility and the Short Term Loans Facility are for working capital purposes and subject to sub-limits.
The interest on these facilities is based on the MCLR plus a margin to be agreed with Standard Chartered Bank at
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the time of each borrowing. The MCLR is to be determined on the date of each disbursement and be effective
until repayment or maturity. Interest will accrue from the draw down date up to the repayment or maturity date.
The Bonds and Guarantees Facility is for the issuance of guarantees and subject to commissions as agreed with
Standard Chartered Bank from time to time. The Pre Shipment Financing Under Export Orders Facility is for the
purchase of raw material, processing, packing, transportation, warehousing and other expenses and overheads
incurred by MSSIPL to ready goods for sale. The interest on this facility is based on the MCLR plus a margin to
be agreed with Standard Chartered Bank at the time of each borrowing. The MCLR is to be determined on the
date of utilization and be effective until repayment. Interest will accrue from the utilization date up to the
repayment date. The interest under the Combined Facility may be changed by Standard Chartered Bank upon the
occurrence of certain market disruption events. The Combined Facility is secured by a first pari passu security
interest over the current assets of MSSIPL. MSSIPL was in compliance under the terms of this Combined Facility
as of September 30, 2017.
On March 23, 2016, our US subsidiary Majesco US entered into a Loan Agreement (the “Loan Agreement”) with
HSBC pursuant to which HSBC agreed to extend loans to Majesco US in the amount of up to US$10,000 and
Majesco US issued a promissory note to HSBC in the maximum principal amount of US$10,000 or any lesser
amount borrowed under the Loan Agreement (the “Note”, and together with the “Loan Agreement”, the
“Facility”). The outstanding principal balance of the loan bears interest based on LIBOR plus a margin in effect
on the first day of the relevant interest period. Until January 1, 2018, only interest will be payable under the loan.
Commencing on January 1, 2018, and on each January 1 and July 1 thereafter until July 1, 2020, installments of
principal in the amount of US$1,666.67 will be due and payable semi-annually. All principal and interest
outstanding under the Note will be due and payable on March 1, 2021. The Facility is unsecured and supported
by a letter of credit issued by a bank in the amount of US$10,000 which is secured by a cash pledge by our
Company. As of March 31, 2017 and September 30, 2017, $10,000 and $10,000 was outstanding, respectively,
under this Facility.
The Facility contains affirmative covenants that require Majesco US to furnish financial statements to HSBC and
to cause our Company to maintain (1) a Net Debt-to-EBITDA Ratio (as defined in the Loan Agreement) of not
more than (a) 5.00 to 1.00 as of the last day of Fiscal 2017 and (b) 2.50 to 1.00 as of the last day of each fiscal
year thereafter, and (2) a Debt Service Coverage Ratio (as defined in the Loan Agreement) of not less than 1.50
to 1.00 as of the last day of each fiscal year. The Facility contains restrictive covenants on Majesco US, including
restrictions on declaring or paying dividends upon and during the continuation of an event of default, incurring
additional indebtedness, selling material portions of its assets or undertaking other substantial changes to the
business, purchasing or holdings securities for investment, and extending credit to any person outside the ordinary
course of business. The Facility also restricts any transfer or change in, or assignment or pledge of the ownership
or control of Majesco US which would cause our Company to directly own less than fifty one percent (51%) of
the issued and outstanding equity interests in Majesco US. The Facility also restricts our Company from incurring
any Net Debt (as defined in the Loan Agreement) in excess of US$25,000 at any time prior to April 1, 2017. The
Facility contains customary events of default provision and indemnification provisions whereby Majesco US will
indemnify HSBC against all losses or damages related to the Facility; provided, however, that Majesco US will
not have any indemnification obligations to HSBC for any claims caused by HSBC’s gross negligence or willful
misconduct. Majesco US may use the loan proceeds solely for the purpose of refinancing existing indebtedness,
capital expenditures and working capital and other general corporate purposes.
On January 13, 2017, Majesco US and its subsidiaries Majesco Software and Solutions Inc. (“MSSI”), and Cover-
All Systems, jointly and severally entered into a Receivable Purchase Agreement with HSBC pursuant to which
HSBC may advance funds against receivables at an agreed advance rate. The outstanding aggregate amount of all
advances may not exceed a $10,000 facility limit. The facility bears interest at two (2%) per cent plus the ninety
(90) day LIBOR rate. HSBC will also receive an arrangement fee equal to 0.20% of the facility limit and a facility
review fee equal to 0.20% of the facility limit. Majesco US will serve as HSBC’s agent for the collection of
receivables, and Majesco US will collect and otherwise enforce payment of the receivables. The term of the
Receivable Purchase Agreement is for a minimum period of twelve (12) months and shall continue unless
terminated by either party. Either party may terminate the Receivable Purchase Agreement at any time upon sixty
(60) days’ prior written notice to the other party. The Receivable Purchase Agreement will provide additional
liquidity to Majesco US for working capital and other general corporate purposes. As of March 31, 2017 and
September 30, 2017, Majesco US had $604 and $4,950, respectively outstanding under this facility. Majesco used
proceeds from this facility to refinance the ICICI facility described above, to fund capital expenditures and for
working capital and other general corporate purposes.
Dividends and Redemption
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For details please see “Dividends” on page 58.
Contractual Obligations
The following tables summarize our known contractual obligations as of March 31, 2017:
Payments due by period (in ` million)
Particulars Total <1 Year 1 – 3 Years 3 – 5 Years >5 Years Capital Leases 40 24 15 1 -
Operating Leases 698 194 395 64 45
Long-Term Debt 649 109 432 108 -
Majesco US Credit Facility 165 165 - - -
Other Obligations – Contingent Consideration 49 49 - - -
Total 1,601 541 842 173 45
The following table summarizes our known contractual obligations as of September 30, 2017:
Payments due by period (in ` million)
Particulars Total <1 Year 1 – 3 Years 3 – 5 Years >5 Years
Capital Leases 22 17 5 - -
Operating Leases 579 157 365 57 -
Long-Term Debt 653 218 435 - -
Majesco US Credit Facility 521 521 - - -
Other Obligations – Contingent Consideration 52 52 - - -
Total 1,827 965 805 57 -
As of March 31, 2017 and September 30, 2017, our operating leases consisted of leases for office space in India,
the United States, Canada, the United Kingdom, Malaysia, Thailand and Singapore for terms ranging from three
to ten years each. Many of these leases include renewal options, with renewal periods generally between two to
five years. We also leased automobiles under capital leases. Contingent consideration reflects discounted future
cash flows during the earn-out period related to our acquisition of the Agile assets in December 2014. See Notes
2.18, 30 and 31 to our consolidated financial statements as well as the chapter titled “Business” on page 88 for
additional information related to our capital and operating leases and other contractual obligations.
In addition to our contractual obligations set forth in the table above, we also have contractual and non-
contractual employee benefits and related obligations. See Note 33 to our consolidated financial statements for
Fiscal 2017 for additional information.
Off-Balance Sheet Arrangements
We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with
unconsolidated entities that would be expected to have a material current or future effect upon our financial
condition or results of operations.
Recent Accounting and Auditing Developments in India
Share-based compensation
Amendment to Ind AS 102: Effective April 1, 2017, amendment to Ind AS 102 which provides specific guidance
to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net
settlement feature in respect of withholding taxes. The adoption of this update is not expected to have a material
impact on our Company’s consolidated financial statements.
Cash Flow Statement
Amendment to Ind AS 7: Effective April 1, 2017, the amendment to Ind AS 7, requires the entities to provide
disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing
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activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a
reconciliation between the opening and closing balances in the Balance Sheet for liabilities arising from financing
activities, to meet the disclosure requirement. The adoption of this update will require an additional disclosure in
our Fiscal 2018 consolidated financial statements.
Recent Accounting and Auditing Developments in the U.S.
Improvements on Employee Share-Based Payment Accounting
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) No. 2016-09, “Improvements on Employee Share-Based Payment Accounting (Topic 718)” (“ASU
2016-09”), which simplifies several aspects of the accounting for employee share-based payment transactions for
both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax
withholding requirements, as well as classification in the statement of cash flows. The new standard is effective
for annual periods beginning after December 15, 2016 and interim periods within those years. The standard
became effective for Majesco US on April 1, 2017. The adoption of this update did not have a material impact on
Majesco US’s consolidated financial statements.
Revenue from Contracts with Customers
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which
provides guidance for revenue recognition. This ASU affects any entity that either enters into contracts with
customers to transfer goods or services or enters into contracts for the transfer of non-financial assets. This ASU
will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-
specific guidance.
In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606):
Deferral of the Effective Date”, deferring the effective date of this standard. As a result, the ASU and related
amendments will be effective for Majesco US for its Fiscal year beginning April 1, 2018, including interim periods
within that Fiscal year.
Subsequently, the FASB issued ASU No. 2016-08, “Principal Versus Agent Consideration (or Reporting Revenue
Gross versus Net)” in March 2016, ASU No. 2016-10, Identifying Performance Obligations and Licensing in
April 2016, and ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients in May 2016. These
amendments clarified certain aspects of Topic 606 and will also be effective for Majesco US for its Fiscal year
beginning April 1, 2018.
The core principle of Topic 606 is to recognize revenues when promised goods or services are transferred to
customers in an amount that reflects the consideration that is expected to be received for those goods or services.
Topic 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment
and estimates may be required within the revenue recognition process than are required under existing US GAAP,
including identifying performance obligations in the contract, estimating the amount of variable consideration to
include in the transaction price and allocating the transaction price to each separate performance obligation, among
others. Topic 606 also provides guidance on the recognition of costs related to obtaining customer contracts.
Preliminarily, Majesco US plans to adopt these ASUs (collectively, Topic 606) on April 1, 2018. Topic 606
permits two methods of adoption: retrospectively to each prior reporting period presented (the “Full Retrospective
Method”), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date
of initial application (the “Modified Retrospective Method”). Majesco US currently intends to apply the Modified
Retrospective Method. Although Majesco US does not expect a material impact on revenues upon adoption, it
expects that the new standard will expand disclosure, specifically around the quantitative and qualitative
information about Majesco US’s underlying performance obligations.
Business Combinations (Topic 805): Clarifying the Definition of a Business
In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805)”: Clarifying the Definition
of a Business, which provides a more robust framework to use in determining when a set of assets and activities
is a business. The standard will be effective for Majesco US beginning April 1, 2018. Based on its current
assessment, Majesco US does not expect the adoption of this update to have a material impact on its consolidated
financial statements.
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Statement of Cash Flows (Topic 230): Restricted Cash
In November 2016, the FASB issued ASU 2016-18,” Statement of Cash Flows (Topic 230)”: Restricted Cash,
which requires the statement of cash flows to report changes in cash, cash equivalents, and restricted cash. The
standard will be effective for Majesco US beginning August 1, 2018. Based on its current assessment, Majesco
US does not expect the adoption of this update to have a material impact on its consolidated financial statements.
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230)”: Classification of Certain
Cash Receipts and Cash Payments (ASU 2016-15), which clarifies how companies present and classify certain
cash receipts and cash payments in the statement of cash flows. The standard will be effective for Majesco US
beginning April 1, 2018. Based on its current assessment, Majesco US does not expect the adoption of this update
to have a material impact on its consolidated financial statements.
Income Tax Consequences of an Intra-Entity Transfer of Assets Other Than Inventory (Topic 740)
In October 2016, the FASB issued ASU 2016-16, “Income Taxes — Intra-Entity Transfers of Assets Other Than
Inventory (Topic 740)”, which requires entities to recognize the income tax consequences of an intra-entity
transfer of an asset other than inventory when the transfer occurs. The new standard must be adopted using a
modified retrospective transition method which is a cumulative-effective adjustment to retained earnings as of the
beginning of the first effective reporting period. The standard will be effective for Majesco US beginning April 1,
2018. Based on its current assessment, Majesco US does not expect the adoption of this update to have a material
impact on its consolidated financial statements.
Accounting for Leases (Topic 842)
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which requires
lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a
manner similar to current practice. ASU 2016-02 states that a lessee would recognize a lease liability for the
obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease
term. The standard will be effective for Majesco US beginning April 1, 2019. Majesco US is currently evaluating
the impact this update will have on its consolidated financial statements.
Simplifying the Test for Goodwill Impairment (Topic 350)
In January 2017, the FASB issued Accounting Standards Update No. 2017-04, “Intangibles - Goodwill and Other
(Topic 350)”: Simplifying the Test for Goodwill Impairment, which removes the requirement for an entity to
calculate the implied fair value of goodwill (as part of step 2 of the current goodwill impairment test) in measuring
a goodwill impairment loss. The standard will be effective for Majesco US beginning April 1, 2020. Early
adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1,
2017. Majesco US is currently evaluating the impact this update will have on its consolidated financial statements.
Quantitative and Qualitative Disclosures About Market Risks
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial
market prices and rates. We are exposed to market risk primary due to fluctuations in foreign currency exchange
rates and interest rates, each as described more fully below. We do not hold or issue derivative financial
instruments for trading or speculative purposes.
Interest Rate Sensitivity
Our exposure to market risk for changes in interest rates relates primarily to our cash and cash equivalents and
investments. We do not use derivative financial instruments to hedge interest rate exposure. Our cash and cash
equivalents and investments as of March 31, 2017 were `11.6 million and `0.80 million, respectively. Our cash
and cash equivalents and investments as of September 30, 2017 were `10.3 million and `0.7 million, respectively.
We invest primarily in highly liquid, money market funds and bank fixed deposits. Because of the short-term
nature of the majority of the interest-bearing securities we hold, we believe that a 10% fluctuation in the interest
rates applicable to our cash and cash equivalents and investments would not have a material effect on our financial
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condition or results of operations.
The rate of interest on the PCFC facility, the Combined Facility, the receivables purchase facility and the term
loan with HSBC which were in effect as of September 30, 2017, are variable and are based on LIBOR plus a fixed
margin. As of September 30, 2017, we had approximately US$4,950, US$3,032 and US$10,000 in borrowings
outstanding under our receivables purchase facility, the Combined Facility and our term loan with HSBC,
respectively. We believe that a 10% fluctuation in the interest rates applicable to our borrowings would not have
a material effect on our financial condition or results of operations.
Foreign Currency Exchange Risk
Our reporting currency is the Indian Rupee and a large amount of our costs are incurred in Indian Rupees.
However, payments to us by customers outside of India are generally made in the local currency. Accordingly,
our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange
rates, particularly changes in the US Dollar, the Canadian dollar, British pound, Thai baht, Malaysian ringgit,
Singapore dollar and Mexican peso. The volatility of exchange rates depends on many factors that we cannot
forecast with reliable accuracy.
We generated approximately 97.5% and 98.1%, respectively, of our consolidated revenues outside of India for
the six months ended September 30, 2017 and the six months ended September 30, 2016. The effect of foreign
exchange rate changes on cash and cash equivalents resulted in a gain of $210 and loss of $201 for the six months
ended September 30, 2017 and September 30, 2016, respectively. For the six months ended September 30, 2017
and September 30, 2016, we had a foreign exchange gain/(loss) of approximately $(667) and $351, respectively.
We use foreign currency forward contracts and par forward contracts to hedge out risks associated with foreign
currency fluctuations related to certain commitments and forecasted transactions. The use of hedging instruments
is governed by our policies which are approved by our board of directors. We designate these hedging instruments
as cash flow hedges. Derivative financial instruments we enter into that are not designated as hedging instruments
in hedge relationships are classified as financial instruments at fair value through profit or loss.
The aggregate contracted U.S. dollar principal amounts of foreign exchange forward contracts (sell) outstanding
as of September 30, 2017 amounted to $19,800. The aggregate contracted GBP principal amounts of foreign
exchange forward contracts (sell) outstanding as of September 30, 2017 amounted to GBP 1,815. The outstanding
forward contracts as of September 30, 2017 mature between 1 month to 24 months. As of September 30, 2017,
we estimate that $66, net of tax, of the net gains/(losses) related to derivatives designated as cash flow hedges
recorded in accumulated other comprehensive income (loss) are expected to be reclassified into earnings within
the subsequent 24 months. The outstanding foreign exchange forward contracts in U.S. dollars as of September
30, 2017 are designated as in hedge relationship and there will be no impact on Majesco US’s statement of
operations due to a strengthening or weakening of 10% in the foreign exchange rates.
The fair value of derivative financial instruments is determined based on observable market inputs and valuation
models. The derivative financial instruments are valued based on valuations received from the relevant
counterparty (i.e., bank). The fair value of the foreign exchange forward contract and foreign exchange par forward
contract has been determined as the difference between the forward rate on reporting date and the forward rate on
the original transaction, multiplied by the transaction’s notional amount (with currency matching). The following
table provides information of fair values of derivative financial instruments: (in ` million)
As of September 30, 2017 Asset Liability
Designated as hedging instruments under Cash Flow Hedges Noncurrent* Current* Noncurrent* Current*
Foreign exchange forward contracts 1.1 5.2 5.1 7.8
*The noncurrent and current portions of derivative assets are included in ‘Other Assets’ and ‘Prepaid Expenses And Other
Current Assets’, respectively and of derivative liabilities are included in ‘Other Liabilities’ and ‘Accrued Expenses And Other
Liabilities’, respectively in our consolidated balance sheet.
For more information on foreign currency translation adjustments and cash flow hedges and other derivative
financial instruments, see Notes 36 to our consolidated financial statements for Fiscal 2017.
Reservations Or Qualifications Or Matters Of Emphasis Or Adverse Remarks Of Auditors
Our Auditor’s reports on our audited unconsolidated financial statements as at, and for the last five fiscals and
audited consolidated financial statements for last two Fiscals (no consolidation done prior to Fiscla 2016) do not
include any reservations or qualifications or matters of emphasis or adverse remarks.
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INDUSTRY OVERVIEW
Global total direct insurance premiums written grew by 3.1% in real terms in 2016, down from 4.3% growth in
2015. The slowdown was mainly driven by considerably lower growth in advanced markets. Robust premium
growth in China supported the emerging markets which were otherwise also in slowdown mode. (Source: Swiss
Re Sigma (No. 3/ 2017), World insurance in 2016: the China growth engine steams ahead)
Life Non-life Total
Advanced Markets -0.5% 2.3% 0.7%
Emerging Markets 17% 9.6% 14%
World 2.5% 3.7% 3.1%
Source: Swiss Re Sigma (No. 3/ 2017), World insurance in 2016: the China growth engine steams ahead
However, the market share of premium volumes continues to be in favour of developed markets, as the table
below shows –
Ranking Country Premium Volume (millions of USD) Market Share (%)
1 United States 1,352,385 28.58%
2 Japan 471,295 9.96%
3 China 466,131 9.85%
4 UK 304,208 6.43%
5 France 237,644 5.02%
6 Germany 215,021 4.54%
7 South Korea 170,862 3.61%
8 Italy 162,383 3.43%
9 Canada 114,523 2.42%
10 Taiwan 101,445 2.14%
11 Australia 82,159 1.74%
12 Netherlands 80,130 1.69%
13 India 79,311 1.68%
14 Brazil 72,646 1.54%
15 Spain 68,599 1.45%
Source: Swiss Re Sigma (No. 3/ 2017), World insurance in 2016: the China growth engine steams ahead
Global life premium growth is expected to improve over the next few years, mainly driven by the emerging
markets. Advanced markets should also grow, but only moderately. While North America is expected to
outperform Western Europe, growth will likely be highest in advanced markets in Asia. In the emerging markets,
China and India will remain the growth engines for life insurance. Growth in the non-life sector is expected to
remain moderate, driven mainly by stronger activity in the advanced economies. Premium growth is expected to
improve in North America and advanced Asia, but remain flat in Western Europe and Oceania. Emerging markets
are likely to grow robustly but at a slower pace than in the recent past, mainly supported by healthy growth in
China and also India to some extent.
Within the Indian Insurance sector, the life insurance segment grew at 14.0% year on year and continues to be
dominated by the Life Insurance Corporation of India (LIC) which holds a 71.8% market share, while private
carriers account for the balance. The non-life (general insurance) segment of the market grew at 32.9% year on
year, on the back of increasing market share of the private sector. Private sector carriers account for 46.6% of the
market, with the balance of the market dominated by public sector carriers. Motor insurance is the major
contributor to the Indian insurance sector (39.2%), followed by health (26.9%). (Source: Insurance Regulatory
and Development Authority of India Annual Report 2016-17)
There has been a proliferation of direct digital distribution channels in recent years, in some markets. At the same
time, the share of traditionally intermediated insurance business remains dominant globally. The digitalisation of
insurance distribution is set to continue, but the pace of change will vary across markets.
Digitalization is having a big impact on the whole distribution process: that is, both in terms of how products and
services are delivered and more generally how companies interact with their customers. Where once consumers
might have relied almost entirely on their agent or broker for all their insurance needs, they are increasingly more
self-directed and make use of many different sources and media to research, seek advice and ultimately purchase
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insurance. Digitalization has added various channels to the customer service mix including website self-service,
e-mail, website live chat, mobile app, text messaging, online forums and social media.
This move to a multi-touch, omni-channel distribution model is most prevalent in mature insurance markets. But
even in emerging economies, digital technology is widening the set of options for customers. By leveraging mobile
channels for communication, registration, payment of premiums via airtime deduction or mobile money, claims
submission and claims payouts, insurance is becoming more accessible and affordable, also in remote, rural
regions of Africa, Asia and South America.
Many insurers are investing heavily in creating digital offerings in a bid to boost their online and contact centre
presence. This includes deploying artificial intelligence (“AI”) to support customers in their purchasing decisions.
Some insurers are also looking externally to gain digital distribution expertise, including partnering with/investing
in InsurTech start-ups, as well as collaborating with established technology and telecommunications firms.
Ultimately, insurers anticipate digital technology will lower operational and policy acquisition costs, widen access
to underserved customers and improve accuracy of underwriting (thereby lowering claims). But success requires
more than simply creating a mobile app or an online customer portal. It typically needs a fundamental change in
an organisation’s operations and mind-set, affecting all elements in the insurance value chain from the role of the
agent to new, advanced, data-analytic capabilities. In the near term, a number of hurdles must be overcome. In
particular, insurers adopting new technology often face constraints from poorly integrated legacy IT systems and
technical skills gaps.
Smart analytics can help by allowing more informed monitoring of the efficiency of both traditional and new
digital channels. Similarly, sophisticated AI-led automation systems (eg. chatbots) can help remove unnecessary
costs and improve the productivity of new and existing insurance intermediaries.
Over the past three years, digital technology has also spawned various types of new intermediary like web-based
aggregators or robo advisers that seek to exploit technical advances in data capture and analytics to improve
customer engagement and satisfaction. The challenge for insurers and traditional intermediaries alike is to
modernise their systems and business models to take advantage of the opportunities that digital technologies
present. Those that fail to do so will likely become increasingly marginalised in the market place.
“Using IT spending as a percentage of premium, Celent estimates that global IT spending by insurance companies
will reach US$184.8 billion by the end of 2017.” “Different geographical markets are at different states of
maturity. Specifically, developing markets remain aggressive in new platform acquisition and technology for
purposes of sales distribution compared to mature markets which are characterized by digital transformation and
modernization. (Source: Celent – IT Spending in Insurance: A Global Perspective, 2017)
Source: Celent – IT Spending in Insurance: A Global Perspective, 2017.
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BUSINESS
Overview
We are a global provider of core insurance software, consulting services and other insurance technology solutions
for business transformation for the insurance industry having presence in India, the United States, Canada, the
United Kingdom, Malaysia, Thailand, Singapore and Mexico. We offer core insurance software solutions for
property and casualty/general insurance (“P&C”), life and annuities (“L&A”) and pensions and group/employee
benefits providers, allowing them to manage policy administration, claims management and billing functions.
In addition, we offer a variety of other technology-based solutions that are designed to enable our customers to
automate and innovate business processes across the end-to-end insurance value chain and comply with policies
and regulations across their organizations. Our solutions include policy management, new business/underwriting,
rating, billing, claims management, distribution management, business analytics, predictive modelling, digital
platforms for mobile and portal use, testing services, cloud services, bureau and content services, transformation
services and consulting services. Our solutions enable customers to respond to evolving market needs and
regulatory changes, across various jurisdictions, while improving the efficiency of their core operations.
Our service offerings for can be categorized in the following broad categories:
Licensing of software products: includes licensed use of our proprietary software;
Professional services: includes consulting services, including project delivery and implementation of
our solutions services;
Cloud: includes providing software as a service (SaaS) using our proprietary software,
and managing/ hosting customer applications and our cloud (private, public or
hybrid) infrastructure;
Support services: includes services that surround and support the business transformation, digital,
data and ongoing use of our proprietary software and cloud applications;
Our revenue percentages for the six months ended September 30, 2017, Fiscal 2017 and Fiscal 2016 by business
line is as follows:
Six Months Ended
September 30, 2017
Fiscal Year Ended
March 31, 2017
Fiscal Year Ended
March 31, 2016
Property and casualty 79.5% 80.9% 77.9%
Life and annuities 18.5% 17.5% 19.2%
Others 2.0% 1.6% 2.9%
Total 100% 100% 100%
Given the long-term nature of our contracts, we believe we have an opportunity to nurture deeper relationships
with our customers which enables us to market our portfolio of solutions with customer references for new sales.
Our customers range from some of the largest global tier one insurance carriers in the industry to startups,
greenfields, and mid-market insurers, including specialty, mutual and regional carriers. As of September 30, 2017,
we served over 160 insurance customers on a worldwide basis.
We generated total income from operations of `8,275.05 million, `7,571.53 million and `3,820.8 million, profit
of `193.94 million, `73.08 million and `56.5 million, earnings before interest, tax, depreciation and amortization
(“EBITDA”) of `422.23 million, `53.34 million and `75.8 million and adjusted EBITDA of `451.02 million,
`104.02 million and `54.6 million in Fiscal 2017, Fiscal 2016 and for the six months ended September 30, 2017.
For a reconciliation of EBITDA and adjusted EBITDA to net income, see “Management’s Discussion and
Analysis of Financial Condition and Results of Operations.
As a result of the de-merger and Cover-All merger, as of October 30, 2017, our Company holds 69.88% of the
outstanding equity shares of Majesco US, with Mastek retaining a 13.81% indirect minority interest in Majesco
US through its wholly-owned subsidiary, Mastek (UK) Ltd. The remainder is owned by employees, officers and
directors of Majesco US and unaffiliated public shareholders.
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We operate our business primarily through our Subsidiary Majesco US.
Our corporate structure is as follows as of October 30, 2017:
For the six months ended September 30, 2017, Fiscal 2017 and Fiscal 2016, Majesco US generated 97.5%, 98.1%
and 98.4% of our total revenues, 0%, 87.80% and 15.0% of our net profits, respectively. Majesco US revenues
for Fiscal 2017 grew by 9.0% compared to Fiscal 2016 and its revenues for the six months ended September 30,
2017 decreased by 11.9% compared to the six months ended September 30, 2016.
Our Competitive Strengths
Our key competitive strengths include:
Well-diversified player with breadth and depth of solutions with extensive industry expertise
We are uniquely positioned to service a large variety of customers in the insurance industry. Our solutions are
designed to provide insurance carriers with the core system capabilities required to effectively manage their
business and enable agility, innovation and speed to enable their business transformation in light of current
changing market dynamics and opportunities. The depth and breadth of our solutions are designed to enable the
entire insurance value chain across all lines of business, including policy, billing, claims, distribution, digital, data
and cloud.
We have a significant presence in the P&C market, which, as of 2016, represents approximately 44.7% of
insurance global market premium volume based on a report published by Swiss Re Sigma in 2017. For Fiscal
2017, 80.9% of our consolidated revenue is from the P&C business.
We are particularly well placed to grow in the L&A market which, as of 2016, represents approximately 55.3%
of insurance global market premium volume based on a report published by Swiss Re Sigma in 2017. We are
uniquely positioned to effectively compete and grow market share in this market with our single modern solution
which supports both group and individual businesses and is designed to enable insurers to adapt and take
advantage of this rapidly changing marketplace.
In Fiscal 2017, we made a transition of our business model from on-premise to on-demand cloud driven model.
Our cloud platform provides insurers a cloud-based end-to-end solution that addresses the entire insurance value
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chain, from green fields, new startups and incubators to mid-market and tier one insurers. We expect momentum
in our cloud business will remain strong as we take advantage of the shift underway in insurance industry.
Focused on driving innovation through in-house R&D and strategic partnerships
We are focused on driving innovation and adopting solutions in line with technological trends. Our culture of
innovation since our establishment has enabled us to expand the range of our offerings to customers and improve
the delivery of our products and services. We have a dedicated team of skilled individuals with technical
background and domain experience in each of our verticals with a focus on evolving technologies. These teams
follow a structured applied innovation and solutions development process and work with delivery functions to
identify the key concerns of our customers and generate solutions, ideas and concepts to address the concerns.
We have invested significantly in product innovation over the last several years, with an increase in investment
of 5.00% for Fiscal 2017 over Fiscal 2016. This has resulted in the rollout of a series of service offerings, the
more recent ones including Majesco Business Analytics, Majesco DigitalConnect, Majesco Testing Services and
Majesco Cloud Insurer, and have updated all of our core software.
We also engage with various technology partners from various key verticals to explore solutions and help us
enhance our product platform and service offerings in tune with frequently changing requirements of the insurance
industry. We have a growing partner ecosystem for systems integrators, solutions, content, infrastructure and
industry relationships, which provides our customers with strategic and operational business value through the
integration of these partners with our solutions.
We believe that our culture of innovation, and ability to identify and nurture partner relationships has enabled us
to grow and retain our customer relationships and successfully achieve process and productivity improvement for
customers. This has enabled us to continuously expand and diversify our services offering, as well as to maintain
our competitiveness.
We have strong long-term relationships with customers
Long-term, strong customer relationships are a key component of our success. Our license agreements with
customers typically range from fixed-year terms (which may be renewable) to perpetual terms and our support
services are usually provided under multi-year agreements which are typically renewable annually. We have
multiple points of entry with customers using our broad solution portfolio of software, consulting and services,
which provides us with multiple sales opportunities that deepen and strengthen our customer relationships. We
also conduct regular reviews with senior management of all our key clients to engage with them to provide
consistent service and to work on future opportunities. We combine our comprehensive range of product and
service offerings with industry specific experiences and insights to provide tailored solutions to our clients across
verticals and geographies.
Diverse and growing customer base
We have a broad and growing client base with clients. Our clients range from some of the largest global tier one
insurance carriers in the industry to startups, greenfields, and mid-market insurers, including specialty, mutual
and regional carriers. For Fiscal 2017, our subsidiary Majesco US had approximately 18 customers with over
US$5 billion in direct written premium, 26 customers with US$1-5 billion in direct written premium, 45 customers
with US$100 million to US$1 billion in direct written premium and 71 customers with less than $100 million in
direct written premium. We had 5 new customer wins in Fiscal 2017 and 24 “go-live” implementation with
customers in Fiscal 2017.
Seasoned management team
We have a seasoned management team with considerable experience in the IT and insurance industries. We
believe that our senior management has pioneered our growth and fostered a culture of innovation,
entrepreneurship and teamwork. Our Chief Executive Officer Mr. Ketan Mehta, has over 32 years of experience
in IT services focused on the insurance industry.
Our employees are spread globally and are instrumental in establishing and maintaining relationships either
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directly or indirectly with our customers. We invest in our employees through training and development programs
under our performance oriented development plan that includes induction programs, technical training, leadership
development and executive education programs. This allows us to identify and develop future leadership, build
company allegiance and excellence in delivery through our “customer first” motto and to promote talent within
our Company.
Proven track record of growth through acquisitions
We have grown both organically and inorganically through a series of acquisitions which we have successfully
integrated in our solutions and service offering platform, enhancing the value to our customers with new
capabilities. Our acquisitions include the acquisition of Vector Insurance Services, LLC, a technology solutions
provider and third-party administrator that focuses on the North American life and annuity insurance industry;
Systems Task Group, an IP-based enterprise solutions provider to the North American P&C insurance industry;
the assets of SEG Software, LLC, a provider of policy administration systems covering individual and group life,
health & annuity insurance products; the data factory tool kit of Kognitio Limited; the insurance consulting
business of Agile Technologies LLC, a business and technology management consulting firm; and Cover-All
Technologies Inc., a provider of core insurance software and business analytics solution primarily focused on
commercial lines for the P&C insurance segment.
Our Growth Strategy
We intend to extend our leadership as a provider of core software and consulting services to the insurance industry.
The key elements of our strategy include:
Proactively innovate and extend our insurance solution leadership.
We intend to continue to enhance the business and technical capabilities of our market leading solution portfolio
for insurance carriers through continued consistent significant R&D investment in core software, cloud,
distribution, data, digital and services for innovative and scalable solutions. We have made over $17.2 million and
$16.3 million in investments in R&D in Fiscal 2017 and Fiscal 2016, respectively, and expect to continue to make
significant R&D investments to continue our growth.
Dynamically expand cloud capabilities.
Approximately 48% of insurers are increasing their investment in cloud services (Source: SMA-Research,
Maturing Technologies Survey 2015). Organizations are adapting the cloud based infrastructure services because
of multidimensional value of cloud services, including agility, scalability, cost benefits and growth opportunities.
Our pre-configured, pre-integrated Majesco Cloud Insurer platform is designed to offer an insurance platform to
rapidly adapt to change and seize opportunities in the insurance industry. Being a pay-as-you-grow enterprise
platform, it is an affordable launchpad for broad range of insurers to migrate from on-premise to cloud based
model.
We plan to offer more comprehensive cloud based solutions designed to enable insurers’ agility, innovation and
speed at a lower total cost of ownership. We believe this service offering will be particularly attractive to
greenfields, start-ups and incubators. We already have over 30 customers to our cloud platform and more
experience than most competitors which is putting us in a unique position to continue to grow in this segment.
Enhance our client centric business model
We intend to continue to enhance our client centric business model that is designed to enable long term customers’
relationships, provide a single point of accountability for outcomes and offer deeper customer relationships with
cross sell opportunities across our solution portfolio, creating customer “stickiness.” We intend to build upon our
established customer relationships and track record of successful implementations to sell additional solutions to
existing customers. We have multiple points of entry with new customers using our broad solution portfolio of
software, consulting and services to meet each customers’ initial needs. In Fiscal 2017, out of our base of 97 P&C
customers, only 19 used all three of our policy, billing and claims solutions leaving a large addressable opportunity
to cross-sell to our customers.
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Grow through acquisitions.
We intend to continue to extend value through acquisitions that have accretive value and diversify or strengthen
our solution offerings or expand our customer base. We will continue to review and pursue acquisitions that we
believe contribute to the depth and breadth of our solutions portfolio or our client base. We are currently reviewing
acquisition opportunities but have not entered into any binding commitments at this time and cannot give any
assurances that we will consummate any acquisitions in the short term. Any acquisition which we may
consummate in future is likely to be financed through our internal accruals and/or proceeds of this Offering and/or
debt and/or future equity dilution. We may also proactively raise equity to create corpus for acquisitions.
Expand our customer base and increase market awareness and thought leadership with our brand and
solutions.
We intend to continue to aggressively pursue new customers by specifically targeting key market segments and
key accounts, expanding our sales and marketing organizations, leveraging current customers as references and
strengthening our geographic presence.
We also intend to continue to proactively strengthen our brand and reputation, enhance market awareness of our
solutions, and thought leadership market position as a strategic partner for the insurance industry.
Deepen and expand our partner ecosystem.
We will continue to seek to collaborate and extend our capabilities and solution business value through growing
our partner ecosystem for systems integrators, solutions, content, infrastructure and industry relationships. The
partner ecosystem provides our customers with strategic and operational business value through the integration
of these solutions with Majesco solutions, providing our customers competitive edge and opportunities.
Our Business
We have been operating in the insurance industry for more than twenty years, successfully partnering with market
leading insurance companies and enabling them to transform their business, introduce innovative products, and
expand distribution channels to generate growth and increase profitability. We are a global provider of core
insurance software, consulting services and other insurance technology solutions for business transformation for
P&C, L&A and group/employee benefits providers, allowing them to enable the entire insurance value chain. We
offer a solution portfolio of software, consulting and services for all lines of business and all tiers of insurers. The
portfolio includes core insurance software for policy, rating, underwriting, billing, claims, distribution
management, digital and data and analytics as well as consulting and services for enterprise consulting, digital,
data, testing and application development and maintenance.
Our customers range from some of the largest global tier one insurance carriers in the industry to startups,
greenfields, and mid-market insurers, including specialty, mutual and regional carriers. As of September 30, 2017,
we served over 160 insurance customers on a worldwide basis.
We primarily generate revenues from the licensing of our proprietary software and related implementation,
support and maintenance fees pursuant to contracts with customers. The license agreements typically range in
length from fixed-year terms (which maybe renewable) to perpetual terms. Support services are provided to
customers pursuant to multi-year support agreements, which are typically renewable on an annual basis post the
initial term of the agreement. We bill customers for license fees in accordance with the terms of the license
agreement, typically payable upon the signing of the agreement and achievement of milestones over the course of
a defined period of time. Support fees are payable in advance by the customer on an annualized, quarterly or
monthly basis. We primarily derive service revenues from implementation and training services performed for
our customers under the terms of a service contract on a time and materials or fixed-price basis. We also generate
revenue from software as a service which includes an upfront setup fee, implementation and usage based
subscription.
Over the past several years, we have:
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released a major version upgrade for the L&A and Group/Employee Benefits software – Majesco Policy for
L&A and Group®;
released a version update for Majesco Billing, Majesco Claims and Majesco Policy for P&C;
launched new data solutions, Majesco Enterprise Data Model and Majesco Enterprise Data Warehouse;
added ten new partners, including 5 InsurTech ones;
announced a strategic partnership with IBM to jointly offer a new cognitive, cloud-based platform to help
insurance carriers worldwide create new services on IBM Cloud;
actively engaged and supported InsurTech, including participation in some accelerators; and
cultivated and expanded our client base across tier one, mid-market and greenfield/start-ups.
Our Solutions
We provide core insurance software to insurance carriers from greenfields to mid-market and large insurance
companies using two different models including (1) the licensed use of our proprietary software; and (2)
cloud/SaaS using the same proprietary software but managed on our cloud (private, public or hybrid)
infrastructure. Our consulting and other insurance technology services likewise are offered to insurance carriers
from greenfields to mid-market and large insurance companies based on the scope and services selected.
Our solutions are designed to provide insurance carriers with the core system capabilities required to effectively
manage their business and enable agility, innovation and speed to meet changing market dynamics and
opportunities.
Our offering is comprised primarily of:
core insurance software solutions for all lines of business in the insurance industry; and
consulting services, including project delivery and implementation of our solutions services and services that
surround and support the business transformation, digital, data and ongoing use.
Software Solutions
Enterprise Solutions
We deliver enterprise software solutions that support all lines of business for P&C, L&A and group/employee
benefits, enabling customer centricity for insurers. This includes billing, distribution management, digital platform
with portals and mobile capabilities, and a cloud business platform. Our enterprise solutions include:
Majesco Billing;
Majesco Distribution Management;
Majesco DigitalConnect;
Majesco CloudInsurer; and
Implementation Services.
Life, Annuity Pension and Group / Employee Benefits Solutions
We deliver solutions for L&A and group/employee benefits core insurance areas, including policy management,
product modeling, product configuration, new business processing, and claims. Our L&A and group/employee
benefits solutions include:
Majesco Policy for L&A and Group; and
Majesco New Business & Underwriting.
Property and Casualty/General Insurance Solutions
We deliver solutions for P&C/General Insurance core insurance areas, including policy management, claims
management, rating, underwriting, product configuration and reinsurance. Our P&C/General Insurance solutions
include:
Majesco Policy for P&C;
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Majesco Claims;
Majesco Underwriting Workstation;
Majesco Business Analytics.
Consulting and Services Solutions
We offer an array of consulting and services to enable insurance companies’ business transformation, backed by
our methodologies and best practices for customers across all lines of business and geography. Our consulting
and services solutions include:
Majesco Enterprise Consulting Services;
Majesco Data Services;
Majesco Digital Services;
Majesco Testing Services; and
Majesco Application Development and Maintenance Services.
Intellectual Property
We rely on a combination of contractual provisions and intellectual property laws to protect our proprietary
technology. We believe that due to the dynamic nature of the computer and software industries, copyright
protection is less significant than factors such as the knowledge and experience of our management and personnel,
the frequency of product enhancements and the timeliness and quality of our support services.
We seek to protect the source code of our products as trade secret information and as unpublished copyright work,
although we often agree to place our source code into escrow in connection with entering into new customer
agreements. We also rely on security and copy protection features in our proprietary software. We distribute our
products under software license agreements which grant customers a personal, non-transferable license to use our
products and contain terms and conditions prohibiting the unauthorized reproduction or transfer of our products.
We do not hold any patents. Majesco Mastek®, Majesco US® and Elixir® are trademarks of Majesco US.
Partner Ecosystem
As part of our development strategy we seek to collaborate and extend our capabilities and solution business value
through a partnership ecosystem for systems integrators (such as Deloitte Consulting and IBM), solutions (such
as Pitney Bowes Software, Inc.), content (such as Insurance Services Office (“ISO”)), infrastructure (such as IBM)
and industry relationships. The partner ecosystem is designed to provide our customers with strategic and
operational business value by extending and expanding our software and services with the complimentary and
unique capabilities of our partner solutions.
Our arrangements are different for each partner. Collaboration with our partners may include co-marketing and
joint business development, collaboration on solutions offerings, use of data/content and information sharing. For
example, we collaborate with our systems integrators partners such as Deloitte and IBM on implementation
services. In some cases, we integrate our solutions with those of our partners to offer a seamless service to our
customers. In other cases, we use the data content of our partners and are active participants in the various industry
organizations we have joined.
Competition
The insurance solution provider market is highly competitive and fragmented.
This market is subject to changing technology, shifting customer needs and introductions of new and innovative
products and services. Our competitors vary in size and in the breadth and scope of the products and services
offered. Our current principal competitors include the following:
Area of Product/Service Competitors
Internally developed software Many insurance companies have sufficient IT resources to maintain and augment their own
proprietary, legacy systems, or consider developing new custom systems.
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Area of Product/Service Competitors
Insurance software vendors Vendors such as Duck Creek, Guidewire Software, Inc., FINEOS, OneShield, Inc., FAST,
Oracle, Sapiens International Corporation, and Insurity, provide software solutions that are
specifically designed to meet the needs of insurance carriers.
Consulting Services firms Firms such as Accenture, Deloitte, E&Y, Nolan Group, CSC, Cognizant, CGI, Mphasis and
Tata Consultancy Services Limited offer consulting and other services such as testing,
application maintenance, and custom development, solutions for the insurance industry.
Sales and Marketing
We market our solution portfolio through an integrated sales and marketing platform through digital marketing,
client partners working with existing customers and through a direct sales force with assigned accounts to provide
a consultative approach. Strategic partnerships with consultants and systems integrators are important to our sales
efforts because they influence buying decisions, help us to identify sales opportunities, and complement our
software and services with their domain expertise and professional services capabilities.
We have a strategic marketing program that conducts a broad range of integrated marketing programs that leverage
thought leadership and other content developed by us to support market segment and solution targeted campaigns,
press relations, media relations, industry research analyst relations, social media, industry tradeshows,
roundtables, videos, webinars and website. We work closely with partners and other third parties to conduct joint
marketing campaigns that generate growth in the sales pipeline.
Major Customers
Majesco has a well-diversified customer base of approximately 160 customers globally. Our clients range from
some of the largest global tier one insurance carriers in the industry to startups, greenfields and mid-market
insurers including specialty, mutual and regional carriers. For Fiscal 2017, we had no customer contributing 10%
or more of total revenues and our top five and top 10 customers generated approximately 26.5% and 40.1% of
revenue, respectively. We expect that our top five customers will continue to account for a significant portion of
revenue for the foreseeable future.
Backlog
As of March 31, 2017, we had unrecognized licenses and support services or professional services backlog of
unbilled work totaling `4,404 million, which are expected to be recognized by March 31, 2018. As of September
30, 2017, we had unrecognized licenses and support services or professional services backlog of unbilled work
totaling `5,184.4 million, which are expected to be recognized by September 30, 2018.
As of March 31, 2017 our US subsidiary Majesco US had unrecognized licenses and support services or
professional services backlog of unbilled work totaling US$64 million, which are expected to be recognized by
March 31, 2018. Quarterly backlog amounts for the first and second quarter of Fiscal 2017 for Majesco US were
US$21.3 million and US$16.6 million, respectively. As of September 30, 2017, Majesco US had unrecognized
licenses and support services or professional services backlog of unbilled work totaling $77.5 million, which are
expected to be recognized by September 30, 2018.
Employees
As of September 30, 2017, we had approximately 2,293 full-time employees and no part-time employees on a
worldwide basis. In addition, as of September 30, 2017, we actively received services from a total of
approximately 130 individuals in their capacities as independent contractors.
None of our employees are covered by collective bargaining arrangements or represented by a union. We consider
relations with our employees to be good.
Properties
Our registered and corporate office is located at MNDC, MBP-P-136, Mahape, Navi Mumbai – 400 710,
Maharashtra, India. These premises were leased to Mastek on a long term lease of 95 years from Maharashtra
96
Industrial Development Corporation. Pursuant to the Scheme of Arrangements, the lease on these premises was
to be transferred to our Company. We have made necessary applications with the applicable regulatory authorities
to transfer the lease in the name of our Company and are waiting for approval.
Other than our registered office, our Company and our Subsidiaries lease office space in India, United States,
Canada, the United Kingdom, Malaysia, and Singapore. We believe that our existing facilities are adequate for
our current and expected future needs. We may seek to negotiate new leases or evaluate additional or alternate
space for our operations.
Insurance
We have insurance policies to cover our assets against losses from fire and other risks to our properties. We also
maintain insurance policies against third party liabilities, including a commercial general liability policy, in
addition to group insurance and medical insurance policies for the benefit of our employees, employment practices
liability insurance, and such other insurance policies as required by applicable law and/or contract. We also have
insurance policies to cover our directors’ and officers’ liability.
Corporate and Social Responsibility
We support the Mastek Foundation, which undertakes variety of social programs including (1) supporting a wide
range of social programmes in the areas of promoting education, enhancing skills of children, and development
of children of women working in red-light areas. We are also involved in special education and employment-
enhancing vocation skills especially among women, elderly and the differently abled, and livelihood enhancement
projects; (2) eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation and
making safe drinking water available; (3) promoting gender equality and empowering women. Activities include
setting up homes/ hostels for women and orphans, old age homes and other such facilities for senior citizens, day
care centres, and measures to reduce inequalities faced by socially and economically backward groups; (4)
undertaking protection and up-gradation of environmental conditions. These include ensuring environmental
sustainability, ecological balance, protection of flora and fauna, animal welfare, agro-forestry, conservation of
natural resources and maintaining the quality of soil, air and water; and (5) any other projects as approved by our
Board of Directors.
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REGULATIONS AND POLICIES
The following description is a summary of the relevant sector specific laws, policies and regulations, as prescribed
by the Government which are applicable for our Company and its Subsidiaries. The information detailed in this
chapter has been obtained from publications available in the public domain. The regulations set out below are
not exhaustive, and are only intended to provide general information to the investors and is neither designed nor
intended to be a substitute for professional legal advice.
A. Laws applicable to the Indian IT industry
The following description is a summary of certain sector specific key laws and regulations in India, which are
applicable to our Company and our Subsidiaries. The information detailed in this section has been obtained from
publications available in the public domain. The regulations set out below may not be exhaustive, and are only
intended to provide general information to the investors and are neither designed nor intended to be a substitute
for professional legal advice. The section also lists out certain other laws in India which are not specific to our
Company or to our Subsidiaries.
Software Technology Parks Scheme
The STPI Scheme was introduced by the Government with the objective of encouraging, promoting and boosting
the software exports from India. The STPI Scheme, which is a 100% export oriented scheme, provides benefits
such as data communication facilities, operational space, common amenities, single window clearances and
approvals including project approvals, import certification and other facilities to boost software exports from
India.
In order to avail the benefits as envisaged by the Government, a company is required to register itself with the
appropriate authorities. The principal compliance required of a company accorded approval under the STPI
Scheme is the fulfilment of the export obligation. The letters of permission may contain other conditions.
Additionally, the unit is required to file monthly, quarterly and annual returns to STPI in the nature of a
performance report indicating the export performance.
The Special Economic Zones Act, 2005 and Special Economic Zone Rules, 2006
SEZs are established, regulated and governed by the Special Economic Zones Act, 2005, as amended (the “SEZ
Act”). The SEZ Act was enacted for the establishment, development and management of SEZs for the promotion
of exports. An SEZ is a specifically delineated duty free enclave, deemed to be a foreign territory for the purposes
of trade operations as well as duties and tariffs. A board of approval (“SEZ Board”) has been set up under the SEZ
Act, which is responsible for promoting SEZs and ensuring their orderly development. The SEZ Board has a
number of powers including the authority to approve (i) proposals for the establishment of SEZs, (ii) the operations
to be carried out in the SEZ by the developer and (iii) foreign collaborations and foreign direct investments in the
SEZ for its development, operations and maintenance.
The Special Economic Zone Rules, 2006 (the “SEZ Rules”) have been enacted to effectively implement the
provisions of the SEZ Act. The SEZ Rules provide a simplified procedure for a single window clearance from
central and state governments for setting up SEZs and “units” in SEZs. The SEZ Rules also prescribe the procedure
for the operation and maintenance of an SEZ, the setting up of an SEZ and conducting business within SEZs,
including by way of “self-certification”. The SEZ Rules also provide for the terms and conditions subject to which
entrepreneurs and developers shall be entitled to exemptions, drawbacks, concessions and certain other benefits.
The SEZ Rules stipulate the minimum area requirement for various categories of SEZs.
Export Oriented Unit Scheme
The Ministry of Commerce, Government introduced the Export Oriented Unit (the “EOU”) Scheme on December
31, 1980. There is no specially earmarked zone under the EOU scheme and an EOU may be set up anywhere in
India subject to operation under the customs bond. They are typically required to fulfil certain criteria such as
achievement of positive net foreign exchange over a period of five years. EOUs are units which must export their
entire production. They may be engaged in the rendering of services, development of software and manufacture
of goods, including repair, remaking, reconditioning and re-engineering. EOUs are allowed to import or locally
procure, duty free, all types of goods including capital goods required for export production.
98
Other Indian laws
In addition to the above, our Company and our Subsidiary in India are also governed by laws in relation to Indian
Foreign Trade Policy, 2015-20, under which no export or import can be made by a person without an IEC number
unless such person is specifically exempted. We are also governed by foreign exchange related laws and the
regulations applicable on investments outside India including the Foreign Exchange Management Act, 1999 and
the rules made thereunder.
Certain laws relating to intellectual property rights such as patent protection under the Patents Act, 1970, copyright
protection under the Copyright Act, 1957 and trademark protection under the Trade Marks Act, 1999 are also
applicable to us. In addition to the domestic laws, India is a party to several international intellectual property
related instruments including the Patent Co-operation Treaty, 1970, the Paris Convention for the Protection of
Industrial Property, 1883, the International Convention for the Protection of Literary and Artistic Works adopted
at Berne in 1886, the Universal Copyright Convention adopted at Geneva in 1952, the Rome Convention for the
Protection of Performers, Producers of Phonograms and Broadcasting Organisations, 1961, and as a member of
the World Trade Organisation is a signatory to the Agreement on Trade Related aspects of Intellectual Property
Rights which became effective on January 1, 1995.
Additionally, certain IT-related laws such as the Information Technology Act, 2000, which provides legal
recognition to electronic records and creates a mechanism for authentication of electronic documentation through
digital signatures, the Information Technology (Reasonable Security Practices and Procedures and Sensitive
Personal Data or Information) Rules, 2011, and certain state specific laws such as Information Technology and
Information Technology Enabled Services Policy, 2015 framed by State of Maharashtra are also applicable to us.
The tax related laws that are pertinent include the Income Tax Act, the Customs Act, 1962, the Integrated Goods
and Services Tax Act, 2017, Central Goods and Service Tax Act, 2017 and the State Goods and Service Tax Act,
2017 and various notifications. Further, certain legislations such as the Shops and Commercial Establishments
Acts of various states and certain state specific laws are applicable to our Company and our Subsidiaries.
A wide variety of labour laws are also applicable to our Company and our Subsidiaries, including the Contract
Labour (Regulation and Abolition) Act, 1970, the Employees’ Provident Funds and Miscellaneous Provisions
Act, 1952, the Employees’ State Insurance Act, 1948, the Industrial Disputes Act, 1947 and the Industrial Disputes
(Central) Rules, 1957, the Maternity Benefit Act, 1961, the Minimum Wages Act, 1948, the Payment of Bonus
Act, 1965, the Payment of Gratuity Act, 1972, the Payment of Wages Act, 1936, Equal Remuneration Act, 1976
and the Workmen’s Compensation Act, 1923.
Others
In addition to the above, our Company is also required to comply with the provisions of the Companies Act, and
other applicable statutes imposed by the Centre or the State for its day-to-day operations. Our Company is also
amenable to various central and state labour laws and tax laws.
Laws applicable for operations outside India
Our Company operates in various jurisdictions, including North America, Europe, Malaysia, Singapore, Thailand
and New Zealand through our Subsidiaries and branch offices. The relevant laws in these jurisdictions are
applicable to our Subsidiaries and branch offices, which relate to incorporation or registration as applicable,
labour, immigration, intellectual property, data protection, taxation, and other business related laws.
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BOARD OF DIRECTORS AND SENIOR MANAGEMENT
Board of Directors
The Board presently consists of five Directors. In accordance with our Articles of Association, we shall not have
less than three Directors and not more than 15 Directors. The quorum for meetings of the Board is one third of
the total number of Directors or two Directors, whichever is higher.
Pursuant to the provisions of the Companies Act, at least two-thirds of the total number of Directors, excluding
the Independent Directors, is liable to retire by rotation, with one-third of such number retiring at each annual
general meeting. A retiring Director is eligible for re-election. Further, the Independent Directors may be
appointed for a maximum of two terms of up to five consecutive years each. Any re-appointment of Independent
Directors shall inter alia be on the basis of the performance evaluation report and approved by the shareholders
by way of special resolution.
The following table sets forth details regarding the Board of Directors as of the date of this Preliminary Placement
Document:
Sr.
No.
Name, Address, Occupation, DIN, Term and Nationality Age Designation
1. Venkatesh Chakravarty
Address: Emerald Bldg., 903 Nirmal Lifestyle, LBS Marg,
Mulund (West), Mumbai - 400 080,
Maharashtra, India
Occupation: Business
DIN: 01102892
Term: Five years from April 30, 2015
Nationality: Indian
59 Non-Executive Chairman and
Independent Director
2. Farid Kazani
Address: Flat No. 802, 8th Floor, Madhur Milan,
14-B Road, Khar West, Mumbai - 400 052
Maharashtra, India
Occupation: Service
DIN: 06914620
Term: Three Years from July 4, 2017
Nationality: Indian
50 Managing Director
3. Radhakrishnan Sundar
Address: 1301, Oddysey 1, Hiranandani Garden, Powai,
Mumbai – 400 076, Maharashtra, India
Occupation: Business
DIN: 00533952
Term: Three years from June 1, 2015
Nationality: Indian
61 Whole-time Director
100
Sr.
No.
Name, Address, Occupation, DIN, Term and Nationality Age Designation
4. Ketan Mehta
Address: 3208 Glenhurst Court, Plano, TX 75093 USA
Occupation: Business
DIN: 00129188
Term: Liable to retire by rotation
Nationality: Indian
59 Non-Executive Director
5. Madhu Dubhashi
Address: B29, Gate No: 3, Abhimanshree Society,
NCL Pashan Road, Pune – 411 008
Maharashtra, India
Occupation: Management Consultant
DIN: 00036846
Term: Five years from April 30, 2015
Nationality: Indian
66 Independent Director
Biographies of the Directors
Mr. Venkatesh Chakravarty, is a Non-Executive Chairman and Independent Director of our Company. He is
currently the Head of India, General Reinsurance AG, India Branch. He is an Associate Member of the Chartered
Insurance Institute and holds a Master’s degree in Administrative Management from Jamnalal Bajaj Institute of
Management Studies.
Mr. Farid Kazani is the Managing Director of our Company. He has served as CFO and Treasurer of Majesco
US since 2011. Mr. Kazani has served as Group CFO and Director of Finance of Mastek from 2009 to 2015. He
holds a degree in Bachelor’s of Commerce from University of Bombay and is Member of the Institute of Chartered
Accountant of India.
Mr. Radhakrishnan Sundar is a Whole-time Director of our Company. He is one of the co-founders of Mastek.
He holds a degree in bachelor of engineering in Electronics and Communication Engineering from the University
of Madras. He also holds post graduate diploma in management from the Indian Institute of Management,
Ahmedabad.
Mr. Ketan Mehta, is a Non-Executive Director of our Company. He has served as President and CEO of Majesco
US and member of Majesco US’s Board of Directors. Mr. Mehta co-founded Mastek in 1982 and has served as a
member of Mastek’s board of directors since then.
Ms. Madhu Dubhashi, is the Independent Director of our Company. She holds post graduate diploma in business
management from the Indian Institute of Management, Ahmedabad.
Relationship with other Directors
None of our Directors are related to each other.
Borrowing powers of the Board
Our Articles, subject to the provisions of the Act, authorise our Board, at its discretion, to generally raise or borrow
101
or secure the payment of any sum or sums of money for the purposes of our Company. Pursuant to Shareholders
resolution dated April 29, 2015, our Board has been authorised to borrow money from time to time at their
discretion, which together with the monies already borrowed by the Company (apart from temporary loans
obtained from the Company’s bankers in the ordinary course of business) may exceed at any time, the aggregate
of the paid up capital of the Company and its free reserves by a sum not exceeding `1,000 million.
Interest of the Directors
All of the Directors may be deemed to be interested to the extent of commission payable to them and feed paid
for attending Board or Board committee meetings as well as to the extent of reimbursement of expenses and
commission payable to them. The Managing Director and the Whole-time Director also may be deemed interested
to the extent of remuneration paid to them for services rendered.
Remuneration paid to the Directors (other than Independent Directors) for the six months ended September 30,
2017 and the last three fiscals: (` in million)
Name of the Director Six months ended
September 30, 2017
Fiscal 2017 Fiscal 2016 Fiscal 2015
Farid Kazani 5.8 14.83 14.78 -
Radhakrishnan Sundar 1.3 2.73 2.72 -
Ketan Mehta - - - -
All of the Directors may also be regarded as interested in any Equity Shares held by them, ESOPs granted to them
which have been vested but unexercised and also to the extent of any dividend payable to them and other
distributions in respect of such Equity Shares held by them. All Directors may also be regarded as interested in
the Equity Shares held by, or subscribed by and allotted to, the companies, firms and trust, in which they are
interested as directors, members, partners, trustees.
Except as provided in this Preliminary Placement Document, our Company has not entered into any contract,
agreement or arrangement during the preceding two years from the date of this Preliminary Placement Document
in which any of the Directors are interested, directly or indirectly, and no payments have been made to them in
respect of any such contracts, agreements, arrangements which are proposed to be made with them.
The Directors have not taken any loans from our Company.
Shareholding of Directors
The following table sets forth the shareholding of the Directors in our Company as on date of this Preliminary
Placement Document:
Name Number of
Equity Shares
Percent of the issued and paid-up
Equity Share capital (in %)
Numbers of outstanding
ESOPs
Ketan Mehta 2,619,100 11.10 -
Radhakrishnan Sundar 1,360,161 5.76 -
Farid Kazani 115,951 0.49 106,771*
Venkatesh Chakravarty 20,000 0.08 6,725
Madhu Dubhashi - - -
*total number of options that have been granted but not vested are 90,521, vested but not exercised are 5000 and
exercised but shares not allotted are 11,250.
Compensation of the Non-executive Directors
The non-executive Directors are paid remuneration consisting of sitting fees, which is determined by the Board
of Directors. The following tables set forth the compensation paid by our Company to the present non-executive
Directors of our Company during the relevant period for Fiscals 2017, 2016 and 2015: (` in million) `
Name of the
Directors
2017 2016 2015
Commission Sitting
Fees
Total Commission Sitting
Fees
Total Commission Sitting
Fees
Total
Venkatesh
Chakravarty
Nil 0.33 0.33 Nil 0.40 0.40 Nil Nil Nil
102
Name of the
Directors
2017 2016 2015
Commission Sitting
Fees
Total Commission Sitting
Fees
Total Commission Sitting
Fees
Total
Ketan Mehta Nil Nil Nil Nil Nil Nil Nil Nil Nil
Madhu Dubhashi Nil 0.42 0.42 Nil 0.50 0.50 Nil Nil Nil
Terms of appointment of the Executive Directors
Mr. Farid Kazani has been re-appointed as Managing Director of our Company on July 4, 2017 for three years
i.e., or until July 3, 2020 pursuant to an agreement dated July 4, 2017 with our Company (“the Agreement”) and
the same has been approved by the shareholders in the Annual General Meeting held on August 4, 2017. Mr. Farid
Kazani has received total compensation of ̀ 14.83 million in Fiscal 2017. He shall not be liable to retire by rotation.
Mr. Kazani is entitled to a remuneration of `0.93 million per month subject to an increase up to such amount as
may be decided by our Nomination and Remuneration Committee and Board of Directors on a yearly basis. Mr.
Kazani is also entitled for performance based bonus, as may be evaluated by the Board of Directors/ Nomination
& Remuneration Committee, from time to time up to a maximum of 30% of the Annual Gross Salary. Mr. Kazani
is also entitled for house rent allowance of 50% of the montly basic salary, special allowance of `0.26 million per
months, ad-hoc allowance of ̀ 0.22 million per month, leave travel allowance, car facility, telephone & broadband,
club fees, providend fund, superannnuation, gratuity, medical benefits, perquisities and ESOPs
Mr. Radhakrishnan Sundar has been appointed as Executive Director of our Company on June 1, 2015 for three
years, or until May 31, 2018, pursuant to an agreement dated June 12, 2015 and resolution passed by the Board
of Directors and the same has been approved by the shareholders through postal ballot. Mr. Radhakrishnan Sundar
has received total compensation of `2.73 million in Fiscal 2017. He shall not be liable to retire by rotation. Mr.
Radhakrishnan Sundar is entitled to a remuneration of `0.20 million per month subject to an increase up to such
amount as may be decided by our Nomination and Remuneration Committee and Board of Directors on a yearly
basis. Mr. Radhakrishnan Sundar is also entitled for car facility, telephone, providend fund, gratuity and
perquisities.
Key Managerial Personnel
The following table sets forth details regarding our key managerial personnel as of the date of this Preliminary
Placement Document:
Sr. No. Name Age (years) Title
1. Farid Kazani 50 Managing Director
2. Kunal Karan 48 Chief Financial Officer
3. Nishant Shirke 37 Company Secretary
Key Managerial Personnel
Other than our Managing Director, details of our key managerial personnel are as follows:
Mr. Kunal Karan, Chief Financial Officer, was appointed as CFO on June 1, 2015. Prior to being appointed as
CFO he was associated with Mastek as Group Manager, Finance. He is a member of Institute of Chartered
Accountants of India and a Certified Public Accountant from The American Institute of Certified Public
Accountants.
Mr. Nishant Shirke, Company Secretary & Compliance Officer, was appointed as Company Secretary &
Compliance Officer on June 1, 2015. Prior to being appointed as Company Secretary & Compliance Officer he
was associated with Mastek as Assistant Manager, secretarial & legal. He member of the Institute of Company
Secretaries of India.
Shareholding of key managerial personnel
The following table sets forth the shareholding of our key managerial personnel (other than our Managing
Director) as on the date of this Preliminary Placement Document:
103
Name Number of
Equity Shares
Percentage of issued and paid-up Equity
Share capital (in %)
Numbers of
outstanding ESOPs
Kunal Karan 1,400 Negligible 18,000
Nishant Shirke 2 Negligible 2,000
Interest of key managerial personnel
The key managerial personnel of our Company (other than our Managing Director) do not have any interest in
our Company other than to the extent of the remuneration or benefits to which they are entitled to as per their
terms of appointment and reimbursement of expenses incurred by them in the ordinary course of business and to
the extent of the Equity Shares held by them or their dependants in our Company, if any.
Our Company has not granted any loans to its key managerial personnel.
Corporate governance
The Board of Directors presently consists of five Directors. In compliance with the requirements of the SEBI
Listing Regulations, the Board of Directors consists of two independent Directors.
We are in compliance with the requirements of the applicable regulations, including the SEBI Listing Regulations,
the Companies Act, 2013 and the SEBI Regulations, in respect of corporate governance including constitution of
the Board and committees thereof. The corporate governance framework is based on an effective independent
Board, separation of the Board’s supervisory role from the executive management team and constitution of the
Board committees, as required under law.
Our Board has been constituted in compliance with the Companies Act, 2013 and Listing Agreement with Stock
Exchanges and the SEBI Listing Regulations. The Board functions either as a full board or through various
committees constituted to oversee specific functions. Our executive management provides our Board detailed
reports on its performance periodically.
Committees of the Board of Directors
The Board of Directors has constituted committees, which have been constituted and function in accordance with
the relevant provisions of the Companies Act and the SEBI Listing Regulations: (i) Audit Committee; (ii)
Investors’/Stakeholders’ Relationship Committee; (iii) Risk Management Committee; (iv) Nomination and
Remuneration Committee; and (v) Corporate Social Responsibility Committee.
The following table sets forth the members of the aforesaid committees as of the date of this Preliminary
Placement Document:
Committee Members
Audit Committee Madhu Dubhashi (Chairperson), Venkatesh Chakravarty and Radhakrishnan Sundar
Nomination, Remuneration, and
Compensation Committee
Venkatesh Chakravarty (Chairman), Madhu Dubhashi and Ketan Mehta
Investors’/Stakeholders’ Relationship
Committee
Venkatesh Chakravarty (Chairman), Farid Kazani and Radhakrishnan Sundar
CSR Committee Venkatesh Chakravarty (Chairman), Farid Kazani and Radhakrishnan Sundar
Other confirmations
None of the Directors, Promoter or key managerial personnel of our Company has any financial or other material
interest in the Issue.
None of the Directors, Promoters or key managerial personnel of our Company have been identified as a ‘wilful
defaulter’ by the RBI, ECGC, any government/ regulatory authority and/or by any bank or financial institution.
Related Party Transactions
For details in relation to the related party transactions entered by our Company during the last three Fiscals, in
accordance with the requirements under Accounting Standard 18 issued by the Institute of Chartered Accountants
104
in India, please see “Financial Statements” on page 152.
Policy on Disclosures and Internal Procedure for prevention of Insider Trading
Regulation 9(1) of the SEBI Insider Trading Regulations applies to us and our employees and requires us to
formulate a code of practices and procedures and a code of conduct to regulate, monitor and report trading by
employees. Our Company is in compliance with the same and has implemented an insider trading policy for
employees. Mr. Nishant Shirke acts as the Compliance Officer of our Company under the aforesaid code of
conduct for the prevention of insider trading. In terms of the Companies Act, 2013, the directors and the key
managerial personnel are prohibited from (a) acquiring an option over, or entering into forward dealings in
securities of our Company; and (b) engaging in insider trading.
105
PRINCIPAL SHAREHOLDERS
The following table sets forth the shareholding pattern of our Company as on December 31, 2017:
I. Summary statement holding of specified securities
Category of shareholder Nos. of
shareholders
No. of fully paid up
equity shares held
Total nos.
shares held
Shareholding as a % of total
no. of shares (calculated as
per SCRR, 1957) As a % of
(A+B+C2)
Number of Shares pledged or
otherwise encumbered
Number of equity
shares held in
dematerialized form No.(a) As a % of total
Shares held(b)
(A) Promoter & Promoter Group 14 11,311,104 11,311,104 47.94 480,000 4.24 11,311,104
(B) Public 25,342 12,282,832 12,282,832 52.06 - 0 12,078,620
(C1) Shares underlying DRs 0 0 0 0 0 0 0
(C2) Shares held by Employee Trust 0 0 0 0 0 0 0
(C) Non-Promoter-Non-Public 0 0 0 0 0 0 0
Grand Total 25,356 23,593,936 23,593,936 100.00 480,000 2.03 23,389,724
II. Statement showing shareholding pattern of the Promoter and Promoter Group
Category of shareholder Nos. of
shareholders
No. of fully paid up
equity shares held
Total nos.
shares
held
Shareholding as a % of
total no. of shares
(calculated as per SCRR,
1957) As a % of (A+B+C2)
Number of Shares pledged or
otherwise encumbered
Number of equity
shares held in
dematerialized form No.(a) As a % of total
Shares held(b)
A1) Indian
Individuals/ Hindu undivided
Family
14 11,311,104 11,311,104 47.94 480,000 4.24 11,311,104
Shankar Sundar - 64,000 64,000 0.27 - - 64,000
Samvitha Sudhakar Ram - 103,328 103,328 0.44 - - 103,328
Ketan Mehta - 2,619,100 2,619,100 11.10 - - 2,619,100
Girija Ram - 163,600 163,600 0.69 - - 163,600
Ashank Desai - 3,099,552 3,099,552 13.14 - - 3,099,552
Chinmay Ashank Desai - 71,600 71,600 0.30 - - 71,600
Rupa Ketan Mehta - 480,800 480,800 2.04 - - 480,800
Sudhakar Ram - 2,581,763 2,581,763 10.94 480,000.00 18.59 2,581,763
Sundar Radhakrishnan - 1,360,161 1,360,161 5.76 - - 1,360,161
Usha Sundar - 460,000 460,000 1.95 - - 460,000
Varun Sundar - 64,000 64,000 0.27 - - 64,000
Padma Desai - 155,200 155,200 0.66 - - 155,200
Avanti Desai - 81,600 81,600 0.35 - - 81,600
106
Tanay Mehta - 6,400 6,400 0.03 - - 6,400
Sub Total A1 14 11,311,104 11,311,104 47.94 480,000 4.24 11,311,104
A2) Foreign 0 0 0 0 0 0 0
A=A1+A2 14 11,311,104 11,311,104 47.94 480,000 4.24 11,311,104
III. Statement showing shareholding pattern of the Public shareholder
Category & Name of the
Shareholders
No. of
shareholder
No. of fully paid
up equity
shares held
Total no.
shares held
Shareholding %
calculated as per SCRR,
1957 As a % of (A+B+C2)
No of Voting
Rights
Total as a
% of Total
Voting right
Number of equity shares
held in dematerialized
form (Not Applicable)
1. Institutions 0 0 0 0 0 0 0
a. Mutual Funds/ 13.00 1,131,229 1,131,229 4.79 1,131,229.00 4.79 1,130,029
DSP Blackrock Micro Cap Fund 1 612,126 612,126 2.59 612,126.00 2.59 612,126
Tata Regular Savings Equity
Fund
1 285,800 285,800 1.21 285,800.00 1.21 285,800
b. Venture Capital Funds 0 0 0 0 0 0 0
c. Alternate Investment Funds 0 0 0 0 0 0 0
d. Foreign Venture Capital
Investors
0 0 0 0 0 0 0
e. Foreign Portfolio Investors 10.00 178,876 178,876 0.76 178,876.00 0.76 177,276
f. Financial Institutions/ Banks 4.00 29,995 29,995 0.13 29,995.00 0.13 29,995
e. Insurance Companies 2.00 1,108,216 1,108,216 4.70 1,108,216.00 4.70 1,108,216
f. Life Insurance Corporation Of
India
1 1,108,216 1,108,216 4.70 1,108,216.00 4.70 1,108,216
h. Provident Funds/ Pension Funds 0 0 0 0 0 0 0
i. Any Other (specify) 0 0 0 0 0 0 0
Sub-Total (B)(1) 29.00 2,448,316 2,448,316 10.38 2,448,316.00 10.38 2,445,516
2. Central Government/ State
Government(s)/ President of India
0 0 0 0 0 0 0
Sub-Total (B)(2) 0 0 0 0 0 0 0
3. Non-institutions 0 0 0 0 0 0 0
a. Individuals - 23,987.00 7,086,005 7,086,005 30.04 7,086,005.00 30.04 6,898,266
i. Individual shareholders holding
nominal share capital up to Rs.
2 lakhs.
23,974.00 5,930,912 5,930,912 25.14 5,930,912.00 25.14 5,743,173
ii. Individual shareholders
holding nominal share capital in
excess of Rs. 2 lakhs.
13.00 1,155,093 1,155,093 4.90 1,155,093.00 4.90 1,155,093
Ashish Kacholia - 275,000 275,000 1.17 275,000.00 1.17 275,000
b. NBFCs registered with RBI 7.00 9,473 9,473 0.04 9,473.00 0.04 9,473
107
Category & Name of the
Shareholders
No. of
shareholder
No. of fully paid
up equity
shares held
Total no.
shares held
Shareholding %
calculated as per SCRR,
1957 As a % of (A+B+C2)
No of Voting
Rights
Total as a
% of Total
Voting right
Number of equity shares
held in dematerialized
form (Not Applicable)
c. Employee Trusts - - - - - - -
d. Overseas Depositories (holding
DRs) (balancing figure)
- - - - - - -
e. Any Other (specify) 1,319.00 2,739,038 2,739,038 11.61 2,739,038.00 11.61 2,725,365
Trust 3.00 4,891 4,891 0.02 4,891.00 0.02 4,891
Overseas Corporate Bodies 1.00 200 200 - 200.00 - 200
Non-Resident Indian (NRI) 428.00 658,106 658,106 2.79 658,106.00 2.79 646,833
Arun Kumar Maheshwari - 240,000 240,000 1.02 240,000.00 1.02 240,000
Clearing member 92.00 30,205 30,205 0.13 30,205.00 0.13 30,205
Body Corporate 591.00 1,788,506 1,788,506 7.58 1,788,506.00 7.58 1,786,106
Birla Sun Life Insurance
Company Limited
- 657,465 657,465 2.79 657,465.00 2.79 657,465
Foreign Nationals 3.00 12,160 12,160 0.05 12,160.00 0.05 12,160
Non-Resident Indian (NRI) 201.00 244,970 244,970 1.04 244,970.00 1.04 244,970
Sub-Total (B)(3) 25,313.00 9,834,516 9,834,516 41.68 9,834,516.00 41.68 9,633,104
Total Public Shareholding (B)=
(B)(1)+(B)(2)+(B)(3)
25,342.00 12,282,832 12,282,832 52.06 12,282,832.00 52.06 12,078,620
IV. Statement showing shareholding pattern of the Non-Promoter- Non-Public shareholder
Category & Name of the
Shareholders(I)
No. of
shareholder(III)
No. of fully paid up
equity shares
held(IV)
Total no. shares
held (VII =
IV+V+VI)
Shareholding % calculated as per
SCRR, 1957 As a % of (A+B+C2)
(VIII)
Number of equity shares held in
dematerialized form(XIV) (Not
Applicable)
C1) Custodian/DR Holder 0 0 - 0.00 -
C2) Employee Benefit Trust 0 0 - 0.00 -
V. Details of disclosure made by the Trading Members holding 1% or more of the Total No. of shares of the company.
NIL
108
ISSUE PROCEDURE
The following is a summary intended to present a general outline of the procedure relating to the application,
bidding, payment, Allocation and Allotment of the Equity Shares to be issued pursuant to the Issue. The procedure
followed in the Issue may differ from the one mentioned below, and investors are presumed to have apprised
themselves of the same from our Company or the Global Coordinator and Book Running Lead Manager. Investors
that apply in the Issue will be required to confirm and will be deemed to have represented to our Company, the
Global Coordinator and Book Running Lead Manager and their respective directors, officers, agents, affiliates
and representatives that they are eligible under all applicable laws, rules, regulations, guidelines and approvals
to acquire the Equity Shares. Our Company and the Global Coordinator and Book Running Lead Manager and
their respective directors, officers, agents, affiliates and representatives accept no responsibility or liability for
advising any investor on whether such investor is eligible to acquire the Equity Shares. Investors are advised to
inform themselves of any restrictions or limitations that may be applicable to them. See the sections “Selling
Restrictions” and “Transfer Restrictions” beginning on pages 122 and 127, respectively.
Our Company, the Global Coordinator and Book Running Lead Manager and their respective directors, officers,
agents, advisors, affiliates and representatives are not liable for any amendment or modification or change to
applicable laws or regulations, which may occur after the date of this Preliminary Placement Document. QIBs
are advised to make their independent investigations and satisfy themselves that they are eligible to apply, and
will not offer, sell, pledge or transfer the Equity Shares to any person who is not eligible under applicable laws,
rules, regulations, guidelines and approvals to acquire Equity Shares. QIBs are advised to ensure that any single
Bid from them does not exceed the investment limits or maximum number of Equity Shares that can be held by
them under applicable law or regulation or as specified in this Preliminary Placement Document. Further, QIBs
are required to satisfy themselves that their Application Forms would not result in triggering a tender offer under
the Takeover Regulations
Qualified Institutions Placement
The Issue is being made to QIBs in reliance upon Chapter VIII of the SEBI ICDR Regulations, Section 42 of the
Companies Act, 2013 read with Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014,
through the mechanism of a QIP wherein a listed company in India may issue and allot equity shares to QIBs on
a private placement basis provided inter alia that:
a special resolution approving the QIP is passed by shareholders of the issuer. Such special resolution must
specify (a) that the allotment of equity shares is proposed to be made pursuant to a QIP; and (b) the relevant
date;
equity shares of the same class of such issuer, which are proposed to be allotted through the QIP, have been
listed on a recognised stock exchange in India having nation-wide trading terminals for a period of at least
one year prior to the date of issuance of notice to its shareholders for convening the meeting to pass the above-
mentioned special resolution;
the aggregate of the proposed issue and all previous QIPs made by the issuer in the same Fiscal does not
exceed five times the net worth (as defined in the SEBI ICDR Regulations) of the issuer as per the audited
balance sheet of the previous Fiscal;
prior to circulating the private placement offer letter, the issuer must prepare and record a list of QIBs to
whom the offer will be made. The offer must be made only to such persons whose names are recorded by the
issuer prior to the invitation to subscribe;
the offer must be made through a private placement offer letter and an application form serially numbered
and addressed specifically to the QIB to whom the offer is made and is sent within 30 days of recording the
names of such QIBs
the issuer shall be in compliance with the minimum public shareholding requirements set out in the SCRR;
the issuer shall have completed allotments with respect to any offer or invitation made earlier by the issuer
or shall have withdrawn or abandoned any invitation or offer previously made by the issuer;
109
the issuer shall offer to each allottee at least such number of equity shares in the issue which would aggregate
to ` 20,000 calculated at the face value of the equity shares;
at least 10% of the equity shares issued to QIBs must be allotted to Mutual Funds, provided that, if this portion
or any part thereof to be allotted to Mutual Funds remains unsubscribed, it may be allotted to other QIBs; and
Bidders are not allowed to withdraw their Bids after the Bid/Issue Closing Date.
Additionally, there is a minimum pricing requirement for pricing the equity shares offered in a QIP under the
SEBI ICDR Regulations. The floor price shall not be less than the average of the weekly high and low of the
closing prices of the equity shares quoted on the stock exchange during the two weeks preceding the relevant date
as calculated in accordance with Chapter VIII of the SEBI ICDR Regulations. However, the issuer may offer a
discount of up to five percent of the floor price, subject to the approval of the shareholders by the special resolution
pursuant to Regulation 82(a) of SEBI ICDR Regulations.
The “relevant date” referred to above, means the date of the meeting in which the board of directors or the
committee of directors duly authorized by the board of directors decides to open the proposed issue and the “stock
exchange” means any of the recognised stock exchanges in India on which the equity shares of the issuer of the
same class are listed and on which the highest trading volume in such equity shares has been recorded during the
two weeks immediately preceding the relevant date.
Equity shares must be allotted within 12 months from the date of the shareholders resolution approving the QIP
and also within 60 days from the date of receipt of application money from the successful applicants. The equity
shares issued pursuant to the QIP must be issued on the basis of a placement document that shall contain all
material information including the information specified in Schedule XVIII of the SEBI ICDR Regulations and
Form PAS- 4.
This preliminary placement document and the placement document are private documents provided to only select
QIBs, through serially numbered copies and are required to be placed on the website of the concerned stock
exchanges and of the issuer with a disclaimer to the effect that they are in connection with an issue to QIBs and
no offer is being made to the public or to any other category of investors.
Securities allotted to a QIB pursuant to a QIP shall not be sold for a period of one year from the date of allotment
except on a recognised stock exchange in India.
The minimum number of allottees for each QIP shall not be less than:
1. Two, where the issue size is less than or equal to ` 2,500 million; and
2. Five, where the issue size is greater than ` 2,500 million.
No single allottee shall be allotted more than 50% of the issue size or less than ` 20,000 of face value of Equity
Shares. QIBs that belong to the same group or that are under common control shall be deemed to be a single
allottee for this purpose.
The issuer shall also make the requisite filings with the RoC, Stock Exchanges, and SEBI within the stipulated
period as required under the Companies Act, 2013 and the Companies (Prospectus and Allotment of Securities)
Rules, 2014.
Our Company has filed a copy of this Preliminary Placement Document and will file a copy of the Placement
Document with the Stock Exchanges.
Our Company has received the in-principle approval of the Stock Exchanges on January 23, 2018 in terms of
Regulation 28(1) of the SEBI Listing Regulations for the Issue. The Board of Directors has authorized the Issue
pursuant to a resolution passed at its meeting held on December 14, 2017. The shareholders of our Company have
authorized the Issue pursuant to a special resolution passed in an EGM dated January 11, 2018.
110
The Equity Shares have not been and will not be registered, listed or otherwise qualified in any other jurisdiction
outside India and may not be offered or sold, and Bids may not be made by persons in any such jurisdiction,
except in compliance with the applicable laws of such jurisdiction. For a description of the selling restrictions in
certain jurisdictions, see “Selling Restrictions” on page 122.
The placement is meant only for QIBs on a private placement basis and is not an offer to the public or to
any other class of investors
Issue Procedure
1. Our Company and the Global Coordinator and Book Running Lead Manager shall circulate serially numbered
copies of this Preliminary Placement Document and the serially numbered Application Form, either in
electronic form or physical form, to QIBs and the Application Form shall be specifically addressed to such
QIBs. Pursuant to section 42(7) of the Companies Act, 2013, our Company shall maintain complete record
of the QIBs to whom this Preliminary Placement Document and the serially numbered Application Form have
been dispatched. Our Company will make the requisite filings with the RoC and with SEBI within the
stipulated time period as required under the Companies Act, 2013 and the rules made thereunder.
2. The list of QIBs to whom the Preliminary Placement Document and the Application Form is delivered shall
be determined by the Global Coordinator and Book Running Lead Manager at their sole discretion. Unless a
serially numbered Preliminary Placement Document along with the Application Form is addressed to
a particular QIB, no invitation to subscribe shall be deemed to have been made to such QIB. Even if
such documentation were to come into the possession of any person other than the intended recipient, no offer
or invitation to offer shall be deemed to have been made to such other person and any application that does
not comply with this requirement shall be treated as invalid.
3. QIBs may submit the Application Form, including any revisions thereof, during the Bidding Period to the
Global Coordinator and Book Running Lead Manager.
4. Bidders shall submit Bids for, and our Company shall issue and allot to each successful Allottee at least such
number of Equity Shares in the Issue which would aggregate to ` 20,000 calculated at the face value of the
Equity Shares.
5. QIBs will be required to indicate the following in the Application Form:
a. name of the QIB to whom Equity Shares are to be Allotted;
b. number of Equity Shares Bid for;
c. price at which they offer to apply for the Equity Shares provided that QIBs may also indicate that they
are agreeable to submit a bid at “Cut-off Price” which shall be any price as may be determined by our
Company in consultation with the Global Coordinator and Book Running Lead Manager at or above the
Floor Price as approved by our Board and committee constituted thereunder, in accordance with SEBI
ICDR Regulations and decided by the Board. Our Company may offer a discount up to 5% to the floor
price in accordance with the provisio of Regulation 85(1) of SEBI ICDR Regulations;
d. a representation that it is outside the United States and is acquiring the Equity Shares in an offshore
transaction as defined in Regulation S and it has agreed to all the representations set forth in the
Application Form;
e. if you are not a resident of India, then the investment amount will be paid out of inward remittance of
foreign exchange received through normal banking channels and as per RBI’s notification no. FEMA
20/2000 – RB dated May 3, 2000, as amended from time to time; and
f. the details of the depository account(s) to which the Equity Shares should be credited.
111
6. Once a duly filled in Application Form is submitted by the QIB, such Application Form constitutes an
irrevocable offer and the same cannot be withdrawn after the Bid/Issue Closing Date. The Bid/Issue Closing
Date shall be notified to the Stock Exchanges and the QIBs shall be deemed to have been given notice of such
date after the receipt of the Application Form.
7. The Bids made by asset management companies or custodians of Mutual Funds shall specifically state the
names of the concerned schemes for which the Bids are made. In case of a Mutual Fund, a separate Bid can
be made in respect of each scheme of the mutual fund registered with SEBI and such Bids in respect of more
than one scheme of the Mutual Fund will not be treated as multiple Bids provided that the Bids clearly indicate
the scheme for which the Bid has been made. Application by various schemes or funds of a Mutual Fund will
be treated as one application from the Mutual Fund. Under the current regulations, the following restrictions
are applicable for investments by Mutual Funds: No mutual fund scheme shall invest more than 10% of its
net asset value in Equity Shares or equity related instruments of any company provided that the limit of 10%
shall not be applicable for investments in index funds or sector or industry specific funds. No mutual fund
under all its schemes should own more than 10% of any company's paid-up capital carrying voting rights.
Bidders are advised to ensure that any single Bid from them does not exceed the investment limits or
maximum number of Equity Shares that can be held by them under applicable laws.
8. Based on the Application Forms received, our Company shall, after closure of the Issue, in consultation with
the Global Coordinator and Book Running Lead Manager, determine the final terms including the Issue Price,
the number of Equity Shares to be issued pursuant to the Issue and the QIBs to whom the same shall be
allocated. We shall notify the Stock Exchanges of the Issue Price. Our Company shall also intimate the Stock
Exchanges about the meeting to decide the Issue Price, two working days in advance (excluding the date of
the intimation and the date of the meeting). On determining the Issue Price and the QIBs to whom Allocation
shall be made, the Global Coordinator and Book Running Lead Manager, shall on behalf of our Company,
send the CANs along with a serially numbered Placement Document to the QIBs who have been Allocated
Equity Shares either in electronic form or by physical delivery. The dispatch of the CANs shall be deemed a
valid, binding and irrevocable contract for the QIBs to pay the entire Issue Price for all the Equity Shares
Allocated to such QIB. The CAN shall contain details such as the number of Equity Shares Allocated to the
QIB, payment instructions including the details of the amounts payable by the QIB for Allotment of the
Equity Shares in its name and the Pay-In Date as applicable to the respective QIBs.
9. Following the receipt of the CAN, each QIB would have to make the payment of the entire application monies
for the Equity Shares indicated in the CAN at the Issue Price through electronic transfer to the Escrow
Account by the Pay-in Date as specified in the CAN sent to the respective QIB. Please note that the
allocation shall be at the absolute discretion of our Company and will be based on the recommendation
of the Global Coordinator and Book Running Lead Manager.
10. No payment shall be made by QIBs in cash. Please note that any payment of application monies for the Equity
Shares shall be made from the bank accounts of the relevant QIBs applying for the Equity Shares. Monies
payable on Equity Shares to be held by joint holders shall be paid from the bank account of the person whose
name appears first in the application. Pending Allotment, all monies received for subscription of the Equity
Shares shall be kept by our Company in a separate bank account with a scheduled bank and shall be utilised
only for the purposes permitted under the Companies Act, 2013.
11. Upon receipt of the application monies from the QIBs, our Company shall Allot Equity Shares as per the
details in the CAN to the QIBs.
12. After passing the resolution for Allotment, our Company will intimate to the Stock Exchanges, the details of
the Allotment and apply for approvals for listing of the Equity Shares on the Stock Exchanges prior to
crediting the Equity Shares into the beneficiary account maintained with the Depository Participant by the
eligible QIBs.
13. After receipt of the listing approvals from the Stock Exchanges, our Company shall credit the Equity Shares
into the Depository Participant accounts of the respective QIB in accordance with the details submitted by
the QIBs in the Application Forms.
14. Our Company shall then apply to Stock Exchanges for the final trading and listing permission.
112
15. The Equity Shares that have been credited to the beneficiary account with the Depository Participant of the
QIBs shall be eligible for trading on the Stock Exchanges only upon the receipt of final listing and trading
approval from Stock Exchanges.
16. Upon receipt of the final listing and trading approval from the Stock Exchanges, our Company shall inform
the QIBs who have received Allotment of the receipt of such approval.
17. Our Company and the Global Coordinator and Book Running Lead Manager shall not be responsible for any
delay or non-receipt of the communication of the final listing and trading permissions from the Stock
Exchanges or any loss arising from such delay or non-receipt. Final listing and trading approval granted by
the Stock Exchanges is also placed on their respective websites. QIBs are advised to apprise themselves of
the status of the receipt of the permissions from Stock Exchanges or our Company.
Qualified Institutional Buyers
Only QIBs as defined in Regulation 2(1)(zd) of the SEBI ICDR Regulations and not otherwise excluded pursuant
to Regulation 86(1)(b) of Chapter VIII of the SEBI ICDR Regulations are eligible to invest in the Issue. Under
Regulation 86(1)(b) of the SEBI ICDR Regulations, no Allotment shall be made, either directly or indirectly, to
any QIB who is a Promoter, or any person related to the Promoters. Currently QIBs include:
Alternate investment funds registered with SEBI;
Eligible FPIs (other than Category III FPI);
Foreign venture capital investors registered with SEBI;
Insurance companies registered with Insurance Regulatory and Development Authority;
Insurance funds set up and managed by the army, navy, or air force of the Union of India;
Insurance funds set up and managed by the Department of Posts, India;
Multilateral and bilateral development financial institutions;
Mutual funds registered with SEBI;
Pension Funds with minimum corpus of ` 250.00 million;
Provident Funds with minimum corpus of ` 250.00 million;
Public financial institutions as defined in section 2(72) of the Companies Act, 2013;
Scheduled commercial banks;
State industrial development corporations;
Systemically Important Non- Banking Financial Company having a net-worth of more than five thousand
million rupees as per the last audited financial statements;
National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005 of the
Government of India published in the Gazette of India; and
Venture capital funds registered with SEBI.
In this Issue, Eligible FPIs are permitted to participate in the Issue subject to compliance with all applicable
laws and such that the shareholding of the FPIs do not exceed specified limits as prescribed under
applicable laws in this regard.
113
All non-residents QIBs shall ensure that the investment amount is paid as per RBI’s notification no. FEMA
20(R)/2017-RB dated November 7, 2017.
In terms of the SEBI FPI Regulations, the issue of Equity Shares to a single FPI or an investor group (which
means the same set of ultimate beneficial owner(s) investing through multiple entities) is not permitted to be
10.00% or above of our post-Issue Equity Share capital. Further, in terms of the FEMA, the total holding by each
FPI shall be below 10% of the total paid-up Equity Share capital of our Company and the total holdings of all
FPIs put together shall not exceed 24% of our paid-up Equity Share capital. The aggregate limit of 24% may be
increased up to the sectoral cap by way of a resolution passed by the Board of Directors followed by a special
resolution passed by the shareholders of our Company. The existing limit for FPIs in our Company is 40 % of the
paid-up capital of our Company.
Eligible FPIs are permitted to participate in the Issue subject to compliance with conditions and restrictions which
may be specified by the Government from time to time.
In terms of FEMA 20, for calculating the aggregate holding of FPIs in a company, holding of all registered FPIs
shall be included.
Restriction on Allotment
Under Regulation 86(1)(b) of the SEBI ICDR Regulations, no allotment shall be made pursuant to the Issue, either
directly or indirectly, to any QIB being our Promoter or any person related to our Promoters. QIBs which have all
or any of the following rights shall be deemed to be persons related to our Promoters:
(i) Rights under a shareholders’ agreement or voting agreement entered into with our Promoter or persons
related to our Promoter;
(ii) Veto rights; or
(iii) A right to appoint any nominee director on the Board.
Provided however that a QIB which does not hold any Equity Shares in our Company and who has acquired the
aforesaid rights in the capacity of a lender shall not be deemed to be a person related to the Promoter.
Neither our Company nor the Global Coordinator and Book Running Lead Manager nor any of their
respective directors, officers, counsels, advisors, representatives, agents or affiliates are liable for any
amendments or modification or changes in applicable laws or regulations, which may occur after the date
of this Preliminary Placement Document. QIBs are advised to make their independent investigations and
satisfy themselves that they are eligible to apply. QIBs are advised to ensure that any single Application
Form from them does not exceed the investment limits or maximum number of Equity Shares that can be
held by them under applicable law or regulation or as specified in this Preliminary Placement Document.
Further, QIBs are required to satisfy themselves that any requisite compliance pursuant to this Allotment
such as public disclosures under applicable laws is complied with. QIBs are advised to consult their advisers
in this regard. Furthermore, QIBs are required to satisfy themselves that their Application Form would
not eventually result in triggering a tender offer under the Takeover Regulations. QIBs are advised that
they shall be solely responsible for compliance with the provisions of the Takeover Regulations, the
Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 and other
applicable laws, rules, regulations, guidelines, notifications, and circulars.
Note: Affiliates or associates of the Global Coordinator and Book Running Lead Manager who are QIBs may
participate in the Issue subject to compliance with applicable laws.
Allotments made to FVCIs, VCFs and AIFs in the Issue are subject to the rules and regulations that are applicable
to each of them respectively, including in relation to lock-in requirements.
A minimum of 10% of the Equity Shares offered in the Issue shall be Allotted to Mutual Funds. If no Mutual
Fund is agreeable to take up the minimum portion as specified above, such minimum portion or part thereof may
be Allotted to other QIBs.
114
Bid Process
Application Form
QIBs are permitted to only use the serially numbered Application Forms (which is addressed to the QIB) supplied
by our Company and the Global Coordinator and Book Running Lead Manager in either electronic form or by
physical delivery for the purpose of making a Bid (including any revision of a Bid) in terms of this Preliminary
Placement Document.
By making a Bid (including revisions thereof) for Equity Shares pursuant to the terms of this Preliminary
Placement Document, each QIB will be deemed to have made the following representations and warranties, and
the representations, warranties, acknowledgements and agreements made under “Representations by Investors”
on page 4.
The representations listed in this section shall be included in the Application Form:
1. The QIB confirms that it is a QIB in terms of Regulation 2(1)(zd) of the SEBI ICDR Regulations and has a
valid and existing registration under the applicable laws of India and is eligible to participate in the Issue and
is not excluded under Regulation 86 of the SEBI ICDR Regulations;
2. The QIB confirms that it is not a Promoter of our Company and is not a person related to the Promoter of our
Company, either directly or indirectly and its Application Form does not directly or indirectly represent the
Promoter or Promoter Group, or a person related to the Promoter of our Company;
3. The QIB confirms that it has no rights under a shareholders’ agreement or voting agreement with the Promoter
or persons related to the Promoters, no veto rights or right to appoint any nominee director on the Board of
our Company other than such rights acquired in the capacity of a lender (not holding any Equity Shares)
which shall not be deemed to be a person related to the Promoters;
4. The QIB acknowledges that it has no right to withdraw its Bid after the Bid/Issue Closing Date;
5. The QIB confirms that if Equity Shares are Allotted pursuant to the Issue, it shall not, for a period of one year
from Allotment, sell such Equity Shares otherwise than on the floor of the Stock Exchanges;
6. The QIB confirms that the QIB is eligible to Bid and hold Equity Shares so Allotted and together with any
Equity Shares held by the QIB prior to the Issue. The QIB further confirms that its holding of the Equity
Shares does not, and shall not, exceed the level permissible as per any applicable regulations applicable to
the QIB;
7. The QIB confirms that the Bids will not eventually result in triggering an open offer under the Takeover
Regulations;
8. The QIB confirms that, to the best of its knowledge and belief, together with other QIBs in the Issue that
belongs to the same group or are under common control, the Allotment to the QIB shall not exceed 50% of
the Issue Size. For the purposes of this statement:
(a) The expression “belongs to the same group” shall derive meaning from the concept of “companies under
the same group” as provided in sub-section (11) of Section 372 of the Companies Act, 1956; and
(b) “Control” shall have the same meaning as is assigned to it by Clause 1(e) of Regulation 2 of the Takeover
Regulations.
9. The QIBs shall not undertake any trade in the Equity Shares credited to its Depository Participant account
until such time that the final listing and trading approval for the Equity Shares is issued by the Stock
Exchanges.
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10. The QIB acknowledges, represents and agrees that in the event its total interest in the paid-up share capital
of our Company or voting rights in our Company, whether direct or indirect, beneficial or otherwise (any
such interest, your “Holding”), when aggregated together with any existing Holding and/or Holding of any
of the persons acting in concert, results in Holding of 5.00% or more of the total paid-up share capital of, or
voting rights in, our Company a disclosure of the aggregate shareholding and voting rights will have to be
made under the Takeover Regulations. In case such QIB is an existing shareholder who, together with persons
acting in concert, holds 5.00% or more of the underlying paid up share capital of, or voting rights in our
Company a disclosure will have to be made under the Takeover Regulations in the event of a change of 2%
or more in the existing Holding of the QIB and persons acting in concert.
11. The QIB represents that it is (i) outside the United States, and (ii) it has agreed to certain other representations
set out in the Application Form.
12. It has read and understood, and by making a Bid for the Equity Shares through the Application Forms and
pursuant to the terms of this Preliminary Placement Document, will be deemed to have made the
representations, warranties and agreements made under the sections “Notice to Investors”, “Representations
by Investors”, “Selling Restrictions” and “Transfer Restrictions” beginning on page 2, 4, 122 and 127,
respectively.
QIBs MUST PROVIDE THEIR DEPOSITORY ACCOUNT DETAILS, THEIR DEPOSITORY
PARTICIPANT’S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND
BENEFICIARY ACCOUNT NUMBER IN THE APPLICATION FORM. QIBs MUST ENSURE THAT
THE NAME GIVEN IN THE APPLICATION FORM IS EXACTLY THE SAME AS THE NAME IN
WHICH THE DEPOSITORY ACCOUNT IS HELD.
IF SO REQUIRED BY THE GLOBAL COORDINATOR AND BOOK RUNNING LEAD MANAGER,
THE QIB SUBMITTING A BID, ALONG WITH THE APPLICATION FORM, WILL ALSO HAVE TO
SUBMIT REQUISITE DOCUMENT(S) TO GLOBAL COORDINATOR AND BOOK RUNNING LEAD
MANAGER TO EVIDENCE THEIR STATUS AS A “QIB” AS DEFINED HEREINABOVE. IF SO
REQUIRED BY THE GLOBAL COORDINATOR AND BOOK RUNNING LEAD MANAGER, THE
ESCROW AGENT OR ANY STATUTORY OR REGULATORY AUTHORITY IN THIS REGARD,
INCLUDING AFTER BID/ISSUE CLOSING DATE, THE QIB SUBMITTING A BID AND/OR BEING
ALLOTTED EQUITY SHARES IN THE ISSUE, WILL ALSO HAVE TO SUBMIT REQUISITE
DOCUMENT(S) TO FULFILL THE KNOW YOUR CUSTOMER (KYC) NORMS.
Demographic details such as an address and a bank account will be obtained from the Depositories as per the
Depository Participant account details given above.
The submission of an Application Form by the QIB shall be deemed a valid, binding and irrevocable offer for the
QIB to pay the entire Issue Price for its share of Allotment (as indicated by the CAN) and becomes a binding
contract on the QIB, upon issuance of the CAN by the Issuer in favour of the QIB.
Submission of Application Form
All Application Forms shall be required to be duly completed with information including the name of the QIB,
the price and the number of Equity Shares applied. The Application Form shall be submitted to the Global
Coordinator and Book Running Lead Manager either through electronic form or through physical delivery at the
following addresses:
Name of the Lead
Manager
Address Contact Person Phone Email
Edelweiss Financial
Services Limited
14th Floor
Edelweiss House
Off C.S.T. Road, Kalina
Mumbai – 400 098
Siddharth Shah/
Shubham Mehta
Tel: +91 22 4009 4600;
Fax: +91 22 4086 3610
The Global Coordinator and Book Running Lead Manager shall not be required to provide any written
acknowledgement of the same.
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All Application Forms duly completed along with payment and a copy of the PAN card or PAN allotment letter
shall be submitted to the Global Coordinator and Book Running Lead Manager as per the details provided in the
respective CAN.
Permanent Account Number or PAN
Each QIB should mention its Permanent Account Number (“PAN”) allotted under the IT Act. The copy of the
PAN card is required to be submitted with the Application Form. Bids without this information will be
considered incomplete and is liable to be rejected. It is to be specifically noted that applicant should not submit
the GIR number instead of the PAN as the Application Form is liable to be rejected on this ground.
Bank Account Details
Each QIB shall mention the details of the bank account from which the payment has been made along with
confirmation that the payment has been made from such account.
Pricing and Allocation
Build-up of the book
The QIBs shall submit their Bids (including the revision thereof) through the Application Form within the Bidding
Period to the Global Coordinator and Book Running Lead Manager. Such Bids cannot be withdrawn after the
Issue Closing Date. The book shall be maintained by the Global Coordinator and Book Running Lead Manager.
Price discovery and Allocation
Our Company, in consultation with the Global Coordinator and Book Running Lead Manager, shall determine the
Issue Price for the Equity Shares, which shall be at or above the Floor Price. After finalisation of the Issue Price,
our Company shall update this Preliminary Placement Document with the details of the Issue and file the
Placement Document with the Stock Exchanges.
Method of Allocation
Our Company shall determine the Allocation in consultation with the Global Coordinator and Book Running Lead
Manager on a discretionary basis and in compliance with Chapter VIII of the SEBI ICDR Regulations.
Bids received from the QIBs at or above the Issue Price shall be grouped together to determine the total demand.
The Allocation to all such QIBs will be made at the Issue Price. Allocation to Mutual Funds for up to a minimum
of 10% of the Issue Size shall be undertaken subject to valid Application Form being received at or above the
Issue Price.
THE DECISION OF OUR COMPANY, IN CONSULTATION WITH THE GLOBAL COORDINATOR
AND BOOK RUNNING LEAD MANAGER, IN RESPECT OF ALLOCATION SHALL BE FINAL AND
BINDING ON ALL QIBS. QIBS MAY NOTE THAT ALLOCATION OF EQUITY SHARES IS AT THE
SOLE AND ABSOLUTE DISCRETION OF OUR COMPANY, IN CONSULTATION WITH THE
GLOBAL COORDINATOR AND BOOK RUNNING LEAD MANAGER, AND QIBS MAY NOT
RECEIVE ANY ALLOCATION EVEN IF THEY HAVE SUBMITTED VALID APPLICATION FORMS
AT OR ABOVE THE ISSUE PRICE. NEITHER OUR COMPANY NOR THE GLOBAL
COORDINATOR AND BOOK RUNNING LEAD MANAGER ARE OBLIGED TO ASSIGN ANY
REASONS FOR SUCH NON-ALLOCATION.
All Application Forms duly completed alongwith payment and a copy of the PAN card or the PAN
allotment letter shall be submitted to the Global Coordinator and Book Running Lead Manager, as per the
details provided in the respective CAN.
CAN
Based on the Application Forms received, our Company, in consultation with the Global Coordinator and Book
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Running Lead Manager, will, in its sole and absolute discretion, decide the list of QIBs to whom the serially
numbered CAN shall be sent, pursuant to which the details of the Equity Shares Allocated to them and the details
of the amounts payable for Allotment of the same in their respective names shall be notified to such QIBs.
Additionally, the CAN would include details of Escrow Account into which such payments would need to be
made, Pay-In Date as well as the probable designated date (“Designated Date”), being the date of credit of the
Equity Shares to the QIB’s account, as applicable to the respective QIBs.
The QIBs who have been Allocated Equity Shares pursuant to the Issue, would also be sent a serially numbered
Placement Document either in electronic form or by physical delivery along with the serially numbered CAN.
The dispatch of the serially numbered Placement Document and the CAN to the QIB shall be deemed a valid,
binding and irrevocable contract for the QIB to furnish all details that may be required by the Global Coordinator
and Book Running Lead Manager and our Company and to pay the entire Issue Price for all the Equity Shares
Allocated to such QIB.
QIBs ARE ADVISED TO INSTRUCT THEIR DEPOSITORY PARTICIPANT TO ACCEPT THE
EQUITY SHARES THAT MAY BE ALLOTTED TO THEM PURSUANT TO THE ISSUE.
Bank Account for the Payment of Bid Money
Our Company has opened an escrow account titled “Majesco Ltd – QIP 2018 Escrow Account” (the “Escrow
Account”) with the Escrow Bank in terms of the arrangements amongst our Company, the Global Coordinator
and Book Running Lead Manager and ICICI Bank Limited acting as the Escrow Bank. The QIBs will be required
to deposit the entire amount payable for the Equity Shares Allocated to it by the Pay-In Date as mentioned in their
respective CAN.
Payments are to be made only through electronic fund transfer in favour of the Escrow Account.
Note: Payments through cheques or demand draft or cash are liable to be rejected.
If the payment is not made favouring the Escrow Account within the time stipulated in the CAN, the Application
Form and the CAN of the QIB are liable to be cancelled.
In case of cancellations or default by the QIBs, our Company and the Global Coordinator and Book Running Lead
Manager have the right to re-allocate the Equity Shares at the Issue Price among existing or new QIBs at their
sole and absolute discretion, subject to the compliance with the requirements of the Companies Act, 2013 and the
SEBI ICDR Regulations.
Our Company undertakes to utilise the amount in the Escrow Account only for the purposes of: (i) adjustments
against Allotment of Equity Shares in the Issue; or (ii) repayment of application money if our Company is not
able to Allot Equity Shares in the Issue.
Designated Date and Allotment of Equity Shares
1. The Equity Shares will not be Allotted unless the QIBs pay the application money for the Equity Shares
allocated to them calculated at Issue Price to the Escrow Account as stated above.
2. Subject to the satisfaction of the terms and conditions of the Placement Agreement, our Company will ensure
that the Allotment of the Equity Shares is completed by the Designated Date provided in the CAN for the
QIBs who have paid the aggregate subscription amounts as stipulated in the CAN.
3. In accordance with the SEBI ICDR Regulations, Equity Shares will be issued and Allotment shall be made
only in the dematerialised form to the Allottees. Allottees will have the option to re-materialise the Equity
Shares, if they so desire, as per the provisions of the Companies Act, 2013 and the Depositories Act.
4. Our Company, at its sole discretion, reserves the right to cancel the Issue at any time up to Allotment without
assigning any reasons whatsoever.
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5. Post receipt of the listing approval of the Stock Exchanges, the Issuer shall credit the Equity Shares into the
Depository Participant account of the QIBs.
6. Following the Allotment and credit of Equity Shares pursuant to the Issue into the QIBs Depository
Participant account, our Company will apply for final listing and trading approval for trading on the Stock
Exchanges.
7. In the event our Company is unable to Issue and Allot the Equity Shares or on cancellation of the Issue, within
60 days from the date of receipt of application money, in accordance with section 42 of the Companies Act,
2013 our Company shall repay the application money within 15 days from expiry of 60 days, failing which
our Company shall repay that money with interest at the rate of 12% per annum from expiry of the 60th day.
The application money to be refunded by us shall be refunded to the same bank account from which
application money was remitted by the QIBs.
8. The Escrow Bank shall release the monies lying to the credit of the Escrow Bank Account to our Company
after the receipt of the final listing and trading approval from the Stock Exchanges.
9. In case of QIBs who have been Allotted more than 5% of the Equity Shares in the Issue, our Company shall
disclose the name and the number of the Equity Shares Allotted to such QIB to Stock Exchanges and Stock
Exchanges shall make the same available on their website. Our Company shall make the requisite filings with
the RoC and the SEBI within the stipulated period as required under the Companies Act, 2013 and the
Companies (Prospectus and Allotment of Securities) Rules, 2014. If you are Allotted any Equity Shares, our
Company is required to disclose details such as your name, address and the number of Equity Shares Allotted
to the RoC and the SEBI.
Other Instructions
Our Right to Reject Bids
Our Company, in consultation with the Global Coordinator and Book Running Lead Manager, may reject Bids,
in part or in full, without assigning any reasons whatsoever. The decision of our Company and the Global
Coordinator and Book Running Lead Manager in relation to the rejection of Bids shall be final and binding.
Equity Shares in dematerialised form with NSDL or CDSL
1. The Allotment of the Equity Shares in the Issue shall be only in dematerialised form, (i.e., not in the form of
physical certificates but be fungible and be represented by the statement issued through the electronic mode).
2. A QIB applying for Equity Shares must have at least one beneficiary account with a Depository Participant
of either NSDL or CDSL prior to making the Bid.
3. Allotment to a successful QIB will be credited in electronic form directly to the beneficiary account (with the
Depository Participant) of the QIB.
4. Equity Shares in electronic form can be traded only on the stock exchanges having electronic connectivity
with NSDL and CDSL. The Stock Exchanges have electronic connectivity with NSDL and CDSL.
5. The trading of the Equity Shares would be in dematerialised form only for all QIBs in the demat segment of
the respective stock exchanges.
6. Our Company will not be responsible or liable for the delay in the credit of the Equity Shares due to errors in
the Application Forms or on part of the QIBs.
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Release of Funds to our Company
The Escrow Agent shall not release the monies lying to the credit of the Escrow Account till such time, that it
receives an instruction in pursuance to the Escrow Agreement, along with the listing approval of the Stock
Exchanges for the Equity Shares offered in the Issue.
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PLACEMENT
Placement Agreement
The Global Coordinator and Book Running Lead Manager has entered into a Placement Agreement with our
Company, pursuant to which the Global Coordinator and Book Running Lead Manager has agreed to manage the
Issue and to act as placement agents in connection with the proposed Issue and procure subscription for Equity
Shares to be placed with the QIBs, pursuant to Chapter VIII of the SEBI ICDR Regulations and Section 42 of the
Companies Act, 2013.
The Placement Agreement contains customary representations, warranties and indemnities from our Company,
and it is subject to termination in accordance with the terms contained therein.
Applications shall be made to list the Equity Shares issued pursuant to the Issue and admit them to trading on the
Stock Exchanges. No assurance can be given as to the liquidity or sustainability of the trading market for such
Equity Shares, the ability of holders of the Equity Shares to sell their Equity Shares or the price at which holders
of the Equity Shares will be able to sell their Equity Shares.
This Preliminary Placement Document has not been, and will not be, registered as a prospectus with the RoC and,
no Equity Shares issued pursuant to the Issue, will be offered in India or overseas to the public or any members
of the public in India or any other class of investors, other than QIBs.
In connection with the Issue, the Global Coordinator and Book Running Lead Manager (or its affiliates) may, for
their own account, subscribe to the Equity Shares or enter into asset swaps, credit derivatives or other derivative
transactions relating to the Equity Shares to be issued pursuant to the Issue at the same time as the offer and sale
of the Equity Shares, or in secondary market transactions. As a result of such transactions, the Global Coordinator
and Book Running Lead Manager may hold long or short positions in such Equity Shares. These transactions may
comprise a substantial portion of the Issue and no specific disclosure will be made of such positions. Affiliates of
the Global Coordinator and Book Running Lead Manager may purchase Equity Shares and be Allotted Equity
Shares for proprietary purposes and not with a view to distribute or in connection with the issuance of P-Notes.
Please refer to “Offshore Derivative Instruments” on page 8.
From time to time, the Global Coordinator and Book Running Lead Manager and its affiliates may engage in
transactions with and perform services of our Company in the ordinary course of business and have engaged, or
may in the future engage, in commercial banking and investment banking transactions with our Company or our
affiliates, for which they have received compensation and may in the future receive compensation.
Lock-up
Our Company has agreed that it will not for a period of 90 days from the date of Allotment under the Issue, without
the prior written consent of the Global Coordinator and Book Running Lead Manager, directly or indirectly, (a)
offer, sell, issue, contract to issue, issue or offer any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise approve the transfer or dispose of, any Equity
Shares or any securities convertible into or exercisable for Equity Shares (including, without limitation, securities
convertible into or exercisable or exchangeable for Equity Shares which may be deemed to be beneficially owned),
or file any registration statement under the Securities Act with respect to any of the foregoing, or (b) enter into
any swap or other agreement or any transaction that transfers, in whole or in part, directly or indirectly, any of the
economic consequences associated with the ownership of any of the Equity Shares or any securities convertible
into or exercisable or exchangeable for Equity Shares (regardless of whether any of the transactions described in
clause (a) or (b) is to be settled by the delivery of Equity Shares or such other securities, in cash or otherwise), or
(c) deposit Equity Shares with any other depositary in connection with a depositary receipt facility, or (d) publicly
announce any intention to enter into any transaction falling within (a) to (c) above or enter into any transaction
(including a transaction involving derivatives) having an economic effect similar to that of an issue or offer or
deposit of Equity Shares in any depositary receipt facility or publicly announce any intention to enter into any
transaction falling within (a) to (c) above. The foregoing restriction shall not apply to any issuance, sale, transfer
or disposition of Equity Shares or options by the Company (a) pursuant to this Issue; (b) pursuant to the Employee
Stock Option Scheme of Majesco Limited – Plan I; and (c) to the extent such issuance, sale, transfer or disposition
is required by any statutory or regulatory authorities or under Indian law.
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Our Promoters and Promoter Group have agreed that they will not for a period of 90 days from the date of
Allotment under the Issue, without the prior written consent of the Global Coordinator and Book Running Lead
Manager, directly or indirectly: (a) issue, offer, pledge, sell, lend, contract to sell, purchase any option or contract
to sell, right or warrant to purchase, lend or make any short sale, lend or otherwise transfer or dispose of, directly
or indirectly, any Equity Shares, or any securities convertible into or exercisable or exchangeable for Equity
Shares or publicly announce an intention with respect to any of the foregoing; (b) enter into any swap or other
agreement that transfers, directly or indirectly, in whole or in part, any of the economic consequences of ownership
of Equity Shares or any securities convertible into or exercisable or exchangeable for Equity Shares; (c) sell, lend,
contract to sell, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or
otherwise transfer or dispose of, directly or indirectly, any shares or interest in an entity which holds any Equity
Shares or (d) publicly announce any intention to enter into any transaction whether any such transaction described
in (a), (b) or (c) above is to be settled by delivery of Equity Shares, or such other securities, in cash or otherwise
except by way of an inter-se transfer amongst the Promoter and Promoter Group. The Equity Shares acquired by
the Promoters during the lock-up period, either from the open market or inter-se transfer amongst the Promoter
and Promoter Group or through conversion of any existing warrants or exercise of any options, shall also be
subject to this promoter lock-up. The Promoter lock-up undertaking shall be substantially in the form prescribed
under the Placement Agreement and shall be delivered to the Global Coordinator and Book Running Lead
Manager on or prior to the date of the Placement Agreement and shall be in full force and effect on the Closing
Date. Further, any Equity Shares acquired by the Promoters and Promoter Group of our Company shall also be
subject to the same restrictions that the Lock-Up are subject to. In addition, each of the Promoters and Promoter
Group of our Company, jointly and severally, agrees that, without the prior written consent of the BRLM, he or it
will not, during the Lock-up Period, make any demand for or exercise any right with respect to, the registration
or sale or deposition of any Equity Shares or any other securities of our Company substantially similar to the
Equity Shares, including, but not limited to options, warrants or other securities that are convertible into,
exercisable or exchangeable for, or that represent the right to receive Equity Shares or any such substantially
similar securities, whether now owned or hereinafter acquired.
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SELLING RESTRICTIONS
The distribution of this Preliminary Placement Document and the offer, sale or delivery of the Equity Shares is
restricted by law in certain jurisdictions. Persons who come into possession of this Preliminary Placement
Document are advised to take legal advice with regard to any restrictions that may be applicable to them and to
observe such restrictions. This Preliminary Placement Document may not be used for the purpose of an offer or
sale in any circumstances in which such offer or sale is not authorized or permitted.
General
Except for in India, no action has been taken or will be taken in any jurisdiction by our Company or the Global
Coordinator and Book Running Lead Manager that would permit an offering of the Equity Shares or the
possession, circulation or distribution of this Preliminary Placement Document or any other material relating to
our Company or the Equity Shares in any jurisdiction where action for such purpose is required. Accordingly, the
Equity Shares may not be offered or sold, directly or indirectly, and neither this Preliminary Placement Document
nor any offering materials or advertisements in connection with the Equity Shares may be distributed or published
in or from any country or jurisdiction except under circumstances that will result in compliance with any
applicable rules and regulations of any such country or jurisdiction. The Issue will be made in compliance with
the applicable SEBI ICDR Regulations. Each purchaser of the Equity Shares in this Issue will be deemed to have
made acknowledgments and agreements as described under “Notice to Investors” and “Transfer Restrictions” on
page 2 and 127, respectively.
India
This Preliminary Placement Document may not be distributed, directly or indirectly, in India or to residents of
India and any Equity Shares may not be offered or sold, directly or indirectly, in India to, or for the account or
benefit of, any resident of India except as permitted by applicable Indian laws and regulations, under which an
offer is strictly on a private and confidential basis and is limited to QIBs, who are eligible to participate in the
Issue. This Preliminary Placement Document is neither a public issue nor a prospectus under the Companies Act
or an advertisement and should not be circulated to any person other than to whom the offer is made.
Cayman Islands
The Preliminary Placement Document does not constitute an offer or invitation to the public in the Cayman Islands
to subscribe for Equity Shares in the Issue.
European Economic Area
In relation to each Member State of the European Economic Area that has implemented the Prospectus Directive
(each, a “Relevant Member State”), with effect from and including the date on which the Prospectus Directive
is or was implemented in that Relevant Member State (the “Relevant Implementation Date”), the Equity Shares
may not be offered or sold to the public in that Relevant Member State prior to the publication of a prospectus in
relation to the Equity Shares which has been approved by the competent authority in that Relevant Member State
or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that
Relevant Member State, all in accordance with the Prospectus Directive (defined below) and the 2010 Amending
Directive (defined below), except that the Equity Shares, with effect from and including the Relevant
Implementation Date, may be offered to the public in that Relevant Member State at any time:
(a) to persons or entities that are “qualified investors” as defined in the Prospectus Directive or, if that Relevant
Member State has implemented the 2010 Amending Directive, as defined in the 2010 Amending Directive;
(b) to (i) fewer than 100 natural or legal persons (other than “qualified investors” as defined in the Prospectus
Directive); or (ii) if that Relevant Member State has implemented the 2010 Amending Directive, fewer than
150 natural or legal persons (other than “qualified investors” as defined in the 2010 Amending Directive), in
each case subject to obtaining the prior consent of the Lead Manager; and
(c) in any circumstances falling within Article 3(2) of the Prospectus Directive as amended (to the extent
implemented in that Relevant Member State) by Article 1(3) of the 2010 Amending Directive, provided that
no such offering of Equity Shares shall result in a requirement for the publication by our Company or the
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Global Coordinator and Book Running Lead Manager of a prospectus pursuant to Article 3 of the Prospectus
Directive as amended (to the extent implemented in that Relevant Member State) by Article 1(3) of the 2010
Amending Directive.
For the purposes of this provision, the expression an “offer of Equity Shares to the public” in relation to any Equity
Shares in any Relevant Member State means the communication in any form and by any means of sufficient
information on the terms of the offer and the Equity Shares to be offered so as to enable an investor to decide to
purchase or subscribe for the Equity Shares, as the same may be varied in that Member State by any measure
implementing the Prospectus Directive in that Member State, the expression “Prospectus Directive” means
Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State and the
expression “2010 Amending Directive” means Directive 2010/73/EU and includes any relevant implementing
measure in each Member State.
Our Company, and the Global Coordinator and Book Running Lead Manager have not authorised, and they will
not authorise, the making of any offer of Equity Shares through any financial intermediary on their behalf, other
than offers made by our Company or the Global Coordinator and Book Running Lead Manager.
Hong Kong
The Preliminary Placement Document has not been reviewed or approved by any regulatory authority in Hong
Kong. In particular, this Preliminary Placement Document has not been, and will not be, registered as a
“prospectus” in Hong Kong under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap
32) (“CO”) nor has it been authorized by the Securities and Futures Commission (“SFC”) in Hong Kong pursuant
to the Securities and Futures Ordinance (Cap 571) (“SFO”). Recipients are advised to exercise caution in relation
to the Issue. If recipients are in any doubt about any of the contents of this Preliminary Placement Document, they
should obtain independent professional advice.
The Preliminary Placement Document does not constitute an offer or invitation to the public in Hong Kong to
acquire any Equity Shares nor an advertisement of the Equity Shares in Hong Kong. The Preliminary Placement
Document must not be issued, circulated or distributed in Hong Kong other than:
(a) to “professional investors” within the meaning of the SFO and any rules made under that ordinance
(“Professional Investors”); or
(b) in other circumstances which do not result in this Preliminary Placement Document being a prospectus as
defined in the CO nor constitute an offer to the public which requires authorization by the SFC under the
SFO.
Unless permitted by the securities laws of Hong Kong, no person may issue or have in its possession for issue,
whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Equity Shares,
which is directed at, or the content of which is likely to be accessed or read by, the public of Hong Kong other
than with respect to the Equity Shares which are or are intended to be disposed of only to persons outside Hong
Kong or only to Professional Investors.
Any offer of the Equity Shares will be personal to the person to whom relevant offer documents are delivered,
and a subscription for the Equity Shares will only be accepted from such person. No person who has received a
copy of this Preliminary Placement Document may issue, circulate or distribute this Preliminary Placement
Document in Hong Kong or make or give a copy of this Preliminary Placement Document to any other person.
No person allotted Equity Shares may sell, or offer to sell, such Shares to the public in Hong Kong within six
months following the date of issue of such Equity Shares.
Mauritius
In accordance with The Securities Act 2005 of Mauritius, no offer of the Equity Shares may be made to the public
in Mauritius without, amongst other things, the prior approval of the Mauritius Financial Services Commission.
The Preliminary Placement Document has not been approved or registered by the Mauritius Financial Services
Commission. Accordingly, the Preliminary Placement Document does not constitute a public offering. The
Preliminary Placement Document is for the exclusive use of the person to whom it has been given by the Global
Coordinator and Book Running Lead Manager and is a private concern between the sender and the recipient.
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People’s Republic of China
This Preliminary Placement Document has not been and will not be filed with, or approved by, the China
Securities Regulatory Commission or any other regulatory authority in the People’s Republic of China (the
“PRC”). This Preliminary Placement Document may not be issued, circulated or distributed in the PRC and the
Equity Shares may not be offered or sold, directly or indirectly, within the territory of the PRC or to any PRC
person or entity.
Qatar (excluding the Qatar Financial Centre)
This Preliminary Placement Document does not, and is not intended to, constitute an invitation or an offer of
securities in the State of Qatar and accordingly should not be construed as such. The Equity Shares have not been,
and shall not be, offered, sold or delivered at any time, directly or indirectly, in the State of Qatar. Any offering
of the Equity Shares shall not constitute a public offer of securities in the State of Qatar.
By receiving this Preliminary Placement Document, the person or entity to whom it has been provided to
understands, acknowledges and agrees that: (a) neither this Preliminary Placement Document nor the Equity
Shares have been registered, considered, authorised or approved by the Qatar Central Bank, the Qatar Financial
Markets Authority, or any other authority or agency in the State of Qatar; (b) our Company and the Global
Coordinator and Book Running Lead Manager are not authorised or licensed by the Qatar Central Bank, the Qatar
Financial Markets Authority or any other authority or agency in the State of Qatar, to market or sell the Equity
Shares within the State of Qatar; (c) this Preliminary Placement Document may not be provided to any person
other than the original recipient and is not for general circulation in the State of Qatar; and (d) no agreement
relating to the sale of the Equity Shares shall be consummated within the State of Qatar.
No marketing of the Equity Shares has been or will be made from within the State of Qatar and no subscription
to the Equity Shares may or will be consummated within the State of Qatar. Any applications to invest in the
Equity Shares shall be received from outside of Qatar. This Preliminary Placement Document shall not form the
basis of, or be relied on in connection with, any contract in Qatar. Our Company and the Global Coordinator and
Book Running Lead Manager are not, by distributing this Preliminary Placement Document, advising individuals
resident in the State of Qatar as to the appropriateness of investing in or purchasing or selling securities or other
financial products. Nothing contained in this Preliminary Placement Document is intended to constitute
investment, legal, tax, accounting or other professional advice in, or in respect of, the State of Qatar.
Qatar Financial Centre
This Preliminary Placement Document does not, and is not intended to, constitute an invitation or offer of Equity
Shares from or within the Qatar Financial Centre (“QFC”), and accordingly should not be construed as such. The
Preliminary Placement Document has not been reviewed or approved by or registered with the Qatar Financial
Centre Authority, the Qatar Financial Centre Regulatory Authority or any other competent legal body in the QFC.
The Preliminary Placement Document is strictly private and confidential, and may not be reproduced or used for
any other purpose, nor provided to any person other than the recipient thereof. Our Company has not been
approved or licenced by or registered with any licensing authorities within the QFC.
Singapore
This Preliminary Placement Document has not been and will not be registered as a prospectus with the Monetary
Authority of Singapore (“MAS”) under the Securities and Futures Act (Chapter 289) of Singapore (“SFA”).
Accordingly, the Equity Shares may not be offered or sold, or made the subject of an invitation for subscription
or purchase nor may this Preliminary Placement Document or any other document or material in connection with
the offer or sale, or invitation for subscription or purchase of the Equity Shares be circulated or distributed,
whether directly or indirectly, in Singapore other than (i) to an “institutional investor” within the meaning of
Section 274 of the SFA and in accordance with the conditions of an exemption invoked under Section 274, (ii) to
a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with
the conditions specified in Section 275, of the SFA, or (iii) other pursuant to, and in accordance with the conditions
of, any other applicable provision of the SFA.
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Where the Equity Shares are subscribed or purchased under Section 275 of the SFA by a relevant person which
is: (a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business
of which is to hold investments and the entire share capital of which is owned by one or more individuals, each
of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole
purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,
shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest
(howsoever described) in that trust shall not be transferred within six months after that corporation or that trust
has acquired the Equity Shares pursuant to an offer made under Section 275 except: (1) to an institutional investor
under Section 274 of the SFA or to a relevant person defined in Section 275(2) of the SFA, or to any person
pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that
corporation or such rights or interest in that trust are acquired at a consideration of not less than S$200,000 (or its
equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange
of securities or other assets, and further for a corporation, in accordance with the conditions specified in Section
275 of the SFA; (2) where no consideration is or will be given for the transfer; or (3) where the transfer is by
operation of law.
United Arab Emirates (excluding the Dubai International Financial Centre)
The Equity Shares have not been, and are not being, publicly offered, sold, promoted or advertised in the United
Arab Emirates (“U.A.E.”) other than in compliance with the laws of the U.A.E. Prospective investors in the Dubai
International Financial Centre should have regard to the specific notice to prospective investors in the Dubai
International Financial Centre set out below. The information contained in this Preliminary Placement Document
does not constitute a public offer of securities in the U.A.E. in accordance with the Commercial Companies Law
(Federal Law No. 8 of 1984 of the U.A.E., as amended) or otherwise and is not intended to be a public offer. Our
Company and the Equity Shares have not been approved or licensed by or registered with the Central Bank of the
United Arab Emirates, the Emirates Securities and Commodities Authority or any other relevant licensing
authorities or governmental agencies in the U.A.E.
This Preliminary Placement Document has not been approved by or filed with the Central Bank of the United
Arab Emirates, the Emirates Securities and Commodities Authority or the Dubai Financial Services Authority.
This Preliminary Placement Document is being issued to a limited number of selected institutional and
sophisticated investors, is not for general circulation in the U.A.E. and may not be provided to any person other
than the original recipient or reproduced or used for any other purpose. If you do not understand the contents of
this Preliminary Placement Document, you should consult an authorised financial adviser. This Preliminary
Placement Document is provided for the benefit of the recipient only, and should not be delivered to, or relied on
by, any other person.
Dubai International Financial Centre
This Preliminary Placement Document relates to an exempt offer (an “Exempt Offer”) in accordance with the
Offered Securities Rules of the Dubai Financial Services Authority (the “DFSA”). This Preliminary Placement
Document is intended for distribution only to persons of a type specified in those rules. It must not be delivered
to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents
in connection with Exempt Offers. The DFSA has not approved this Preliminary Placement Document nor taken
steps to verify the information set out in it, and has no responsibility for it. The Equity Shares to which this
Preliminary Placement Document relates may be illiquid and/or subject to restrictions on their resale. Prospective
purchasers of the Equity Shares offered in the Issue should conduct their own due diligence on the Equity Shares.
If you do not understand the contents of this Preliminary Placement Document, you should consult an authorised
financial adviser.
United Kingdom (in addition to the European Economic Area selling restrictions above)
The Equity Shares offered in the Issue cannot be promoted in the United Kingdom to the general public. The
contents of this Preliminary Placement Document have not been approved by an authorised person within the
meaning of Financial Services and Markets Act 2000, as amended (the “FSMA”). The Global Coordinator and
Book Running Lead Manager (a) may only communicate or caused to be communicated and will only
communicate or cause to be communicated an invitation or inducement to engage in investment activity (within
the meaning of Section 21 of the FSMA), to persons who (i) are investment professionals falling within Article
19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the
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“Financial Promotion Order”), or (ii) fall within any of the categories of persons described in article 49(2)(a) to
(d) of the Financial Promotion Order or otherwise in circumstances in which section 21(1) of the FSMA does not
apply to our Company; and (b) is required to comply with all applicable provisions of the FSMA with respect to
anything done by it in relation to the Equity Shares in, from or otherwise involving the United Kingdom. Any
invitation or inducement to engage in investment activity (within the meaning of Section 21 of FSMA) in
connection with, or relating to, the sale or purchase of any Equity Shares, may only be communicated or caused
to be communicated in circumstances in which Section 21(1) of the FSMA does not apply. It is the responsibility
of all persons under whose control or into whose possession this document comes to inform themselves about and
to ensure observance of all applicable provisions of FSMA in respect of anything done in relation to an investment
in Equity Shares in, from or otherwise involving, the United Kingdom.
United States of America
The Equity Shares offered in the Issue have not been and will not be registered under the Securities Act or the
securities laws of any state of the United States and may not be offered or sold in the United States except pursuant
to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and
applicable state securities laws. The Equity Shares are not being offered or sold in the United States in the Issue.
The Equity Shares are being offered and sold in the Issue only outside the United States in “offshore transactions”
(as defined in Regulation S) in reliance on Regulation S. To help ensure that the offer and sale of the Equity Shares
in the Issue was made in compliance with Regulation S, each purchaser of Equity Shares in the Issue will be
deemed to have made the representations, warranties, acknowledgements and undertakings set forth in “Transfer
Restrictions” on page 127.
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TRANSFER RESTRICTIONS
Due to the following restrictions, investors are advised to consult legal counsels prior to making any resale, pledge
or transfer of the Equity Shares.
Pursuant to Chapter VIII of the SEBI ICDR Regulations, successful Bidders are not permitted to sell the Equity
Shares Allotted pursuant to the Issue for a period of one year from the date of Allotment, except on the Stock
Exchanges. In addition, Allotments made to QIBs, including FVCIs, VCFs and AIFs in the Issue, may be subject
to lock-in requirements under the rules and regulations that are applicable to them.
United States of America
The Equity Shares offered in the Issue have not been and will not be registered under the Securities Act or the
securities laws of any state of the United States and may not be offered or sold in the United States except pursuant
to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and
applicable state securities laws.
Each purchaser of the Equity Shares, by accepting delivery of this Preliminary Placement Document, will be
deemed to:
Represent and warrant to our Company, the Global Coordinator and Book Running Lead Manager and its
affiliates that the offer and sale of the Equity Shares to it is in compliance with all applicable laws and
regulations.
Represent and warrant to our Company, the Global Coordinator and Book Running Lead Manager and its
affiliates that it was outside the United States (within the meaning of Regulation S) at the time the offer of
the Equity Shares was made to it and it was outside the United States (within the meaning of Regulation S)
when its buy order for the Equity Shares was originated.
Represent and warrant to our Company, the Global Coordinator and Book Running Lead Manager and its
affiliates that it did not purchase the Equity Shares as a result of any “directed selling efforts” (as defined in
Regulation S).
Acknowledge that the Equity Shares have not been and will not be registered under the Securities Act or the
securities law of any state of the United States and warrant to our Company, the Global Coordinator and Book
Running Lead Manager and its affiliates that it will not offer, sell, pledge or otherwise transfer the Equity
Shares except in an offshore transaction complying with Rule 903 or Rule 904 of Regulation S or pursuant
to any other available exemption from registration under the Securities Act and in accordance with all
applicable securities laws of the states of the United States and any other jurisdiction, including India.
Represent and warrant to our Company, the Global Coordinator and Book Running Lead Manager and its
affiliates that if it acquired any of the Equity Shares as fiduciary or agent for one or more investor accounts,
it has sole investment discretion with respect to each such account and that it has full power to make the
foregoing acknowledgments, representations and agreements on behalf of each such account.
Agree to indemnify and hold the Company, the Global Coordinator and Book Running Lead Manager and its
affiliates harmless from any and all costs, claims, liabilities and expenses (including legal fees and expenses)
arising out of or in connection with any breach of these representations, warranties or agreements. It agrees
that the indemnity set forth in this paragraph shall survive the resale of the Equity Shares.
Acknowledge that our Company, the Global Coordinator and Book Running Lead Manager and its affiliates,
and others will rely upon the truth and accuracy of the foregoing acknowledgements, representations,
warranties and agreements.
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THE SECURITIES MARKET OF INDIA
The information in this section has been extracted from documents available on the website of SEBI and the Stock
Exchanges and has not been prepared or independently verified by our Company or the Global Coordinator and
Book Running Lead Manager or any of their respective affiliates or advisors.
The Indian Securities Market
India has a long history of organised securities trading. In 1875, the first stock exchange was established in
Mumbai. BSE and NSE are the significant stock exchanges in terms of the number of listed companies, market
capitalisation and trading activity.
Indian Stock Exchanges
Indian stock exchanges are regulated primarily by SEBI, as well as by the Government acting through the Ministry
of Finance, Capital Markets Division, under the Securities Contracts (Regulation) Act, 1956 (the “SCRA”) and
the Securities Contracts (Regulation) Rules, 1957 (the “SCRR”). On June 20, 2012, SEBI, in exercise of its
powers under the SCRA and the Securities and Exchange Board of India Act, 1992, as amended from time to time
(the “SEBI Act”), notified the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations)
Regulations, 2012 (the “SCR (SECC) Rules”), which regulate inter alia the recognition, ownership and internal
governance of stock exchanges and clearing corporations in India together with providing for minimum
capitalisation requirements for stock exchanges. The SCRA, the SCRR and the SCR (SECC) Rules along with
various rules, bye-laws and regulations of the respective stock exchanges, regulate the recognition of stock
exchanges, the qualifications for membership thereof and the manner, in which contracts are entered into, settled
and enforced between members of the stock exchanges.
The SEBI Act empowers SEBI to regulate the Indian securities markets, including stock exchanges and
intermediaries in the capital markets, promote and monitor self-regulatory organisations and prohibit fraudulent
and unfair trade practices. Regulations and guidelines concerning minimum disclosure requirements by public
companies, investor protection, insider trading, substantial acquisitions of shares and takeover of companies, buy-
backs of securities, employee stock option schemes, stockbrokers, merchant bankers, underwriters, mutual funds,
FPIs, credit rating agencies and other capital market participants have been notified by the relevant regulatory
authority.
Listing of Securities
The listing of securities on a recognised Indian stock exchange is regulated by the applicable Indian laws including
the Companies Act, the SCRA, the SCRR, the SEBI Act and various guidelines and regulations issued by SEBI
and the SEBI Listing Regulations. The SCRA empowers the governing body of each recognised stock exchange
to suspend trading of or withdraw admission to dealings in a listed security for breach of or non-compliance with
any conditions or breach of a company’s obligations under the SEBI Listing Regulations or for any reason, subject
to the issuer receiving prior written notice of the intent of the exchange and upon granting of a hearing in the
matter. SEBI also has the power to amend the SEBI Listing Regulations and bye-laws of the stock exchanges in
India, to overrule a stock exchange’s governing body and withdraw recognition of a recognised stock exchange.
Minimum Level of Public Shareholding
All listed companies are required to ensure a minimum public shareholding at 25%. Further, where the public
shareholding in a listed company falls below 25% at any time, such company is required to bring the public
shareholding to 25% within a maximum period of 12 months from the date of such fall. Consequently, a listed
company may be delisted from the stock exchanges for not complying with the above-mentioned requirement.
Our Company is in compliance with this minimum public shareholding requirement.
Pursuant to an amendment of the SCRR in June 2010, all listed companies (except public sector undertakings)
were required to maintain a minimum public shareholding of 25%. However, pursuant to a subsequent amendment
to the SCRR, a public company, including public sector undertakings, seeking to get a particular class or kind of
securities listed shall offer and allot to the public (i) at least 25% of such class or kind of securities issued by the
company, if the post issue capital is less than or equal to ` 16,000,000,000, (ii) at least such percentage of such
class or kind of securities issued by the company equivalent to ` 4,000,000,000, if the post issue capital of the
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company is more than ` 16,000,000,000 but less than or equal to ` 40,000,000,000 or (iii) at least 10% of such
class or kind of securities issued by the company, if the post issue capital of the company is above `
40,000,000,000. In case of (ii) and (iii) above, the public shareholding is required to be increased to 25% within
a period of three years from the date of listing of the securities. In this regard, SEBI has provided several
mechanisms to comply with this requirement.
Where the public shareholding in a listed company falls below 25% at any time, such company shall bring the
public shareholding to 25% within a maximum period of 12 months from the date of such the public shareholding
having fallen below the 25% threshold.
Delisting
SEBI has notified the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 in
relation to the voluntary and compulsory delisting of equity shares from the stock exchanges which were
significantly modified in 2015. In addition, certain amendments to the SCRR have also been notified in relation
to delisting.
Index-Based Market-Wide Circuit Breaker System
In order to restrict abnormal price volatility in any particular stock, SEBI has instructed stock exchanges to apply
daily circuit breakers which do not allow transactions beyond a certain level of price volatility. The index based
market-wide circuit breaker system (equity and equity derivatives) applies at three stages of the index movement,
at 10%, 15% and 20%. These circuit breakers, when triggered, bring about a co-ordinated trading halt in all equity
and equity derivative markets nationwide. The market-wide circuit breakers are triggered by movement of either
the SENSEX of BSE or the S&P CNX NIFTY of the NSE, whichever is breached earlier.
In addition to the market-wide index-based circuit breakers, there are currently in place individual scrip-wise price
bands of up to 20% movements either up or down. However, no price bands are applicable on scrips on which
derivative products are available or scrips included in indices on which derivative products are available.
The stock exchanges in India can also exercise the power to suspend trading during periods of market volatility.
Margin requirements are imposed by stock exchanges that are required to be paid by the stockbrokers.
BSE
Established in 1875, BSE is the oldest stock exchange in India. In 1956, it became the first stock exchange in
India to obtain permanent recognition from the Government under the SCRA.
NSE
NSE was established by financial institutions and banks to provide nationwide online, satellite-linked, screen-
based trading facilities with market-makers and electronic clearing and settlement for securities including
government securities, debentures, public sector bonds and units. NSE was recognised as a stock exchange under
the SCRA in April 1993 and commenced operations in the wholesale debt market segment in June 1994. The
capital market (equities) segment commenced operations in November 1994 and operations in the derivatives
segment commenced in June 2000.
Internet-based Securities Trading and Services
Internet trading takes place through order routing systems, which route client orders to exchange trading systems
for execution. Stockbrokers interested in providing this service are required to apply for permission to the relevant
stock exchange and also have to comply with certain minimum conditions stipulated under applicable law. NSE
became the first exchange to grant approval to its members for providing internet based trading services. Internet
trading is possible on both the “equities” as well as the “derivatives” segments of NSE. NSE became the first
exchange to grant approval to its members for providing internet-based trading services. Internet trading is
possible on both the “equities” and the “derivatives” segments of NSE.
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Trading Hours
Trading on both NSE and BSE occurs from Monday to Friday, between 9:15 a.m. and 3:30 p.m. IST (excluding
the 15 minutes pre-open session from 9:00 a.m. to 9:15 a.m.). BSE and NSE are closed on public holidays. The
recognised stock exchanges have been permitted to set their own trading hours (in the cash and derivatives
segments) subject to the condition that (i) the trading hours are between 9.00 a.m. and 5.00 p.m.; and (ii) the stock
exchange has in place a risk management system and infrastructure commensurate to the trading hours.
Trading Procedure
In order to facilitate smooth transactions, BSE replaced its open outcry system with BSE On-line Trading (or
“BOLT”) facility in 1995. This totally automated screen based trading in securities was put into practice
nationwide. This has enhanced transparency in dealings and has assisted considerably in smoothening settlement
cycles and improving efficiency in back-office work.
NSE has introduced a fully automated trading system called National Exchange for Automated Trading (or
“NEAT”), which operates on strict time/price priority besides enabling efficient trade. NEAT has provided depth
in the market by enabling large number of members all over India to trade simultaneously, narrowing the spreads.
Takeover Regulations
Disclosure and mandatory bid obligations for listed Indian companies under Indian law are governed by the
Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as
amended (“Takeover Regulations”), which provides specific regulations in relation to substantial acquisition of
shares and takeover. Once the equity shares of a company are listed on a stock exchange in India, the provisions
of the Takeover Regulations will apply to any acquisition of the company’s shares/voting rights/control.
The Takeover Regulations prescribe certain thresholds or trigger points in the shareholding a person or entity has
in the listed Indian company, which give rise to certain obligations on part of the acquirer. Acquisitions up to a
certain threshold prescribed under the Takeover Regulations mandate specific disclosure requirements, while
acquisitions crossing particular thresholds may result in the acquirer having to make an open offer of the shares
of the target company. The Takeover Regulations also provides for the possibility of indirect acquisitions,
imposing specific obligations on the acquirer in case of such indirect acquisition.
Insider Trading Regulations
The SEBI (Prohibition of Insider Trading) Regulations, 2015 have been notified by SEBI to prohibit and penalise
insider trading in India. An insider is, among other things, prohibited from dealing either on his own behalf or on
behalf of any other person, in the securities of a listed company or a company proposed to be listed when in
possession of unpublished price sensitive information.
The Insider Trading Regulations also provide disclosure obligations for shareholders holding more than a
predefined percentage, and directors and officers, with respect to their shareholding in the company, and the
changes therein. The definition of “insider” includes any person who has received or has had access to unpublished
price sensitive information in relation to securities of a company or any person who has a connection with the
company that is expected to put him in possession of unpublished price sensitive information.
Depositories
The Depositories Act provides a legal framework for the establishment of depositories to record ownership details
and effect transfers in book-entry form. Further, SEBI framed regulations in relation to, among other things, the
formation and registration of such depositories, the registration of participants as well as the rights and obligations
of the depositories, participants, companies and beneficial owners. The depository system has significantly
improved the operation of the Indian securities markets.
Derivatives (Futures and Options)
Trading in derivatives is governed by the SCRA, the SCRR and the SEBI Act. The SCRA was amended in
February 2000 and derivatives contracts were included within the term “securities”, as defined by the SCRA.
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Trading in derivatives in India takes place either on separate and independent derivatives exchanges or on a
separate segment of an existing stock exchange. The derivatives exchange or derivatives segment of a stock
exchange functions as a self-regulatory organisation under the supervision of the SEBI.
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DESCRIPTION OF THE EQUITY SHARES
The following is information relating to the Equity Shares including a brief summary of the Memorandum and
Articles of Association, the Companies Act. Prospective investors are urged to read the Memorandum and Articles
of Association carefully, and consult with their advisers, as the Memorandum and Articles of Association and
applicable Indian law, and not this summary, govern the rights attached to the Equity Shares.
The following is information relating to the Equity Shares including a brief summary of the Memorandum and
Articles of Association and the Companies Act. Prospective investors are urged to read the Memorandum and
Articles of Association carefully, and consult with their advisers, as the Memorandum and Articles of Association
and applicable Indian law, and not this summary, govern the rights attached to the Equity Shares.
Share Capital
The authorised share capital of our Company is ` 250,000,000 consisting of 50,000,000 Equity Shares of `5 each.
As on the date of this Preliminary Placement Document, the issued, subscribed and paid up capital of our Company
is `118,043,030.00 consisting of 23,608,606 fully paid up Equity Shares of `5 each. The Equity Shares are listed
on BSE and NSE.
Dividends
Under Indian law, a company pays final dividend upon a recommendation by its board of directors and approval
by a majority of the shareholders at the AGM held in each Fiscal. The board of directors may declare and pay
interim dividends, which needs to be confirmed by the majority of shareholders at the next AGM. Under the
Companies Act, unless the board of directors of a company recommends the payment of final dividend, the
shareholders at a general meeting have power to declare dividend, which may be less than the amount
recommended by the board of directors. The shareholders have no right to declare dividend at a rate higher than
the one recommended by the board of directors. Subject to certain conditions laid down by section 123 of the
Companies Act, 2013 no dividend can be declared or paid by a company for any Fiscal except (a) out of the profits
of the company for that year, calculated in accordance with the provisions of the Companies Act or (b) out of the
profits of the company for any previous Fiscal(s) arrived at as laid down by the Companies Act and remaining
undistributed; or (c) out of both; or (d) out of money provided by the Central Government or a state Government
for payment of dividend by our Company in pursuance of a guarantee given by that Government.
The Equity Shares issued pursuant to this Preliminary Placement Document shall rank pari passu with the existing
Equity Shares in all respects including entitlements to any dividends that may be declared by our Company.
Capitalisation of Reserves and Issue of Bonus Shares
In addition to permitting dividends to be paid out of current or retained earnings as described above, the
Companies Act permits the board of directors to distribute an amount transferred in the free reserves, the securities
premium account or the capital redemption reserve account to its shareholders, in the form of fully paid up bonus
ordinary shares, which are similar to stock dividend. These bonus ordinary shares must be distributed to
shareholders in proportion to the number of ordinary shares owned by them as recommended by the board of
directors. No issue of bonus shares may be made by capitalizing reserves created by revaluation of assets. Further,
any issue of bonus shares would be subject to SEBI ICDR Regulations.
The Articles of Association of our Company provide that, any general meeting, may upon the recommendation of
the Board, resolve that any moneys, investments or other assets forming a part of the undivided profit of our
Company for the time being standing to the credit of the reserve fund or any other fund or the profit and loss
account of our Company and available for dividend or any amount standing to the credit of the shares premium
account or otherwise available for distribution be capitalised on the recommendation of the Directors.
Pre-emptive Rights and Alteration of Share Capital
Subject to the provisions of the Companies Act, our Company may increase its share capital by issuing new shares
on such terms and with such rights as it, by action of its shareholders in a general meeting may determine.
According to section 62 of the Companies Act, 2013 such new shares shall be offered to existing shareholders in
proportion to the amount paid up on those shares at that date. The offer shall be made by notice specifying the
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number of shares offered and the date (being not less than 15 days and not exceeding 30 days from the date of the
offer) within which the offer, if not accepted, will be deemed to have been declined. After such date the Board
may dispose of the shares offered in respect of which no acceptance has been received which shall not be
disadvantageous to the shareholders of our Company. The offer is deemed to include a right exercisable by the
person concerned to renounce the shares offered to him in favour of any other person.
Under the provisions of section 62(1)(c) of the Companies Act, 2013, new shares may be offered to any persons
whether or not those persons include existing shareholders, either for cash of for a consideration other than cash,
if the price of such shares is determined by the valuation report of a registered valuer subject to such conditions
as may be prescribed, if a special resolution to that effect is passed by our Company’s shareholders in a general
meeting.
The Articles of Association authorise it to increase its authorised capital by issuing new shares consisting of equity
and/or preference shares, as our Company may determine in a general meeting. Our Company may, by special
resolution, also alter its share capital by converting any fully paid up shares into stock and reconverting that stock
into fully paid up shares of any denomination.
The Articles of Association provide that our Company, by a special resolution passed at the general meeting, from
time to time, may consolidate or sub-divide its share capital and the resolution may provide that holders of shares
resulting from such sub-division shall have some special advantage as regards dividend, capital or otherwise as
compared with any other shares.
General meetings of shareholders
There are two types of general meetings of the shareholders:
(i) AGM; and
(ii) EGM.
Our Company must hold its AGM within six months after the expiry of each Fiscal provided that not more than
15 months shall elapse between the AGM and next one, unless extended by the RoC at its request for any special
reason for a period not exceeding three months. The Board of Directors may convene an EGM when necessary or
at the request of a shareholder or shareholders holding in the aggregate not less than one tenth of our Company’s
issued paid up capital (carrying a right to vote in respect of the relevant matter on the date of receipt of the
requisition).
Notices, either in writing or through electronic mode, convening a meeting setting out the date, day, hour, place
and agenda of the meeting must be given to members at least 21 clear days prior to the date of the proposed
meeting. A general meeting may be called after giving shorter notice if consent is received, in writing or electronic
mode, from not less than 95% of the shareholders entitled to vote. Five shareholders present in person, shall
constitute a quorum for a general meeting of our Company, whether AGM or EGM. The quorum requirements
applicable to shareholder meetings under the Companies Act have to be physically complied with.
A company intending to pass a resolution relating to matters such as, but not limited to, amendment in the objects
clause of the Memorandum, the issuing of shares with different voting or dividend rights, a variation of the rights
attached to a class of shares or debentures or other securities, buy-back of shares, giving loans or extending
guarantees in excess of limits prescribed, is required to obtain the resolution passed by means of a postal ballot
instead of transacting the business in the company’s general meeting. A notice to all the shareholders shall be sent
along with a draft resolution explaining the reasons therefore and requesting them to send their assent or dissent
in writing on a postal ballot within a period of 30 days from the date of posting the letter. Postal ballot includes
voting by electronic mode.
Voting rights
At a general meeting, upon a show of hands, every member holding shares and entitled to vote and present in
person has one vote. Upon a poll, the voting rights of each shareholder entitled to vote and present in person or
by proxy is in the same proportion as the capital paid up on each share held by such holder bears to our Company’s
total paid up capital. Voting is by a show of hands, unless a poll is ordered by the Chairman of the meeting.
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Ordinary resolutions may be passed by simple majority of those present and voting. Special resolutions require
that the votes cast in favour of the resolution must be at least three times the votes cast against the resolution.
A shareholder may exercise his voting rights by proxy to be given in the form required by the Articles of
Association. The instrument appointing a proxy is required to be lodged with our Company at least 48 hours
before the time of the meeting. A proxy may not vote except on a poll and does not have a right to speak at
meetings.
Shareholders may exercise their right to vote at general meetings or through postal ballot by voting through e-
voting facilities in accordance with the circular dated April 17, 2014 issued by SEBI and the Companies Act,
2013.
Transfer of shares
Shares held through depositories are transferred in the form of book entries or in electronic form in accordance
with the regulations laid down by SEBI. These regulations provide the regime for the functioning of the
depositories and the participants and set out the manner in which the records are to be kept and maintained and
the safeguards to be followed in this system. Transfers of beneficial ownership of shares held through a depository
are subject to STT (levied on and collected by the stock exchanges on which such equity shares are sold), however
are exempt from stamp duty. Our Company has entered into an agreement for such depository services with the
NSDL and the CDSL. SEBI requires that our Company’s shares for trading and settlement purposes be in book-
entry form for all investors, except for transactions that are not made on a stock exchange and transactions that
are not required to be reported to the stock exchange. Our Company shall keep a book in which every transfer or
transmission of shares will be entered.
Pursuant to the SEBI Listing Regulations, in the event our Company has not effected the transfer of shares within
one month or where our Company has failed to communicate to the transferee any valid objection to the transfer
within the stipulated time period of one month, it is required to compensate the aggrieved party for the opportunity
loss caused during the period of the delay. The shares of our Company shall be freely transferable. Under the
SEBI Listing Regulations, notice of such refusal must be sent to the transferee within one month of the date on
which the transfer was lodged with our Company.
According to the Articles of Association of our Company, any person who becomes entitled to shares by reason
of death, lunacy, bankruptcy or insolvency of a member shall be entitled to the same dividend and other advantages
to which he would be entitled if he was a registered member.
Liquidation rights
Subject to the rights of creditors, of employees and of the holders of any other shares entitled by their terms of
issue to preferential repayment over the shares, in the event of a winding-up of our Company, the holders of the
Equity Shares are entitled to be repaid the amounts of capital paid up or credited as paid up on such shares or in
case of a shortfall, proportionately. All surplus assets after payments due to employees, the holders of any
preference shares and other creditors belong to the holders of the ordinary shares in proportion to the amount paid
up or credited as paid up on such shares, respectively, at the commencement of the winding-up.
135
STATEMENT OF TAX BENEFITS
The Board of Directors
Majesco Limited (formerly Minefield Computers Ltd)
MBP-P-136, MNDC, Mahape
Navi Mumbai – 400 710,
Maharashtra, India.
(the “Company”)
Statement of Possible Tax Benefits available to Majesco Limited and its shareholders.
We hereby confirm that the enclosed ‘annexure’, prepared by Majesco Limited (the “Company”) states the
possible tax benefits available to the Company and the shareholders of the company under the Income - tax Act,
1961 (‘the Act’) as amended by the Finance Act, 2017 presently in force in India. Several of these benefits are
dependent on the Company or its shareholders fulfilling the conditions prescribed under the relevant provisions
of the respective tax laws. Hence, the ability of the Company or its shareholders to derive the tax benefits is
dependent upon fulfilling such conditions, which is based on the business imperatives, the company may or may
not choose to fulfill.
The benefits discussed in the enclosed Annexure are not exhaustive and the preparation of the contents stated is
the responsibility of the Company’s management. We are informed that this statement is only intended to provide
general information to the investors and hence is neither designed nor intended to be a substitute for professional
tax advice. In view of the individual nature of the tax consequences and the changing tax laws, each investor is
advised to consult his or her own tax consultant with respect to the specific tax implications arising out of the
demerger.
Our confirmation is based on the information, explanations and representations obtained from the Company and
on the basis of our understanding of the business activities and operations of the Company.
We have relied on the report on the tax benefits, issued by M/s Suresh Surana & Associates LLP, company’s tax
adviser for this purpose.
We do not express any opinion or provide any assurance as to whether:
a) The Company is availing any of these tax benefits or will avail these benefits in future. The Company or
its shareholders will continue to obtain these benefits in the future; or
b) The conditions prescribed for availing the benefits, where applicable have been / would be met.
c) The Authorities / Courts will concur with the views expressed herein.
Our views are based on the existing provisions of law and our interpretation of the same, which are subject to
change from time to time. We do not assume to take responsibility to update the views consequent to such changes.
This report is addressed to and is provided to enable the Board of Directors of the Company to include this report
in the information memorandum to be filed by the company with Stock Exchange(s) and the concerned registrar
of Companies in connection with the issue of shares to the Qualified Institutions.
For M/s. Varma & Varma
Chartered Accountants
Firm Registration Number: 004532S
K.P. Srinivas
Partner
Membership Number: 208520
Place: Navi Mumbai
Date: January 23, 2018
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Annexure A
ANNEXURE TO THE STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO MAJESCO
LIMITED AND ITS SHAREHOLDER
Outlined below are the possible tax benefits available to the Company and its shareholders under the
current direct tax laws in India for the Financial Year 2017-18.
A. BENEFITS TO THE COMPANY UNDER THE INCOME TAX ACT, 1961 (“THE ACT”)
1. GENERAL TAX BENEFITS:
a. Business Income / Deductions:
The Company is entitled to claim depreciation on specified tangible and intangible assets owned by it and
used for the purpose of its business as per the provisions of Section 32 of the Act. Business losses, if any,
for an assessment year can be carried forward and set off against business profits for 8 subsequent years.
Unabsorbed depreciation, if any for an assessment year can be carried forward and set off against any
source of income in subsequent years as per the provisions of Sections 32 and 71 of the Act.
As per Section 35DD of the Act, the company is eligible for the expenditure incurred wholly and
exclusively for the purpose of amalgamation and demerger of an undertaking an amount equal to one-fifth
of such expenditure for each of the successive five previous years.
As per provisions of Section 80G of the Act, the company is entitled to claim deduction of a specified
amount in respect of certain eligible donations if made, subject to the fulfillment of the conditions specified
in that Section .
b. Capital Gain
Computation of capital gain
Capital assets are to be categorized into short term capital assets and long term capital assets based on their
nature and the period of holding. All capital assets, being a security (other than a unit) listed in a recognized
stock exchange in India or unit of the Unit Trust of India or a unit of equity oriented fund or a zero coupon
bond, held by an assessee for more than twelve months are considered to be long term capital assets. With
respect to shares not listed in Indian stock exchanges, the holding period should exceed twenty four months
to be considered as long term capital asset and with respect to units of a mutual fund (other than equity
oriented mutual fund) specified under Section 10(23D) of the Act and any other capital asset, the holding
period should exceed thirty six months to be considered as long term capital assets. Capital gain arising from
the transfer of long term capital asset is termed as long term capital gain (“LTCG”).
Short Term Capital Gain (“STCG”) means capital gain arising from the transfer of short term capital asset.
Short term capital asset shall mean to be asset which is not a long term asset.
LTCG arising on transfer of equity shares of a company or units of an equity oriented fund (as defined which
has been set up under a scheme of a Mutual fund specified under Section 10(23D) of the Act) or unit of
business trust is exempt from tax as per provisions of Section 10(38) of the Act, provided the transaction of
transfer of such shares or units is chargeable to securities transaction tax (“STT”) and subject to the conditions
specified in that Section. Further, the condition of chargeability of STT shall not be applicable to any long
term capital gains arising out of transaction undertaken on a recognized stock exchange located in any
International Financial Services Centre and where the consideration for such transaction is paid or payable in
foreign currency. However, such LTCG shall be taken into account in computing the book profits and income
tax payable under Section 115JB of the Act.
137
As per provisions of Section 47(xb) of the Act, conversion of preference shares into equity shares shall not
be considered as “transfer” and accordingly, gain arising on conversion shall not be subject to tax.
Section 48 of the Act, which prescribe the mode of computation of capital gains, provides for deduction of
cost of acquisition / improvement (“COA/I”) and expenses incurred (other than STT paid) in connection with
the transfer of a capital asset, from the sale consideration to arrive at the amounts of capital gains. However,
in respect of LTCG arising on transfer of capital assets, other than bonds and debentures (excluding capital
indexed bonds issued by the Government or Sovereign Gold Bond issued by Reserve Bank of India under
Sovereign Gold Bond Scheme, 2015) and depreciable assets, it offers a benefit by permitting substitution of
COA/I with the indexed cost of acquisition / improvement computed by applying the cost inflation index as
prescribed from time to time.
As per provisions of Section 112 of the Act, LTCG not exempt under Section 10(38) of the Act is subject to
tax at the rate of 20% with indexation benefits. However, if such tax payable on transfer of listed securities
or units or zero coupon bonds exceed 10% of the LTCG (without indexation benefit), the excess tax shall be
ignored for the purpose of computing the tax payable by the assessee.
As per provisions of Section 111A of the Act, STCG arising on transfer of equity shares or units of equity
oriented mutual fund (as defined which has been set up under a scheme of a mutual fund specified under
Section 10(23D) of the Act) or unit of business trust is subject to tax at the rate of 15% provided the transaction
is chargeable to STT. Further, the condition of chargeability of STT shall not be applicable to any long term
capital gains arising out of transaction undertaken on a recognized stock exchange located in any International
Financial Services Centre and where the consideration for such transaction is paid or payable in foreign
currency. No deduction under Chapter VIA is allowed from such income.
STCG arising on transfer of equity shares or units of equity oriented mutual fund (as defined which has been
set up under a scheme of a mutual fund specified under Section 10(23D) of the Act), where such transaction
is not chargeable to STT or STCG arising on transfer of any other short term capital asset is taxable at the
normal rate of tax.
The tax rates mentioned above stands increased by surcharge, payable at the rate of 7% or 12% of the income
tax where the taxable income of a domestic company exceeds INR.1,00,00,000 or INR.10,00,00,000
respectively. Further education cess and secondary and higher education cess at the rate of 2% and 1%
respectively of the income tax is payable by all categories of tax payers.
Rate of income tax and MAT
As per Section 115JB of the Act, where the income tax payable under the normal provisions of the Act by
the Company is less than 18.5% of its book profit (as calculated as per this section), such book profit shall be
deemed to be the total income of the Company and the Minimum Alternate Tax (“MAT”) payable shall be
18.5% of such income (plus applicable surcharge and cess). Thus the effective rate is 19.055% if the book
profits does not exceed INR.1,00,00,000, 20.38885% if book profit is between INR.1,00,00,000 and
INR.10,00,00,000, 21.3416% if book profit is more than INR.10,00,00,000.
As per the provisions of Section 115JAA of the Act, the Company is eligible to claim credit for MAT paid
for any assessment year commencing on or after April 1, 2006 against normal income tax payable in
subsequent assessment years.
MAT credit shall be allowed for any assessment year to the extent of difference between the tax payable as
per the normal provisions of the Act and the tax paid on the book profit as computed under Section 115JB of
the Act for that assessment year. Such MAT credit is available for set off upto 15 assessment years succeeding
the assessment year in which the MAT credit arises.
As per provisions of Section 71 read with Section 74 of the Act, long term capital loss arising during a year
is allowed to be set off only against long term capital gains. Balance loss, if any, shall be carried forward and
set off against long term capital gains arising during subsequent 8 assessment years.
138
As per Section 139(3) of the Act, the capital loss sustained can be carried forward for set off in subsequent
years only when return under Section 139(1) of the Act is filed by the assessee.
Exemption of capital gain from income -tax
Under Section 54EC of the Act, capital gains arising from transfer of long term capital assets (other than
those exempt under Section 10(38)) shall be exempt from tax, subject to the conditions and to the extent
specified therein, if the capital gains are invested within a period of six months from the date of transfer, in
certain notified bonds redeemable after three years and issued by –
i. National Highway Authority of India (NHAI) constituted under Section 3 of the National Highway
Authority of India Act, 1988; or
ii. Rural Electrification Corporation Limited (RECL), a company formed and registered under the
Companies Act, 1956; or
iii. Any other bond notified by Central Government in this behalf.
Where part of the capital gains is reinvested, the exemption is available on a proportionate basis. The
exemption in respect of capital gains upon aforesaid investments made during the financial year in which the
original asset or assets are transferred and in the subsequent financial year shall not exceed INR.50,00,000/-.
Where the new bonds are transferred or converted into money within three years from the date of their
acquisition, the amount so exempted is taxable as capital gains in the year of transfer / conversion.
Further under Section 54EE of the Act, capital gain on transfer of a long term capital asset (other than those
exempt under Section 10(38)) shall be exempt from tax, subject to the conditions and to the extent specified
therein, if the capital gains are invested within a period of six months from the date of transfer in specified
assets viz. a unit or units, issued before the 1 April, 2019 of fund notified by the Central Government.
Where part of the capital gain is reinvested, the exemption is available on a proportionate basis.
Further, the exemption in respect of capital gains upon aforesaid investments made during the financial year
in which the original asset or assets are transferred and in the subsequent financial year shall not exceed
INR.50,00,000/-. The specified asset must be held for a period of 3 years from the date of its acquisition.
Further, in case an assessee takes any loan or advance on the security of such specified asset, he shall be
deemed to have transferred such specified asset on the date on which such loan or advance is taken.
As per provisions of Section 14A of the Act, expenditure incurred to earn exempt income is not allowed as
deduction while determining taxable income.
The characterization of the gain / losses, arising from sale / transfer of shares as “business income” or “capital
gains” would depend on the nature of holding and various other factors.
c. Securities Transaction Tax (“STT”)
As per provisions of Section 36(1)(xv) of the Act, STT paid in respect of the taxable securities transactions
entered into in the course of the business is allowed as a deduction if the income arising from such taxable
securities transactions is included in the income computed under the head “Profit and gains of business or
profession”. Where such deduction is claimed, no further deduction in respect of the said amount is allowed
while determining the income chargeable to tax as capital gains.
d. Dividends
As per provisions of Section 10(34) read with Section 115-O of the Act, dividend (both interim and final), if
any received by the Company on its investments in shares of another Domestic Company is exempt from tax.
The Company will be liable to pay dividend distribution tax at the rate of 15% (plus a surcharge of 12% on
139
the dividend distribution tax and education cess and secondary and higher education cess of 2% and 1%
respectively on the amount of dividend distribution tax and surcharge thereon) on the total amount distributed
as dividend. Further, the rate of Dividend Distribution Tax needs to be computed on the gross up basis,
resulting in increase in effective tax rate to 20.357647%.
While computing the amount of dividend distribution tax payable by a Domestic Company, the dividend
received from a subsidiary company which is Domestic Company and on which dividend distribution tax has
been paid by such subsidiary Company, then same shall be reduced by the Domestic Company.
As per provisions of Section 10(35) of the Act, dividend received in respect of units of a mutual fund specified
under Section 10(23D) of the Act (other than income arising from transfer of such units) is exempt from tax.
However, in view of provisions of Section 14A of the Act, no deduction is allowed in respect of any
expenditure incurred in relation to earning such dividend income, which are fully exempt from tax.
As per the provisions of Section 115BBD of the Act, dividend received by an Indian company from a
specified foreign company (in which it has shareholding of 26% or more) would be taxable at the concessional
rate of 15% on gross basis (excluding surcharge and education cess).
While computing the amount of dividend distribution tax payable by a Domestic Company, the dividend
received from a foreign subsidiary on which income tax has been paid by the Domestic Company under
Section 115BBD of the Act shall be reduced.
Also, Section 94(7) of the Act provides that loss arising from sale / transfer of shares or units purchased
within a period of three months prior to the record date and sold / transferred within three months or nine
months respectively after such record date, will be disallowed to the extent of dividend income claimed as
exempt from tax, on such shares or units.
B. BENEFITS TO THE RESIDENT SHAREHOLDERS OF THE COMPANY UNDER THE ACT
a. Dividends exempt under section 10(34) of the Act
As per provisions of Section 10(34) of the Act, dividend (both interim and final), if any, received by the
resident members / shareholders from the domestic company is exempt from tax. Where the aggregate of
income by way of dividend from domestic companies received by specified assesse (means a person other
than a domestic company, certain specified fund or institution or trust or university referred in section 10(23C)
or trust or institution registered under section 12A or 12AA of the Act), resident in India, in excess of
INR.10,00,000/-, the same shall be chargeable to tax @ 10% on gross basis.
b. Capital gains
Computation of capital gains
Capital assets are to be categorized into short term capital assets and long term capital assets based on their
nature and the period of holding. All capital assets, being a security (other than a unit), listed in a recognized
stock exchange in India or unit of the Unit Trust of India or a unit of equity oriented fund or a zero coupon
bond, held by an assessee for more than twelve months are considered to be long term capital assets. With
respect to shares not listed in stock exchange in India, the holding period should exceed twenty four months
to be considered as long term capital asset and with respect to units of a mutual fund (other than equity
oriented mutual fund) specified under Section 10(23D) of the Act and any other capital asset, the holding
period should exceed thirty six months to be considered as long term capital assets. Capital gain arising from
the transfer of Long term capital asset is termed as long term capital gain (“LTCG”).
Short Term Capital Gain (“STCG”) means capital gain arising from the transfer of short term capital asset.
Short term capital asset shall mean to be asset which is not a long term asset.
LTCG arising on transfer of equity shares of a company or units of an equity oriented fund (as defined which
has been set up under a scheme of a Mutual fund specified under Section 10(23D) of the Act) or unit of
140
business trust is exempt from tax as per provisions of Section 10(38) of the Act, provided the transaction of
transfer of such shares or units is chargeable to securities transaction tax (“STT”) and subject to the conditions
specified in that section. Further, the condition of chargeability of STT shall not be applicable to any long
term capital gains arising out of transaction undertaken on a recognized stock exchange located in any
International Financial Services Centre and where the consideration for such transaction is paid or payable in
foreign currency. However, such LTCG shall be taken into account in computing the book profits and income
tax payable under Section 115JB of the Act.
As per provisions of Section 47(xb) of the Act, conversion of preference shares into equity shares shall not
be considered as “transfer” and accordingly, gain arising on conversion shall not be subject to tax.
Section 48 of the Act, which prescribes the mode of computation of capital gains, provides for deduction of
cost of acquisition / improvement (“COA/I”) and expenses incurred (other than STT paid) in connection with
the transfer of a capital asset, from the sale consideration to arrive at the amounts of capital gains. However
in respect of LTCG arising on transfer of capital assets, other than bonds and debentures (excluding capital
indexed bonds issued by the Government or Sovereign Gold Bond issued by Reserve Bank of India under
Sovereign Gold Bond Scheme, 2015) and depreciable assets, it offers a benefit by permitting substitution of
COA/I with the indexed cost of acquisition / improvement computed by applying the cost inflation index as
prescribed from time to time.
As per provisions of Section 112 of the Act, LTCG not exempt under Section 10(38) of the Act is subject to
tax at the rate of 20% with indexation benefits. However, if such tax payable on transfer of listed securities
or units or zero coupon bonds exceed 10% of the LTCG (without indexation benefit), the excess tax shall be
ignored for the purpose of computing the tax payable by the assessee.
As per provisions of Section 111A of the Act, STCG arising on transfer of equity shares or units of equity
oriented mutual fund (as defined which has been set up under a scheme of a mutual fund specified under
Section 10(23D) of the Act) or unit of business trust is subject to tax at the rate of 15% provided the transaction
is chargeable to STT. Further, the condition of chargeability of STT shall not be applicable to any long term
capital gains arising out of transaction undertaken on a recognized stock exchange located in any International
Financial Services Centre and where the consideration for such transaction is paid or payable in foreign
currency. No deduction under Chapter VIA is allowed from such income.
STCG arising on transfer of equity shares or units of equity oriented mutual fund (as defined which has been
set up under a scheme of a mutual fund specified under Section 10(23D) of the Act), where such transactions
not chargeable to STT or STCG arising on transfer of any other capital asset is taxable at the normal rates of
tax as applicable to the shareholder.
The tax rates mentioned above stands increased by surcharge, payable at the rate of 7% or 12% of the income
tax where the taxable income of a domestic company exceeds INR.1,00,00,000 or INR.10,00,00,000
respectively. Further, education cess and secondary and higher education cess on the total income at the rate
of 2% and 1% respectively of the income tax is payable by all categories of tax payers.
Surcharge shall be payable at the rate of 12% in case of partnership firms where taxable income exceeds
INR.1,00,00,000. Further, the surcharge rate for individual and HUF is 10% where the taxable income
exceeds INR 50,00,000 and 15% where the taxable income exceeds INR.1,00,00,000. Education cess and
secondary and higher education cess on the total income at the rate of 2% and 1% respectively is payable in
all cases.
As per provisions of Section 71 read with Section 74 of the Act, short term capital loss arising during a year
is allowed to be set off against short term as well as long term capital gains. Balance loss, if any, shall be
carried forward and set off against any capital gains arising during subsequent 8 assessment years.
As per provisions of Section 71 read with Section 74 of the Act, long term capital loss arising during a year
is allowed to be set off against long term capital gains. Balance loss, if any, shall be carried forward and set
off against long term capital gains arising during subsequent 8 assessment years.
141
As per Section 139(3) of the Act, the capital loss sustained can be carried forward for set off in subsequent
years only when return under Section 139(1) of the Act is filed by the assessee.
Exemption of capital gains
Under Section 54EC of the Act, capital gains arising from transfer of long term capital assets (other than
those exempt under Section 10(38)) shall be exempt from tax, subject to the conditions and to the extent
specified therein, if the capital gain are invested within a period of six months from the date of transfer in
certain notified bonds redeemable after three years and issued by –
National Highway Authority of India (NHAI) constituted under Section 3 of the National Highway
Authority of India Act, 1988; or
Rural Electrification Corporation Limited (RECL), a company formed and registered under the
Companies Act, 1956; or
Any other bond notified by Central Government in this behalf.
Where part of the capital gain is reinvested, the exemption is available on a proportionate basis. The
exemption in respect of capital gains upon aforesaid investments made during the financial year in which the
original asset or assets are transferred and in the subsequent financial year shall not exceed INR.50,00,000/-.
Where the new bonds are transferred or converted into money within three years from the date of their
acquisition, the amount so exempted is taxable as capital gains in the year of transfer / conversion.
Further under 54EE of the Act, capital gain on transfer of a long term capital asset other than those exempt
under Section 10(38)) shall be exempt from tax, subject to the conditions and to the extent specified therein,
if the capital gains are invested within a period of six months from the date of transfer in specified assets viz.
a unit or units, issued before the 1 April, 2019 of fund notified by the Central Government.
Where part of the capital gains is reinvested, the exemption is available on a proportionate basis.
Further, the exemption in respect of capital gains upon aforesaid investments made during the financial year
in which the original asset or assets are transferred and in the subsequent financial year shall not exceed
INR.50,00,000/-. The specified asset must be held for a period of 3 years from the date of its acquisition.
Further, in a case an assessee takes any loan or advance on the security of such specified asset, he shall be
deemed to have transferred such specified asset on the date on which such loan or advance is taken.
As per provisions of Section 14A of the Act, expenditure incurred to earn an exempt income is not allowed
as deduction while determining taxable income.
The characterization of the gain / losses, arising from sale / transfer of shares as business income or capital
gains would depend on the nature of holding and various other factors.
As per provisions of Section 54F of the Act, LTCG arising to an individual or Hindu Undivided Family
(“HUF”) from transfer of shares is exempt from tax if the net consideration from such transfer is utilized
within a period of one year before, or two years after the date of transfer, for purchase of a new residential
house, or for construction of residential house within three years from the date of transfer subject to conditions
and to the extent specified therein.
As per provisions of Section 56(2)(x)(c) of the Act, where any person receives any property (which is defined
to include share and securities) subject to exception provided in proviso therein, without consideration or for
a consideration which is less than the aggregate fair market value of the property by an amount exceeding
fifty thousand rupees, the excess of fair market value of such property over the said consideration is
chargeable to tax under the head “Income from other sources”. Further, where capital gain arises from transfer
of such property then, as per section 49(4) of the Act, cost of acquisition of such property shall be value
considered under section 56(2)(x)(c) of the Act.
142
C. BENEFITS TO NON-RESIDENT SHAREHOLDERS OF THE COMPANY UNDER THE ACT
a. Dividends exempt under Section 10(34) of the Act
As per provisions of Section 10(34) of the Act, dividend (both interim and final), if any, received by non-
resident shareholders from the domestic company is exempt from tax.
b. Capital gains
Capital gains are to be categorized into short term capital assets and long term capital assets based on their
nature and the period of holding. All capital assets, being a security (other than a unit) listed in a recognized
stock exchange in India or unit of the Unit Trust of India or a unit of equity oriented fund or a zero coupon
bond, held by an assessee for shares not listed on a stock exchange in India, the holding period should exceed
twenty four months to be considered as long term capital asset and with respect to units of a mutual fund
(other than equity oriented mutual fund) specified under section 10(23D) of the Act and any other capital
asset, the holding period should exceed thirty six months to be considered as long term capital assets. Capital
gain arising from the transfer of Long term capital asset is termed as long term capital gain (“LTCG”).
Short Term Capital Gain means capital gain arising from the transfer of short term capital asset. Short term
capital asset shall mean to be asset which is not a long term asset.
LTCG arising on transfer of equity shares of a company or units of an equity oriented fund (as defined which
has been set up under a scheme of a Mutual fund specified under Section 10(23D) of the Act) or unit of
business trust is exempt from tax as per provisions of Section 10(38) of the Act, provided the transaction of
transfer of such shares or units is chargeable to securities transaction tax (“STT”) and subject to the conditions
specified in that Section. Further, the condition of chargeability of STT shall not be applicable to any long
term capital gains arising out of transaction undertaken on a recognized stock exchange located in any
International Financial Services Centre and where the consideration for such transaction is paid or payable in
foreign currency. However, such LTCG shall be taken into account in computing the book profits and income
tax payable under Section 115JB of the Act.
As per provisions of Section 47(xb) of the Act, conversion of preference shares into equity shares shall not
be considered as “transfer” and accordingly, gain arising on conversion shall not be subject to tax.
As per first proviso to Section 48 of the Act, the capital gains arising to a non-resident on transfer of shares
of an Indian Company need to be computed by converting the cost of acquisition, expenditure incurred in
connection with such transfer and full value of the consideration received or accruing as a result of the
transfer, into the same foreign currency in which the shares were originally purchased. The resultant gains
thereafter need to be reconverted into Indian currency. The conversion needs to be at the prescribed rates
prevailing or dates stipulated. Further, the benefit of indexation as provided in second proviso to Section 48
of the Act is not available to non-resident shareholders.
The LTCG arising on transfer of unlisted securities are chargeable at the rate of ten percent of such gains
without giving effect to first and second proviso to Section 48 of the Act.
As per provisions of Section 111A of the Act, STCG arising on transfer of equity shares or units of equity
oriented mutual fund (as defined which has been set up under a scheme of a mutual fund specified under
Section 10(23D) of the Act) or unit of business trust is subject to tax at the rate of 15% provided the transaction
is chargeable to STT. Further, the condition of chargeability of STT shall not be applicable to any long term
capital gains arising out of transaction undertaken on a recognized stock exchange located in an International
Financial Services Centre and where the consideration for such transaction is paid or payable in foreign
currency. No deduction under Chapter VIA is allowed from such income.
STCG arising on transfer of equity shares or units of equity oriented mutual fund (as defined which has been
set up under a scheme of a mutual fund specified under Section 10(23D) of the Act), where such transaction
143
is not chargeable to STT is taxable at the rate of 40% (for foreign companies) and prescribed slab rates (for
individual and HUF).
In case of foreign company surcharge will be 2% or 5% depending upon taxable income exceeds
INR.1,00,00,000 or INR.10,00,00,000 respectively. In case of other non-residents, whose taxable income
exceeds INR 50,00,000 surcharge shall be payable at 10% and whose INR.1,00,00,000 surcharge shall be
payable at 15%.
Further, education cess and secondary and higher education cess at the rate of 2% and 1% respectively of the
income tax is payable by all categories of tax payers.
As per Section 115JB of the Act, where the income tax payable under the normal provisions of the Act by
the foreign company is less than 18.5% of its book profits (as calculated as per this Section), such book profits
shall be deemed to be the total income of the Company and the Minimum Alternate Tax (“MAT”) payable
shall be 18.5% of such income (plus applicable surcharge and cess).
Capital gains from transfer of securities, interest, royalty and FTS accruing or arising to foreign company
have been excluded from chargeability of MAT, if tax payable on such income is less than 18.5%. Further,
expenditure, if any, debited to the profit and loss account, corresponding to such income shall also be added
back to the book profit for the purpose of computation of MAT.
It has been clarified that MAT provisions shall not be applicable to foreign company if:
a) The assessee is a resident of the country or specified territory with which India has agreement under
section 90(1) / 90A(1) of the Act and the assessee does not have permanent establishment in India.
b) The assessee is a resident of country with which India does not have agreement and the assessee is not
required to seek registration under any law for the time being in force relating to foreign companies.
As per section 9A of the Act, foreign specified eligible investment fund shall not be said to be resident in
India merely because the eligible fund manager is situated in India. Further, fund management activities
carried out through an eligible fund manager on behalf of fund shall not constitute business connections in
India for that fund.
As per provisions of Section 71 read with Section 74 of the Act, short term capital loss arising during a year
is allowed to be set off against short term as well as long term capital gains. Balance loss, if any, shall be
carried forward and set off against any capital gains arising during subsequent 8 assessment years.
As per provisions of Section 71 read with Section 74 of the Act, long term capital loss arising during a year
is allowed to be set off only against long term capital gains. Balance loss, if any, shall be carried forward and
set off against long term capital gains arising during subsequent 8 assessment years.
As per section 139(3) of the Act, the capital loss sustained can be carried forward for set off in subsequent
years only when return under Section 139(1) of the Act is filed by the assessee.
Under Section 54EC of the Act, capital gains arising from transfer of long term capital assets (other than
those exempt under Section 10(38)) shall be exempt from tax, subject to the conditions and to the extent
specified therein, if the capital gains are invested within a period of six months from the date of transfer in
certain notified bonds redeemable after three years and issued by –
National Highway Authority of India (NHAI) constituted under Section 3 of the National Highway
Authority of India Act, 1988; and
Rural Electrification Corporation Limited (RECL), a company formed and registered under the
Companies Act, 1956.
Any other bond notified by Central Government in this behalf.
144
Where part of the capital gains is reinvested, the exemption is available on a proportionate basis. The
exemption in respect of capital gains upon aforesaid investments made during the financial year in which
the original assets or assets are transferred and in the subsequent financial year shall not exceed
INR.50,00,000/-.
Where the new bonds are transferred or converted into money within three years from the date of their
acquisition, the amount so exempted is taxable as capital gains in the year of transfer / conversion.
Further under 54EE of the Act, capital gain on transfer of a long term capital asset other than those exempt
under Section 10(38)) shall be exempt from tax, subject to the conditions and to the extent specified therein,
if the capital gains are invested within a period of six months from the date of transfer in specified assets viz.
a unit or units, issued before the 1 April, 2019 of fund notified by the Central Government.
Where part of the capital gains is reinvested, the exemption is available on a proportionate basis.
Further, the exemption in respect of capital gains upon aforesaid investments made during the financial year
in which the original asset or assets are transferred and in the subsequent financial year shall not exceed
INR.50,00,000/-. The specified asset must be held for a period of 3 years from the date of its acquisition.
Further, in a case an assessee takes any loan or advance on the security of such specified asset, he shall be
deemed to have transferred such specified asset on the date on which such loan or advance is taken.
As per provisions of Section 14A of the Act, expenditure incurred to earn an exempt income is not allowed
as deduction while determining taxable income.
The characterization of the gain / losses, arising from sale / transfer of shares as business income or capital
gains would depend on the nature of holding and various other factors.
In addition, to the same, some benefits are also available to a non-resident shareholder being an individual or
HUF.
As per provisions of Section 54F of the Act, LTCG arising from transfer of shares is exempt from tax if the
net consideration from such transfer is utilized within a period of one year before or two years after the date
of transfer, for purchase of a new residential house, or for construction of residential house within three years
from the date of transfer and subject to conditions and to the extent specified therein. The said benefit is
available only to individual and HUF.
As per provisions of Section 56(2)(x)(c) of the Act, where any person receives any property (which is defined
to include share and securities) subject to exception provided in proviso therein, without consideration or for
a consideration which is less than the aggregate fair market value of the property by an amount exceeding
fifty thousand rupees, the excess of fair market value of such property over the said consideration is
chargeable to tax under the head “Income from other sources”. Further, where capital gain arises from transfer
of such property then, as per section 49(4) of the Act, cost of acquisition of such property shall be value
considered under section 56(2)(x)(c) of the Act.
As per provisions of Section 90(2) of the Act, non-resident shareholders can opt to be taxed in India as per
the provisions of the Act, or the double taxation avoidance agreement entered by the Government of India
with the country of residence of the non-resident shareholder, whichever is more beneficial.
c. Non-resident Indian – Taxation:
Special provisions in case of non-resident Indian (“NRI”) in respect of income / LTCG from specified foreign
exchange assets under Chapter XII-A of the Act are as follows:
NRI means a citizen of India or a person of Indian origin who is not a resident. A person is deemed to be of
Indian origin if he or either of his parents or any of his grandparents, were born in undivided India.
Specified foreign exchange assets include shares of an Indian company which are acquired / purchased /
subscribed by NRI in convertible foreign exchange.
145
As per provisions of Section 115E of the Act, LTCG arising to a NRI from transfer of specified foreign
exchange assets is taxable at the rate of 10% plus surcharge of 10% where the taxable income exceeds INR
50,00,000 and 15% if the total income exceeds INR.1,00,00,000. Further education cess and secondary &
higher education cess of 2% and 1% respectively is also payable.
As per provisions of Section 115E of the Act, income (other than dividend which is exempt under section
10(34) of the Act) from investments and LTCG (other than gain exempt under Section 10(38) of the Act)
from assets (other than specified foreign exchange assets) arising to a NRI is taxable at the rate of 20% plus
surcharge of 10% where the taxable income exceeds INR 50,00,000 and 15% if the total income exceeds
INR.1,00,00,000. Further education cess and secondary & higher education cess of 2% and 1% respectively
is also payable. No deduction is allowed from such income in respect of any expenditure or allowance or
deductions under Chapter VIA of the Act.
As per provisions of Section 115F of the Act, LTCG (other than gain exempt under section 10(38)) arising to
a NRI on transfer of a foreign exchange asset is exempt from tax if the net consideration from such transfer
is invested in the specified assets or savings certificates within six months from the date of such transfer,
subject to the extent and conditions specified in that section.
As per provisions of Section 115G of the Act, where the total income of a NRI consists only of income /
LTCG from such foreign exchange asset / specified asset and tax thereon has been deducted at source in
accordance with the Act, the NRI is not required to file a return of income.
As per provisions of Section 115H of the Act, where a person who is a NRI in any previous year, becomes
assessable as a resident in India in respect of the total income of any subsequent year, he / she may furnish a
declaration in writing to the assessing officer, along with his / her return of income under Section 139 of the
Act for the assessment year in which he / she is first assessable as a resident, to the effect that the provisions
of the Chapter XII-A shall continue to apply to him / her in relation to investment income derived from the
specified assets for that year and subsequent years until such assets are transferred or converted into money.
As per provisions of Section 115I of the Act, a NRI can opt not to be governed by the provisions of Chapter
XII-A for any assessment year by furnishing return of income for that assessment year under Section 139 of
the Act, declaring therein that the provisions of the chapter shall not apply for that assessment year. In such
a situation, the other provisions of the Act shall be applicable while determining the taxable income and tax
liability arising thereon.
D. BENEFITS AVAILABLE TO FOREIGN INSTITUTIONAL INVESTORS (“FIIS”) UNDER THE
ACT
a. Dividends exempt under Section 10(34) of the Act
As per provisions of Section 10(34) of the Act, dividend (both interim and final), if any, received by a
shareholder from a domestic company is exempt from tax.
b. Long term capital gains exempt under Section 10(38) of the Act
LTCG arising a transfer of equity shares of a company is exempt from tax as per provisions of Section 10(38)
of the Act provided the transaction is chargeable to STT and subject to conditions specified in that section.
Further, the condition of chargeability of STT shall not be applicable to any long term capital gains arising
out of transaction undertaken on a recognized stock exchange located in any International Financial Services
Centre and where the consideration for such transaction is paid or payable in foreign currency.
It is pertinent to note that as per provisions of Section 14A of the Act, expenditure incurred to earn an exempt
income is not allowed as deduction while determining taxable income.
c. Capital Gains
146
As per provisions of Section 115AD of the Act, income (other than income by way of dividends referred to
in Section 115-O) received in respect of securities (other than units referred to in Section 115AB) is taxable
at the rate of 20% (plus applicable surcharge and education cess and secondary & higher education cess). No
deduction is allowed from such income in respect of any expenditure or allowance or deductions under
Chapter VIA of the Act.
As per provisions of Section 115AD of the Act, capital gains arising from transfer of securities is taxable as
follows:
Nature of Income Rate of Tax (%)
LTCG an transfer of equity shares not subjected to STT 10
STCG on transfer of equity shares subjected to STT 15
STCG on transfer of equity shares not subjected to STT 30
The characterization of the Gain / losses, arising from sale/ transfer of securities to be considered as “capital
gain”. In this regard, “capital asset” is defined under section 2(14) of the Act to mean any securities held by
FII which has invested in such securities in accordance with the SEBI Regulation.
For Corporate FII’s, the tax rates mentioned above stands increased by surcharge, payable at the rate of 5%
where the taxable income exceeds INR.10,00,00,000 and at the rate of 2% where the taxable income exceeds
INR.1,00,00,000 and does not exceed INR.10,00,00,000. Further, education cess and secondary and higher
education cess at the rate of 2% and 1% respectively on the income tax is payable by all categories of FII’s.
Capital gains from transfer of securities accruing or arising to corporate FIIs have been excluded from
chargeability of MAT if tax payable on such income is less than 18.5%. Further, expenditures, if any, debited
to the profit and loss account, corresponding to such income shall also be added back to the book profit for
the purpose of computation of MAT.
It has been clarified that MAT provisions shall not be applicable to corporate FIIs if:
a) The assessee is a resident of the country or specified territory with which India has agreement under
Section 90(1) / 90A(1) of the Act and the assessee does not have permanent establishment in India.
b) The assessee is a resident of country with which India does not have agreement and the assessee is not
required to seek registration under any law for the time being in force relating to foreign companies.
The benefit of exemption under Section 54EC as well as 54EE of the Act, mentioned above in case of the
Company is also available to FIIs.
As per provisions of Section 90(2) of the Act, FIIs can opt to be taxed in India as per the provisions of the
Act or the double taxation avoidance agreement entered into by the Government of India with the country of
residence of the FIIs, whichever is more beneficial.
d. Securities Transaction Tax
Exemption from STT in respect of taxable transactions entered into by any person on a recognized association
located in unit of International Financial Services Centre where the consideration for such transaction is paid
or payable in foreign currency.
E. BENEFITS AVAILABLE TO MUTUAL FUNDS UNDER THE INCOME TAX ACT
As per provisions of Section 10(23D) of the Act, any income of mutual funds registered under the Securities
and Exchange Board of India Act, 1992 or Regulations made there under, or mutual funds set up by public
sector banks or public financial institutions and mutual funds authorized by the Reserve Bank of India is
exempt from income tax, subject to the prescribed conditions.
However, the mutual funds are liable to pay tax on income distributed to unit holders of non-equity oriented
mutual funds under Section 115R of the Act.
147
F. BENEFITS AVAILABLE TO VENTURE CAPITAL COMPANIES / FUNDS UNDER THE ACT
As per the provisions of Section 10(23FB) of the Act, any income of Venture Capital Companies (“VCC”) /
Funds (“VCF”) (set up to raise funds for investment in a Venture Capital Undertaking registered and notified
in this behalf) registered with the Securities and Exchange Board of India, would be exempt from income tax,
subject to the conditions specified therein. However, the exemption is restricted to the VCC and VCF set up
to raise funds for investments in a Venture Capital Undertaking, which is engaged in the business as specified
under Section 10(23FB)(c).
The above provisions shall not be applicable to any income earned by Venture Capital Company or Venture
Capital Fund which is a specified investment fund as per section 115UB of the Act.
Provisions of Section 56(2)(viib) are not applicable to a venture Capital Company / Fund.
In the case of Foreign Venture Capital Companies / Funds who are non-residents, as per Section 90(2) of the
Act, the provisions of the Act would prevail over the provisions of the relevant tax treaty to the extent they
are more beneficial to the non-resident. Thus, the applicable Tax Treaty provisions also need to be examined
and factored for final and more favorable implications.
Notes:
All the above benefits are as per the current tax laws and will be applicable only to the sole / first name holder
where the shares are held by joint holders.
The above statement of possible direct tax benefits sets out the provisions of law in a summary manner only
and is not a complete analysis or hang of all potential tax consequences of the purchase, ownership and
disposal of shares.
The above statement of possible direct tax benefits sets out the possible tax benefits available to the Company
and its shareholders under the current tax laws, presently in force in India. Several of these benefits are
dependent on the Company or its shareholders fulfilling the conditions prescribed under the relevant tax laws.
In respect of non-residents, the tax rates and the consequent taxation mentioned above shall be further subject
to any benefits available under the double taxation avoidance agreement, if any between India and the country
in which the non-resident is a resident. Further, non-resident shall not be entitled to claim any relief under the
double taxation avoidance agreement unless a Tax Residency Certificate along with Form 10F, as specified
are furnished.
148
LEGAL PROCEEDINGS
Our Company and its Subsidiaries are, from time to time, involved in various legal proceedings in the ordinary
course of business, which involve matters pertaining to, amongst others, criminal, tax, civil, intellectual property
rights and other disputes.
Our Company and its Subsidiaries are not involved in any material legal proceedings and disputes, and no
proceedings are threatened, which may have, or have had, a material adverse effect on the business, financial
condition, cash flows or operations of our Company and its Subsidiaries as on the date of this Preliminary
Placement Document.
Inquiries, inspections or investigations under Companies Act
There are no inquiries, inspections or investigations initiated or conducted against our Company and our
Subsidiaries under the Companies Act, 2013 or any previous company law in the last three years. Further, there
are no prosecutions filed (whether pending or not), fines imposed, compounding of offences in the last three years
involving our Company and our Subsidiaries.
Material Frauds
There are no material frauds committed against our Company during the last three years.
Defaults in respect of dues payable
Our Company has no outstanding defaults in relation to statutory dues payable, dues payable to holders of any
debentures (including interest thereon) or dues in respect of deposits (including interest thereon) or any defaults
in repayment of loans from any bank or financial institution (including interest thereon).
Litigation or legal action against Promoters taken by any Ministry, Department of Government or any statutory
authority
There is no litigation or legal action against promoters taken by any Ministry, Department of Government or any
statutory authority.
149
STATUTORY AUDITORS
Our Company’s current statutory auditors, M/s. Varma & Varma, Chartered Accountants, are independent
auditors with respect to our Company as required by the Companies Act and in accordance with the guidelines
issued by the ICAI. The financial statements as at and for Fiscals 2017 and 2016 included in this Preliminary
Placement Document have been audited M/s. Varma & Varma, Chartered Accountants.
The consolidated unaudited financial results for the quarter ended September 30, 2017 have been reviewed M/s.
Varma & Varma, Chartered Accountants in accordance with the Standard on Review Engagement 2410 “Review
of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Institute of
Chartered Accountants of India.
150
GENERAL INFORMATION
Our Company was incorporated as a private limited company on June 27, 2013 as “Minefields Computers
Private Limited”. Subsequently, pursuant to issuance of a fresh certificate of incorporation dated December
2, 2014, the Company was converted into a public limited company ,“Minefields Computers Limited”.
Subsequently, the name of the Company was changed to its current name as “Majesco Limited” pursuant to
issuance of a fresh certificate of incorporation consequent on change of name dated June 12, 2015.
Our registered and corporate office is located at Mastek New Development Centre, MBP-P-136, Mahape,
Navi Mumbai – 400 710, Maharashtra, India.
The authorised share capital of our Company is ` 250,00,00,000 consisting of 50,000,000 Equity Shares of
face value of ` 5 each.
The issued, subscribed and paid-up capital before the issue of our Company is ` 118,043,030 consisting of
23,608,606 Equity Shares of face value of ` 5 each.
The Equity Shares are listed on BSE and NSE with effect from August 19, 2015.
The Issue has been authorised by the Board of Directors on December 14, 2017 and the shareholders pursuant
to their resolution adopted by way of special Resolution in Extra-Ordinary General Meeting on January 11,
2018.
We have received in-principle approval to list the Equity Shares to be issued pursuant to the Issue, on BSE
and NSE on January 23, 2018.
Copies of our Memorandum and Articles of Association will be available for inspection between 9:30 am to
6:30 pm on any weekday (except Saturdays, Sundays and public holidays) at our Registered Office.
We have obtained all consents, approvals and authorisations required in connection with this Issue.
There has been no material change in our financial or trading position since September 30, 2017, the date of
the latest financial statements is included in this Preliminary Placement Document, except as disclosed herein.
Our Company’s statutory auditors are M/s. Varma & Varma, Chartered Accountants. The financial statements
as at and for Fiscals 2017 and 2016 included in this Preliminary Placement Document have been audited M/s.
Varma & Varma, Chartered Accountants.
The consolidated unaudited financial results for the quarter September 30, 2017, have been reviewed M/s.
Varma & Varma, Chartered Accountants in accordance with the Standard on Review Engagement 2410
“Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the
Institute of Chartered Accountants of India.
Except as disclosed in this Preliminary Placement Document, there are no litigation or arbitration proceedings
against or affecting us, or our assets or revenues, nor are we aware of any pending or threatened litigation or
arbitration proceedings, which are or might be material in the context of this Issue. For further details, please
refer to chapter “Legal Proceedings” on page 148.
Our Company confirms that it is in compliance with the minimum public shareholding requirements as
specified in the SCRR, SEBI Listing Regulations and SCRA.
The Floor Price is ` 532 per Equity Share, calculated in accordance with the provisions of Chapter VIII of
the SEBI ICDR Regulations, as certified by M/s. Varma & Varma, Chartered Accountants. Our Company
may offer a discount of not more than 5.00% on the Floor Price in terms of Regulation 85 of the SEBI ICDR
Regulations.
Details of the Compliance Officer:
151
Mr. Nishant Shirke
Company Secretary & Compliance Officer
Mastek New Development Centre, MBP-P-136,
Mahape, Navi Mumbai - 400 710,
Maharashtra, India
Tel.: +91 22 6791 4545
E-mail: [email protected]
152
FINANCIAL STATEMENTS
1. Financial Statements of our Company Page Nos.
Consolidated unaudited financial results for quarter ended September 30, 2017 F - 1 to F – 9
Audited Consolidated Financial Statements for the year ended March 31, 2017 F – 10 to F – 48
Audited Consolidated Financial Statements for the year ended March 31, 2016 F – 49 to F - 82
2. Financial Statements of Majesco US Page Nos.
Consolidated unaudited financial results for quarter ended September 30, 2017 F – 83to F – 109
Consolidated Financial Statements for the year ended March 31, 2017 F – 110 to F – 164
Consolidated Financial Statements for the year ended March 31, 2016 F – 165 to F - 236
Consolidated Financial Statements for the year ended March 31, 2015 F – 237 to F - 277
MAJESCO LIMITED
CONSOLIDATED UNAUDITED FINANCIAL RESULTS FOR
QUARTER ENDED SEPTEMBER 30, 2017
F - 1
e wwww c55,- W./ma Chartered Accountants
LIMITED REVIEW REPORT
To, The Board of Directors, Majesco Limited, MNDC, MBP-P-136, Mahape New Mumbai 400710
1) We have reviewed the accompanying statement of consolidated unaudited financial results (the "Statement") of Majesco Limited (the company'), and its subsidiaries as stated in Note 2 to the consolidated unaudited financial results, hereinafter referred to as the "Group"-for the quarter and six months ended September 30, 2017, being submitted by the company pursuant to the requirements of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations,2015, read with SEBI Circular No. CIR/CFD/CMD/15/2015 dated November 30, 2015 and SEBI Circular No. CIR/CFD/FAC/62/2016 dated July 5, 2016.
2)This statement which is the responsibility of the Company's Management and has been approved by the Board of Directors has been prepared in accordance with the recognition and measurement principles laid down in the Indian Accounting Standard 34 "Interim Financial Reporting" (Ind AS 34'), prescribed under section 133 of the Companies Act, 2013 read with relevant rules issued thereunder and other accounting principles generally accepted in India. Our responsibility is to issue a report on the Statement based on our review.
3) We conducted our review in accordance with the Standard on Review Engagement (SRE) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Institute of Chartered Accountants of India. This standard requires that we plan and perform the review to obtain moderate assurance as to whether the financial results are free of material misstatement. A review is limited primarily to inquiries of group's personnel responsible for financial and accounting matters and analytical procedures applied to group's financial data and thus provide less assurance than an audit. We have not performed an audit and accordingly, we do not express an
audit opinion.
4) The company had prepared consolidated financial results for the quarter and six months period ended September 30, 2016 and year ended March 31, 2017 in accordance with the applicable Accounting Standards prescribed under section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules,2014. Such consolidated financial results for the quarter and six months ended September 30,2016 and year ended March 31, 2017 have been adjusted for the differences in the accounting principles adopted by the Company on transition to Ind AS, which have been reviewed by us. Our review report is not modified in respect of this matter.
-,) )
ACR',-C- ci __--
Unit No. 101, Option Primo, Plot No. X-21, MIDC Road, No. 21, Andheri East, Mumbai - 400 093. Tel : +91 +22 2839 5837 E-mail : [email protected] F - 2
Chartered Accountants
5) We did not review the financial results of eight Subsidiaries considered in the preparation of the Statement, which constitute total revenue on INR 37,557 lakhs and total profit after tax INR 3,413 lakhs for the six months ended September 30, 2017.The Interim financial results and other financial information in respect of these eight subsidiaries are based on management certification filed with U.S. stock exchange, and our opinion on the statement, to the extent they have been derived from such financial results is solely on the basis of the said management certification.
Further, the subsidiaries located outside India whose financial results have been prepared in accordance with accounting principles generally accepted in the United States of America or U.S.GAAP. The Company's management has converted the financial results of such subsidiaries located outside India from U.S.GAAP to Indian Accounting standards (Ind-AS) . We have reviewed these conversion adjustments made by the Company's management. Our report in so far as it relates to the financial results, and balances and affairs of such subsidiaries located outside India is based on the management certification and the conversion adjustments prepared by the management of the Company and reviewed by us.
Our review report is not modified in respect of these matters.
6) Based on our review conducted as above, nothing has come to our attention that causes us to believe that the accompanying statement prepared in all material respects in accordance with the applicable Indian Accounting Standards specified under section 133 of the Companies Act, 2013 and other recognized accounting practices and policies has not disclosed the information required to be disclosed in terms of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 read with SEBI Circular No. CIR/CFD/CMD/15/2015 dated November 30, 2015 and SEBI Circular No. CIR/CFD/FAC/62/2016 dated July 5, 2016 including the manner in which it is to be disclosed, or that it contains any material misstatement.
For VARMA & VARMA Chartered Accountants
FRN 004532S
Place : Mumbai Date : November 7, 2017
CHERIAN K BABY Partner
M. No. 16043
Unit No. 101, Option Primo, Plot No. X-21, MIDC Road, No. 21, Andheri East, Mumbai - 400 093. Tel : +91 +22 2839 5837 E-mail : [email protected] F - 3
MAJESCO LIMITED Registered Office : MNDC, MBP - P - 136
Mahape, Navi Mumbai - 400710 CIN No. L72300MH2013PLC244874
STATEMENT OF CONSOLIDATED UNAUDITED RESULTS FOR THE QUARTER AND SIX MONTHS ENDED SEPTEMBER 30, 2017 All amounts in INR
SN Particulars Quarter ended Six months ended Year ended September 30.2017
June 30, 2017
September 30, 2016
September 30, 2017
(Unaudited)
September 30, 2016
March 31, 2017
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) 1 Income
Revenue from operations 199.11 182.97 210.44 382.08 431.10 827.52 Other income 2.64 1.70 2.06 4.34 4.45 9.67
Total income 201.75 184.67 212.50 386.42 435.55 837.19 2 Expenses
Employee benefits expense 140.33 130.88 149.65 271.21 303.19 563.32 Finance cost 0.69 1.38 1.77 2.07 4.68 7.83 Depreciation and amortization expense 4.82 4.86 3.92 9.68 7.74 17.20 Other expenses 56.60 57.31 53.77 113.91 118.24 237.55
Total expenses 202.44 194.43 209.11 396.87 433.85 825.90 3 Profit / (loss) before exceptional Items (0.69) (9.76) 3.39 (10.45) 1.70 11.29 4 Exceptional items, net - gain / (loss) 10.62 - 10.62 (2.66) 5 Profit / (loss) before tax 9.93 (9.76) 3.39 0.17 1.70 8.63 6 Tax expenses
Income tax - current 15.03 1.43 1.29 16.46 3.14 3.14 Income tax - prior periods - - - - (0.32) Deferred tax (15.77) (6.17) (1.69) (21.94) (3.88) (3.06)
Total tax (0.74) (4.74) (0.40) (5.48) (0.74) (0.24) 7 Net profit / (loss) 10.67 (5.02) 3.79 5.65 2.44 8.87 8 Other comprehensive income
A. (i) Items that will not be reclassified to profit or loss 0.41 (0.69) 0.97 (0.28) 1.39 1.44 (ii) Income tax relating to items that will not be reclassified to profit or loss (0.15) 0.23 (0.33) 0.08 (0.47) (0.48)
B. (i) Items that will be reclassified to profit or loss 3.73 0.19 (6.64) 3.92 (4.54) (9.91) (ii) Income tax relating to items that will be reclassified to profit or loss 0.30 (0.03) (0.08) 0.27 (0.11) 0.20
Total other comprehensive income , net of tax 4.29 (0.30) (6.08) 3.99 (3.73) (8.75) 9 Total comprehensive income 14.96 (5.32) (2.29) 9.64 (1.29) 0.12 10 Profit / (loss) attributable to:
Owners of the company 10.64 (3.18) 2.72 7.46 2.01 6.58 Non-Controlling Interest 0.03 (1.84) 1.07 (1.81) 0.43 2.29
Other comprehensive income attributable to: - - Owners of the company 3.00 (0.22) (4.18) 2.78 (2.60) (6.10) Non-Controlling Interest 1.29 (0.08) (1.90) 1.21 (1.13) (2.65)
Total comprehensive Income attributable to: Owners of the company 13.64 (3.40) (1.46) 10.24 (0.59) 0.48 Non-Controlling Interest 1.32 (1.92) (0.83) (0.60) (0.70) (0.36)
11 Paid up equity share capital (Face value of INR 5/- each) 11.77 11.73 11.68 11.77 11.68 11.68 12 Reserves excluding Revaluation Reserves as per balance sheet NA NA NA NA NA 279.84 13 Earning per share of INR 5/- each (not annualized) . -
Basic (INR) 4.55 (2.15) 1.63 2.40 1.0-5 _ (-• : • Diluted (INR) 4.34 (2.15) „1-X ---- ---, 2.19 ;0.98.' s .6
F - 4
As at PARTICULARS September 30 March 31 ,
, 2017 2017 (Unaudited) (Unaudited)
ASSETS 1 Non-current assets
(a) Property, plant and equipment 23.31 27.13 (b) Capital work-in-progress 0.01 1.73 (c) Investment Property 7.65 10.09 (d) Goodwill 222.26 220.85 (e) Other intangible assets (f) Financial assets
(i) Investments
3.59
-
3.61
- (ii) Loans 5.42 4.50 (ii) Other financial assets 0.11 -
(g) Deferred tax assets (Net) 61.68 39.96 (h) Other non-current assets 7.02 4.44
2 Current assets (a) Financial assets
(i) Investments 68.64 17.58 (ii) Trade receivables 106.45 83.03 (iii) Cash and cash equivalents 108.29 103.07 (iv) Bank balances 5.01 55.01 (v) Loans 0.35 0.35 (vi) Other financial assets 67.42 54.34
(b) Current tax assets (Net) - 4.85 (c) Other current assets 23.76 24.11
Total Assets 710.97 654.65
MAJESCO LIMITED Registered Office : MNDC, MBP - P - 136
Mahape, Nevi Mumbai - 400710 CIN No. L72300MH2013PLC244874
BALANCE SHEET
All amounts in INR c ores, unless otherwise stated
F - 5
PARTICULARS As at
September 30 .2017
March 31 , 2017 ___,
(Unaudited) (Unaudited) EQUITY AND LIABILITIES
1 Equity Equity share capital 11.77 11.69 Other equity 298.94 279.84 Non-controlling interest 75.11 76.58
2 Non-current liabilities (a) Financial liabilities
(i) Borrowings 55.23 54.88 (ii) Other financial liabilities 6.20 5.50
(b) Provisions 21.12 21.01 (c) Deferred tax liabilities (Net) - - (d) Other non-current liabilities 28.35 28.17
3 Current liabilities (a) Financial liabilities
(i) Borrowings 59.78 24.01 (ii) Trade payables 15.38 14.48 (iii) Other financial liabilities 71.12 75.93
(b) Other current liabilities 52.65 54.10 (c) Provisions 7.38 8.46 (d) Current tax liabilities (Net) 7.94 -
710.97 654.65
MAJESCO LIMITED Registered Office : MNDC, MBP - P - 136
Mahape, Navi Mumbai - 400710 CIN No. L72300MH2013PLC244874
(All amounts in INR crores, unless otherwise stated)
F - 6
MAJESCO LIMITED Registered Office : MNDC, MBP - P - 136
Mahape, Nevi Mumbai - 400710 CIN No. L72300MH2013PLC244874
STATEMENT OF CONSOLIDATED UNAUDITED SEGMENTAL INFORMATION FOR THE QUARTER AND SIX MONTHS ENDED SEPTEMBER 30, 2017
(All amounts in INR crores, unless otherwise stated)
SN Particulars Quarter ended Six months ended Year ended September 30,
2017 June 30,
2017 September 30,
2016 September 30,
2017 September 30,
2016 March 31,
2017 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
I Segment Revenue North America 176.98 161.70 184.67 338.68 379.69 731.35 UK 9.39 9.67 15.45 19.06 31.43 55.86 Others 12.74 11.60 10.32 24.34 19.98 40.31
Income from operations (net) 199.11 182.97 210.44 382.08 431.10 827.52 2 Segment Results profit / (loss) before tax and interest
North America 12.34 (1.26) 9.47 11.08 17.10 42.68 UK 0.89 0.99 5.61 1.88 12.29 17.10 Others 0.74 0.41 0.89 1.15 1.21 2.78
Total 13.97 0.14 15.97 14.11 30.60 62.56 Less : i. Finance costs 0.69 1.38 1.77 2.07 4.68 7.83
ii. Other un-allocable expenditure net of un-allocable income 13.97 8.52 10.81 22.49 24.21 43.44 Profit / (loss) from ordinary activities after finance costs but before exceptional Items (0.69) (9.76) 3.39 (10.45) 1.71 11.29 Exceptional items - gain / (loss) 10.62 - 10.62 - (2.66) Profit / (loss) from ordinary activities before tax and non-controlling interest 9.93 (9.76) 3.39 0.17 1.71 8.63
3 Segment assets North America 523.34 494.54 460.36 523.34 460.36 484.78 UK 27.16 38.22 28.16 27.16 28.16 25.58 Others 29.84 31.77 24.56 29.84 24.56 24.83 Unallocable / corporate 130.63 121.42 138.33 130.63 138.33 119.46
Total segment assets 710.97 685.95 651.41 710.97 651.41 654.65 4 Segment liabilities
North America 277.22 249.88 246.60 277.22 246.60 255.10 UK 12.11 29.65 10.64 12.11 10.64 9.85 Others 6.95 7.40 1.53 6.95 1.53 6.12 Unallocable / corporate 28.87 17.64 38.47 28.87 38.47 15.47
Total segment liabilities 325.15 304.57 297.24 325.15 297.24 286.54 5 Capital employed
North America 246.12 244.66 213.76 246.12 213.76 229.68 UK 15.05 8.57 17.52 15.05 17.52 15.73 Others 22.89 24.37 23.03 22.89 23.03 18.71 Unallocable / corporate 101.76 103.78 99.86 101.76 99.86 103.
Total capital employed 385.82 381.38 354.17 385.82 354.17 •.tkt
F - 7
MAJESCO LIMITED Registered Office : MNDC, MBP - P - 136
Mahape, Navi Mumbai - 400710 CIN No. L72300MH2013PLC244874
NOTES:
1 The above results were reviewed by the Audit Committee on November 07, 2017 and were thereafter approved by the Board at its meeting held on November 07, 2017.
2 The consolidated financial results and consolidated statement of assets and liabilities relate to Majesco Group. The Group consists of Majesco Limited and its subsidiaries and step down subsidiaries mentioned below :
Majesco Majesco (Thailand) Co. Ltd. Majesco (UK) Limited Majesco Software and Solutions Inc. Majesco Software and Solutions India Private Limited Majesco Canada Limited Majesco Sdn. Bhd. Cover All Systems Inc. Majesco Asia Pacific Pte. Ltd.
3 The Company adopted Indian Accounting Standards ('IND AS") and accordingly the financial results and the Balance Sheet for the above periods presented have been prepared in accordance with the recognition and measurement principles laid down in Ind AS 34 Interim Financial Reporting prescribed under Section 133 of the Companies Act, 2013 read with the relevant rules issued thereunder and the other accounting principles generally accepted in India. The date of transition to Ind AS is April 1, 2016. The impact of transition has been accounted for in opening reserve and the comparative period results have been restated accordingly.
4 As required by Circular No.CIR/CFD/FAC/62/2016 dated July 5, 2016 issued by the Securities and Exchange Board of India ('SEBI'), the financial results and financial information for the quarter ended and six months ended September 30,2016 and the year ended March 31, 2017 have been prepared by the management after making the necessary adjustments to give a true and fair view of the results in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013. These adjustments have been subject to limited review by auditors.
5 The company has prepared reconciliation of profit under Indian GAAP vis-à-vis total comprehensive income under Ind AS for the year ended March 31,2017 and for the three months and six months period ended September 30, 2016.
Reconciliation between statement of profit and loss as previously reported (referred to as 'Previous GAAP') and Ind AS
Particulars Quarter ended Six months ended
__, Year ended
September 30 ,2016
September 30 ,2016
March 31 , 2017
(Unaudited) (Unaudited) (Unaudited) Net Profit as per previous GAAP 7.11 8.82 19.40
Measurement of financial instruments at fair value (0.58) (1.03) (1.86) ESOP fair valuation cost (4.34) (8.89) (16.53) Actuarial (gain)/losses on employee defined benefit funds recognized in other comprehensive income (0.96) (1.39) (1.44) Reversal of Goodwill amortization 2.21 4.42 8.85 Tax impact 0.35 0.51 0.45
Net profit as per IND AS 3.79 2.44 8.87 Other comprehensive income, net of taxes (6.08) (3.73) (8.75)
Total comprehensive income under IND AS (2.29) (1.29) 0.12
F - 8
As per our separate report of even date
For Varma & Varma Chartered Accountants
FRN: 004532
Partner M No: 16043
Place : Navi Mumbai Date : November 07, 2017
MAJESCO LIMITED Registered Office : MNDC, MBP - P - 136
Mahape, Navi Mumbai - 400710 CIN No. L72300MH2013PLC244874
6 The company has prepared reconciliation of Equity under Indian GAAP vis-A-vis Equity under Ind AS for the year ended March 31,2017. Reconciliation of equity previously reported ( referred to as 'Previous GAAP') and Ind AS:
(All amounts in INR crones unless otl . Particulars
. Year ended
March 31 , 2017 (Unaudited)
Equity under Previous GAAP 363.13 IND AS effects
Fair valuation of Security deposits and Mutual funds investments (0.02) Fair valuation of term loan 0.60 Remeasurement of defined benefit obligation (1.76) Fair Valuation of consideration payable in business combination (2.66) Tax on Hedging reserve (0.19) Reversal of goodwill amortization 8.85 Others 0.16
Equity as per IND AS 368.11
7 Other comprehensive income includes remeasurement of defined benefit obligation, exchange differences on translation of foreign operations and net change in fair value of cash flow hedge.
8 Exceptional items :
(a) During the quarter and six months ended September 30, 2017, the company has made a profit on sale of investment property of INR 10.62 crores. The Company had entered into a deed of assignment on August 1, 2017 for assignment of all its rights, title and interest in relation to the property located at 3rd Floor, Marisoft III, Building — E, East wing Pune, Maharashtra in favour of the buyer for a total consideration of INR 15.55 crores. The said transaction has been completed on August 1, 2017.
(b) In the previous year, The company has provided INR 2.25 crore on account of it's share of stamp duty against demand raised on Mastek Limited by the Office of the Superintendent of Stamps, Gandhinagar, for implementation of the demerger scheme.
(c) In the previous year, Majesco Sdn Bhd, a step down subsidiary of the company, in its consolidated financials has provided loss of INR 0.41 crore on account of impairment of goodwill of Majesco Asia Pacific Pte Ltd as a result of lower than expected performance of Majesco Asia Pacific Pte Ltd. Considering the nature and amount of loss provided it has been disclosed as an exceptional item.
9 The Board of Directors at their meeting held on August 03, 2017 had declared Special Dividend of INR 1/- per share of nominal value of INR 5/- each for the financial year. The Company has complied with necessary provisions of The Companies Act, 2013 relating to payment of dividend.
10 Previous period's / year's figures have been regrouped or reclassified wherever necessary.
For and on behalf of the Board
Farldkzani Managing Director DIN: 06914620
Place : Navi Mumbai Date : November 07, 2017
F - 9
2017 ANNUAL REPORT | 109
CONSOLIDATED FINANCIAL
STATEMENTS
F - 10
110 | MAJESCO LIMITED
INDEPENDENT AUDITORS’ REPORTCONSOLIDATED FINANCIAL STATEMENTS
To, The Members, Majesco Limited
Report on the Consolidated Financial Statements
Management’s Responsibility for the Consolidated Financial Statements
Auditors’ Responsibility
Opinion
F - 11
Financial Statements
2017 ANNUAL REPORT | 111
Report on Other Legal and Regulatory Requirements
VARMA & VARMA
Cherian K Baby Place: Mumbai Date: May 9, 2017
F - 12
112 | MAJESCO LIMITED
INDEPENDENT AUDITORS’ REPORT
ANNEXURE A TO THE INDEPENDENT AUDITORS’ REPORT
Management’s Responsibility for Internal Financial Controls
Auditors’ Responsibility
error.
F - 13
Financial Statements
2017 ANNUAL REPORT | 113
procedures may deteriorate.
Opinion
VARMA & VARMA
Cherian K Baby Place: Mumbai Date: May 9, 2017
F - 14
114 | MAJESCO LIMITED
CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2017`
Note Ref
As at March 31, 2017
As at March 31, 2016
EQUITY AND LIABILITIES Shareholders’ funds
3 1,168.15 1,152.62 27,625.44 28,793.59 27,593.51
Minority interest 7,519.27
5 5,555.63 6 2,816.45 3,321.71 7 2,108.20
1,660.58 Trade payables Micro small and medium enterprises 1.79
Other than micro small and medium enterprises 1,427.29 10 13,770.01 11 844.50
Total 64,497.31 67,368.27 ASSETSNon-current assets
Tangible assets 3,489.09 Intangible assets 2,755.58 3,375.03
18,797.63 173.31
13 231.19 4,044.84
15 1,270.93 16 33.82
Current assets Current investments 17 1,711.51 Trade receivables 8,300.47
15,808.56 20 2,323.00
Other current assets 21 5,557.38 Total 64,497.31 67,368.27
1 & 2Other notes
For and on behalf of the Board As per our report of even dateFarid Kazani
DIN- 06914620
Venkatesh Chakravarty
DIN- 01102892
For Varma & Varma
FRN: 004532S
Radhakrishnan Sundar
DIN- 00533952
Kunal Karan Nishant S Shirke Cherian K Baby
M No: 16043
Place : Navi Mumbai Date : May 9, 2017
Place : Navi Mumbai Date : May 9, 2017
F - 15
Financial Statements
2017 ANNUAL REPORT | 115
For and on behalf of the Board As per our report of even dateFarid Kazani
DIN- 06914620
Venkatesh Chakravarty
DIN- 01102892
For Varma & Varma
FRN: 004532S
Radhakrishnan Sundar
DIN- 00533952
Kunal Karan Nishant S Shirke Cherian K Baby
M No: 16043
Place : Navi Mumbai Date : May 9, 2017
Place : Navi Mumbai Date : May 9, 2017
CONSOLIDATED PROFIT AND LOSS STATEMENT FOR THE YEAR ENDED MARCH 31, 2017`
Note Ref
Year ended March 31, 2017
Year ended March 31, 2016
22 82,750.54 75,715.26 Other income 23 899.56 Total Revenue 83,650.10 76,623.40
54,519.84 50,557.21 25 555.60 26 2,607.06 27 23,742.34
Total Expenses 81,424.84 76,937.41
2,225.26
266.11
1,959.15
313.69 720.36 (262.35)
(31.56)
1,939.37 730.77
Minority interest 512.09
1,427.28 688.82
Earnings per Share (EPS)` `
`) 6.14 3.02 `) 5.78
1 & 2Other notes
F - 16
116 | MAJESCO LIMITED
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2017`
Year ended March 31, 2017
Year ended March 31, 2016
2,225.26
(561.09) (111.62)
(4.44) 21.81
555.60 2,647.76
556.32 160.01 -
74.42 5,404.03 5,615.62
374.99 (1,849.84)
9,544.80 (511.42) 9,033.39 (266.11) 8,767.28 (1,497.49)
69.34 (2,466.99)
Capital advances - (440.00)
164.92 561.09 322.23
- (403.49)
(2,515.13) (11,779.43)
358.47 (1,845.00)
(555.60) (2,042.13) 6,044.15
(199.94)
Net (decrease) / increase in cash and cash equivalents during the year 4,010.09 (7,488.94) 3,860.61
- -
Cash and cash equivalents at the end of the year 7,870.70 3,860.61
F - 17
Financial Statements
2017 ANNUAL REPORT | 117
For and on behalf of the Board As per our report of even dateFarid Kazani
DIN- 06914620
Venkatesh Chakravarty
DIN- 01102892
For Varma & Varma
FRN: 004532S
Radhakrishnan Sundar
DIN- 00533952
Kunal Karan Nishant S Shirke Cherian K Baby
M No: 16043
Place : Navi Mumbai Date : May 9, 2017
Place : Navi Mumbai Date : May 9, 2017
F - 18
118 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2017
Chennai.
Name of the Company Country of
held as at March 31,
2017
held as at March 31,
2016
Majesco
Majesco Canada Ltd. Canada
United
India
Malaysia
Thailand
F - 19
Financial Statements
2017 ANNUAL REPORT | 119
Assets Useful Life
Computers 2 years
5 yearsVehicles 5 years
Leasehold land Lease Term ranging
Leasehold improvements 5 years or the primary period
2013.
residual values are received periodically, including at each
Assets Useful Life
2.5 Impairment of assets
selling price and value in use. Value in use is the present value
2.6 Investments
Investments that are readily realisable and are intended
current investments. Current investments are carried at cost
made to recognise a decline, other than temporary, in the
sheet date.
in subsidiaries.
F - 20
120 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
plans established and maintained in accordance
(c) Compensated Absences
accumulated leave balance subject to an upper limit
F - 21
Financial Statements
2017 ANNUAL REPORT | 121
compensated absences such as paid annual leave and
as the related services are rendered and related costs are
to the collectability arises subsequent to the rendering
not adjusted.
2.11 Other income
right to receive payment is established. Interest income is
2.12 Leases
the liability and interest cost, so as to obtain a constant
lease term.
2.13 Earnings per share
the year, unless they have been issued at a later date. The
proceeds receivable had the shares been actually issued at F - 22
122 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
2.14 Income taxes
2.15 Onerous contracts
segments on a reasonable basis, have been included under
2.19 Cash and cash equivalents
Cash and cash equivalents include cash in hand, demand
F - 23
Financial Statements
2017 ANNUAL REPORT | 123
`
As at March 31, 2017
As at March 31, 2016
3 Share capital
` `
1,500.00 1,500.00
Total 1,500.00 1,500.00
` `
1,168.15 1,152.62
Total 1,168.15 1,152.62
a. `
b. The company declares and pays dividends in Indian rupees.
c. In the previous years
d.
No. of shares Amount No. of shares Amount
23,052,401 1,152.62 50,000 5.00
- -
- -
310,634 15.53
23,363,035 1,168.15 23,052,401 1,152.62
f. Details of shares held by shareholders holding more than 5% of the aggregate shares in the Company
` `
No. of shares % of holding
3,099,552 13.27%
2,634,763 11.28%
2,519,100 10.78%
1,390,161 5.95%
1,307,989 5.60%
Total 10,951,565 46.88% 9,856,132 42.76%
2,398,300 3,072,633
F - 24
124 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
`
As at March 31, 2017
As at March 31, 2016
4 Reserves and surplus
5,219.41 -
5,219.41
261.92 332.89
10.05 604.86
133.88 -
26.51 (10.05) 150.34
General reserve 4,177.24
- - -
95.26 4,272.50
Hedging reserve account 116.85
- (59.07)
17.76 75.54
2,901.25 -
(938.20) 2,211.66 282.12
2,245.17
13,630.34 - 16,650.72
-
1,427.28 15,057.62
Total 27,625.44 26,440.89
F - 25
Financial Statements
2017 ANNUAL REPORT | 125
`
As at March 31, 2017
As at March 31, 2016
5,404.17
151.46 Total 5,555.63 4,585.09
be due and payable by March 1 , 2021.
As at March 31, 2017
As at March 31, 2016
Unearned revenue 2,816.45
- 757.52 Total 2,816.45 3,321.71
7 Long-term provisions
2,101.58
6.62 Total 2,108.20 1,872.04
- 1,268.90
391.68 Total 1,660.58 4,605.18
`
`
`
`
F - 26
126 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
`
As at March 31, 2017
As at March 31, 2016
9 Trade payables 1.79
1,427.29 Total 1,429.08 1,806.26
9.1 MSME disclosure 1.79
-
appointed day -
the interest amounts under this act. -
Interest accrued and remaining unpaid - -
Total 1.79 -
outstanding as payable to such supplier at the year end.
236.56 105.65 1,080.83
Unearned revenue 4,350.45 5,231.66 238.03 135.00
Other payables 3,377.94 2,302.97
0.01 310.10 Interest accrued and not due 151.73
741.45 48.36
1,059.57 Others 182.11 Total 13,770.01 15,472.89
11 Short-term provisions
679.99 Other provisions
1.61 162.90 271.23
- Total 844.50 883.45
F - 27
Financial Statements
2017 ANNUAL REPORT | 127
12
Fixe
d as
sets
(i)
Ta
ngib
le a
sset
sGr
oss B
lock
(at c
ost)
Net
Blo
ck (W
DV)
As a
t Apr
il 1,
201
6Ad
just
men
tsFo
reig
n ex
chan
ge
adju
stm
ents
As a
t Mar
ch
31, 2
017
As a
t Apr
il 1,
201
6Fo
r the
ye
arAd
just
men
tsFo
reig
n ex
chan
ge
adju
stm
ents
As a
t Mar
ch
31, 2
017
As a
t Mar
ch
31, 2
017
As a
t Mar
ch
31, 2
016
60.
15
1,2
05.7
6
Com
pute
rs 3
51.6
3 6
1.76
6
60.2
3
Vehi
cles
2.6
7 1
31.6
0 To
tal
( a )
7,4
26.7
0 1
,554
.63
(353
.91)
(105
.05)
8,5
22.3
7 4
,594
.55
1,3
04.7
2 (3
01.9
3) (8
2.04
) 5
,515
.30
3,0
07.0
7 2
,832
.15
b.
Leas
ed a
sset
s :
Le
aseh
old
land
22.
66
Le
aseh
old
impr
ovem
ents
1
05.2
2 5
5.11
Vehi
cles
1
2.60
To
tal (
b )
508
.56
151
.65
(31.
48)
(6.8
6) 6
21.8
7 8
2.18
7
8.64
(1
8.56
) (2
.41)
139
.85
482
.02
426
.38
Tota
l ( a
+ b
) 7
,935
.26
1,7
06.2
8 (3
85.3
9) (1
11.9
1) 9
,144
.24
4,6
76.7
3 1
,383
.36
(320
.49)
(84.
45)
5,6
55.1
5 3
,489
.09
3,2
58.5
3
(ii)
Inta
ngib
le a
sset
s
Gros
s Blo
ck (a
t cos
t)N
et B
lock
(WDV
)
As a
t Apr
il 1,
201
6Ad
just
men
tsFo
reig
n ex
chan
ge
adju
stm
ents
As a
t Mar
ch
31, 2
017
As a
t Apr
il 1,
201
6Fo
r the
ye
arAd
just
men
tsFo
reig
n ex
chan
ge
adju
stm
ents
As a
t Mar
ch
31, 2
017
As a
t Mar
ch
31, 2
017
As a
t Mar
ch
31, 2
016
Tota
l 7
,247
.71
640
.68
(75.
48)
(196
.00)
7,6
16.9
1 3
,872
.68
1,2
14.9
2 (7
5.48
) (1
50.7
9) 4
,861
.33
2,7
55.5
8 3
,375
.03
Tot a
l ( i
+ ii
) 1
5,18
2.97
2
,346
.96
(460
.87)
(307
.91)
16,
761.
15
8,5
49.4
1 2
,598
.28
(395
.97)
(235
.24)
10,
516.
48
6,2
44.6
7 6
,633
.56
`pe
ndin
g to
be
regi
ster
ed a
s at M
arch
31,
201
7
`
`
F - 28
128 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS12
Fi
xed
asse
ts fo
r pre
viou
s yea
r end
ed M
arch
31,
201
6
(i)
Tang
ible
ass
ets
Gros
s Blo
ck (a
t cos
t)Ne
t Blo
ck (W
DV)
Tran
sfer
pu
rsua
nt to
th
e sc
hem
e of
ar
rang
emen
t(R
efer
not
e 39
)
On
subs
idia
ries
Fore
ign
exch
ange
adju
stm
ents
As a
t M
arch
31,
20
16
Tran
sfer
pu
rsua
nt to
th
e sc
hem
e of
ar
rang
emen
t(R
efer
not
e 39
)
On
subs
idia
ries
For t
he
year
Fore
ign
exch
ange
adju
stm
ents
As a
t M
arch
31,
20
16
As a
t Mar
ch
31, 2
016
36.
53
Co
mpu
ters
16.
76
351
.63
375
.65
660
.23
Ve
hicl
es 3
.00
111
.51
60.
36
50.
26
131
.60
Tota
l ( a
) 4
,825
.71
754
.15
1,7
35.9
9 (3
0.98
) 1
41.8
3 7
,426
.70
3,2
51.4
0 5
07.9
5 7
46.2
8 (2
8.10
) 1
17.0
1 4
,594
.55
2,8
32.1
5 b.
Le
ased
ass
ets :
Le
aseh
old
land
Le
aseh
old
impr
ovem
ents
3
.37
23.
31
1.5
7
Vehi
cles
1
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8 To
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,951
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.20
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,280
.01
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.34
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.28
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.58
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,258
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(ii
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ch
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- 15
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9,43
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1,
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21
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,182
.97
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6,63
3.56
`
F - 29
Financial Statements
2017 ANNUAL REPORT | 129
`
As at March 31, 2017
As at March 31, 2016
13 Non-current investments
Opening 387.62
-
Closing 387.62
Opening 147.65
-
8.78
Closing 156.43
Net block 231.19 239.97
231.19 239.97
14 Deferred tax assets
199.86 62.55
1,017.49
2,110.88 3,131.60
616.87
835.41
(735.67)
Total 4,044.84 3,801.36
15 Long-term loans and advances
Capital advances -
378.42
83.00 172.77
Other loans and advances
809.51
Total 1,270.93 1,044.82
16 Other non-current assets
33.82 29.70
F - 30
130 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
`
As at March 31, 2017
As at March 31, 2016
17 Current investments
`
372.07
`
267.52
` ` 1,000)
220.00
`
219.84
`
218.79
`
213.29
`
200.00
`
-
`
- 200.75
`
- 250.31
`
- 210.00
Total 1,711.51 1,196.40
1,711.51
1,758.12 1,199.07
18 Trade receivables
Unsecured, considered good 145.88 2.01
483.83
(483.83)
Unsecured, considered good 8,154.59
334.49
(334.49)
Total 8,300.47 15,195.02
F - 31
Financial Statements
2017 ANNUAL REPORT | 131
`
As at March 31, 2017
As at March 31, 2016
19 Cash and bank balances Cash and cash equivalents Cash on hand 0.28
In current accounts 7,679.94 3,606.06 190.49
7,870.71
7,840.00
94.90 100.26 2.95 162.51
7,937.85 7,662.77 Total 15,808.56 11,523.38
` `
` `
Company. ` ` 2.20 given to
``
20 Short-term loans and advances
Other loans and advances 141.96 480.63 306.84
78.10
Considered good 34.93 7.70
(7.70) 1,206.04
74.50 Total 2,323.00 2,392.54
scheme, paid under protest. F - 32
132 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
`
As at March 31, 2017
As at March 31, 2016
21 Other current assets
38.32 Unbilled revenue Considered good 5,370.38
379.28 (379.28)
64.40
Considered good 84.28 - 23.53 -
Total 5,557.38 6,009.85
81,334.57
1,281.62 1,737.30 134.35
Total 82,750.54 75,715.26
23 Other income 561.09 322.23 139.46 111.62
4.44 2.02 Miscellaneous income 82.95 Total 899.56 908.14
49,609.11 2,980.33
21.81 1,908.59
Total 54,519.84 50,557.21
25 Finance costs 346.69
Interest on term loan 101.39 7.36
100.16 Total 555.60 428.18
1,383.36 1,214.92 1,005.66
8.78 Total 2,607.06 1,784.94 F - 33
Financial Statements
2017 ANNUAL REPORT | 133
`
As at March 31, 2017
As at March 31, 2016
27 Other expensesTravelling and conveyance 4,882.01
5,588.44 3,485.79 1,581.49 1,500.52
321.35 207.00 Others 1,226.96
1,404.47 1,130.60 707.14 696.90 322.90 667.31 143.73
Insurance 617.07 344.47 418.90 556.32 160.01 160.92 221.31 207.64
9.05 7.27 23.70
74.42 -
985.10 Total 23,742.34 24,167.08
23.78 23.50 11.78
7.00 7.00 1.10 1.64
130.87
- 225.41 111
40.70 Total 266.11 457.59
`
F - 34
134 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
`
Year ended March 31, 2017
Year ended March 31, 2016
29 Earnings per share (EPS)
1,427.28
23,238,779 1,443,488
24,682,267
` `
`) 6.14 3.02`) 5.78
As at March 31, 2017
As at March 31, 2016
31.12 27.00
776.47 -
`
Company
6,485.00
7,521.54 1,621.25
490.26
- 171.50
Capital and other commitments
377.61
F - 35
Financial Statements
2017 ANNUAL REPORT | 135
`
As at March 31, 2017
As at March 31, 2016
31 Leases
1,126.97 1,130.56
2,585.16
454.32
Total minimum lease payments 4,166.45
Year ended March 31, 2017
Year ended March 31, 2016
1,404.47 1,130.60
(ii) Finance leases
257.32 113.55
158.81
Total minimum lease payments 416.13 200.35
28.11
388.02 185.40
151.46
236.56 105.65
388.02 185.40
32 Income taxes
F - 36
136 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
`
Year ended March 31, 2017
Year ended March 31, 2016
724.05 626.06 10.73 6.25
1.06 35.29 27.26
109.98 2,099.22
Total (Refer note 24) 2,980.33 2,730.07
As at March 31, 2017
As at March 31, 2016
2,060.75 287.50 223.07
Interest cost 182.37 (425.72) (252.02)
- 1,852.88 2,060.75
2,100.49 189.13
0.04 -
(252.02) (42.80)
1,994.84 2,100.50
1,852.88 2,060.75 (1,994.84)
- (141.96) (39.75)
141.96 Total 141.96 39.75
287.50 223.07 Interest cost 182.37
(189.13) (382.92) (102.18) 47.85
F - 37
Financial Statements
2017 ANNUAL REPORT | 137
`
Year ended March 31, 2017
Year ended March 31, 2016
100%
7.45%7.50%7.00%
60 years 60 years
210.00 210.00
As at March 31, 2017
As at March 31, 2016
(1,852.88) 1,994.84 2,100.50
141.96
- On plan assets 42.80
Opening balance 2,343.62 -
Charge during the year 949.05 (511.10)
Closing balance 2,781.57 2,343.62 2,101.58
679.99
(a) Nature and extent of employee share-based payment plans that existed during the year:
Plan I
F - 38
138 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
`
` `
As at March 31, 2017
As at March 31, 2016
3,072,633 - 2,575,177
77,500 (310,634) (100,483)
Cancelled during the year (340,716) 2,398,300 3,072,633
granted.
Year ended March 31, 2017
Year ended March 31, 2016
1,427.28 (745.52)
21.81 703.57
23,238,779 `) 6.14 3.02
`) 3.03
24,682,267 `) 5.78
`) 2.85 0.26
310,634`) 112.16 111.20 F - 39
Financial Statements
2017 ANNUAL REPORT | 139
`
As at March 31, 2017outstanding
Weighted average exercise price (`)
Weighted average remaining
contractual life (years)
`)
850,545 66.51 5.47
746,380 127.45 5.93
801,375 377.99 7.94
Total 2,398,300 189.55 6.45
As at March 31, 2016
`)
1,059,846 68.65 7.78
1,053,287 132.27 7.75
959,500 378.34 10.25
Total 3,072,633 187.16 8.54
Year ended March 31, 2017
Year ended March 31, 2016
77,500
Discounted price as per the scheme
`) 513.40
`) 511.48
51.62%
6 years 6 years
0.00%
7.19%
dividend by the Company.
150.34
21.81
F - 40
140 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
35
Year ended March 31, 2017
Year ended March 31, 2016
74.42 180.18
Contracts contracts contracts
`
Contracts contracts contracts
` 37.00 106.60
As at March 31, 2017
As at March 31, 2016
-
(57.78) (57.78) (116.85)
6.62 -
64.40
As at March 31, 2017 As at March 31, 2016 Currency FC in lakhs ` in lakhs FC in lakhs ` in lakhs
I. Assets Trade receivable 0.10 0.33
Total Trade receivable 0.10 0.33 - - Unhedged receivables 0.10 0.33 - -
0.01 0.33 1.07 71.13 0.20
Total payables 0.21 13.02 47.58 3,152.45 Unhedged payables 0.21 13.02 47.58 3,152.45
`
F - 41
Financial Statements
2017 ANNUAL REPORT | 141
`37 Related Party Disclosures
Key Management Personnel
Year ended March 31, 2017
Year ended March 31, 2016
239.83
27.28 27.21
148.32
139.93
231.15 235.13
232.02
387.47
227.56
207.22 203.22
69.64 27.52
137.80
41.39 27.11
11.20
-
-
2.01
F - 42
142 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
`
Year ended March 31, 2017
Year ended March 31, 2016
Segment Revenue
73,135.39
5,585.98
Others 4,029.17 3,701.50
Total 82,750.54 75,715.26
Segment Result
4,913.06
1,705.31
Others 426.26
Total 7,044.63
Common unallocable charges, net 5,163.33
555.60
Other income (899.56)
2,225.26
266.11
1,959.15 (771.60)
common unallocable charges.
F - 43
Financial Statements
2017 ANNUAL REPORT | 143
`
As at March 31, 2017
As at March 31, 2016
Segment Assets
47,614.00
2,558.37
Others 2,374.87
52,547.24
11,950.07
Total Assets 64,497.31 67,368.27
25,195.80
984.66
Others 610.97
26,791.43
1,393.02
28,184.45 32,546.61
Year ended March 31, 2017
Year ended March 31, 2016
Capital expenditure incurred
2,052.75
54.45
Others 173.96
Unallocated 65.80
Total 2,346.96 3,715.85
2,451.76
46.97 26.27
Others 25.98
Unallocated 82.35
Total 2,607.06 1,784.94
`F - 44
144 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
`
`
` `
`
`
` 2,625.00).
`
`
`
F - 45
Financial Statements
2017 ANNUAL REPORT | 145
`
44 Mexico Branch
45 Minority Interest
`)
NotesOther Total
17,500 10,000 27,500
6,365 6,365
17,500 17,500
F - 46
146 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Net AssetsAs at March 31, 2017 As at March 31, 2016
As % of consolidated
net assets
Amount As % of consolidated
net assets
Amount
Majesco Limited 89.94% 25,897.25
SubsidiaryIndian
2.56% 736.26
Majesco -56.71% (16,328.29)10.08% 2,901.95 13.49% 3,883.90
Majesco Canada Ltd. -6.69% (1,926.39)0.28% 80.15
-0.49% (142.17) 37.76 -2.40% (690.49)-0.14% (39.36) 0.13
Minority Interest -26.11% (7,519.27)
76.20% 21,940.06
Total 100.00% 28,793.59 100.00% 27,593.51
Year ended March 31, 2017 Year ended March 31, 2016
As % of consolidated
Amount As % of consolidated
Amount
Majesco Limited 16.58% 236.65
SubsidiaryIndian
28.90% 412.42
Majesco -218.93% (3,124.78)-6.37% (90.86) 262.55
327.32% 4,671.82 Majesco Canada Ltd. -13.95% (199.15)
4.50% 64.18 5.98% 85.29
-4.36% (62.30)-2.29% (32.64)
Minority Interest -35.88% (512.09)
-1.49% (21.27)
Total 100.00% 1,427.28 100.00% 688.82
`
F - 47
Financial Statements
2017 ANNUAL REPORT | 147
`
49
For and on behalf of the Board As per our report of even dateFarid Kazani
DIN- 06914620
Venkatesh Chakravarty
DIN- 01102892
For Varma & Varma
FRN: 004532S
Radhakrishnan Sundar
DIN- 00533952
Kunal Karan Nishant S Shirke Cherian K Baby
M No: 16043
Place : Navi Mumbai Date : May 9, 2017
Place : Navi Mumbai Date : May 9, 2017
F - 48
CONSOLIDATED
FINANCIAL
STATEMENTS
2016 ANNUAL REPORT | 101
F - 49
To,
The Members,
Majesco Limited
Report on the Consolidated Financial Statements
1. We have audited the accompanying consolidated financial statements of Majesco Limited (“hereinafter referred to as the Holding
Company”) and its subsidiaries (the Holding Company and its subsidiaries together referred to as or “the Group”), comprising of the
consolidated balance sheet as at March 31, 2016, the consolidated statement of Profit and Loss, the consolidated Cash Flow Statement
for the year then ended, and a summary of the significant accounting policies and other explanatory information prepared based on the
relevant records (hereinafter referred to as “the consolidated financial statements”).
Management’s Responsibility for the Consolidated Financial Statements
2. The Holding Company’s Board of Directors is responsible for the preparation of the consolidated financial statements in terms of the
requirements of the Companies Act, 2013 (hereinafter referred to as “the Act”) that give a true and fair view of the consolidated financial
position, consolidated financial performance and consolidated cash flows of the Group in accordance with the accounting principles
generally accepted in India, including the Accounting Standards specified under Section 133 of the Companies Act, 2013 read with Rule 7
of the Companies (Accounts) Rules, 2014. The Holding Company’s Board of Directors is also responsible for ensuring accuracy of records
including financial information considered necessary for the preparation of Consolidated Financial Statements. The respective Board of
Directors of the Companies included in the Group are responsible for maintenance of adequate accounting records in accordance with
the provisions of the Act for safeguarding the assets of the Group and for preventing and detecting frauds and other irregularities; the
selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the
design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the
accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give
a true and fair view and are free from material misstatement, whether due to fraud or error, which have been used for the purpose of
preparation of the consolidated financial statements by the Directors of the Holding Company, as aforesaid.
Auditors’ Responsibility
3. Our responsibility is to express an opinion on the consolidated financial statements based on our audit. While conducting the audit, we
have taken into account the provisions of the Act and the Rules made thereunder including the accounting standards and matters which
are required to be included in the audit report.
4. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act and other applicable
authoritative pronouncements issued by the Institute of Chartered Accountants of India. Those standards and pronouncements require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
5. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the consolidated financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement
of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal
financial control relevant to the Holding Company’s preparation of the consolidated financial statements that give a true and fair view, in
order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the
accounting policies used and the reasonableness of the accounting estimates made by the Holding Company’s Board of Directors, as well
as evaluating the overall presentation of the consolidated financial statements.
6. We believe that the audit evidence obtained by us and the audit evidence obtained by the other auditors in terms of their reports referred
to in sub-paragraph 8 of the Other Matters paragraph below, is sufficient and appropriate to provide a basis for our opinion on the
consolidated financial statements.
Opinion
7. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid consolidated financial
statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the
accounting principles generally accepted in India of the consolidated state of affairs of the Group, as at March 31, 2016, and their
consolidated profits and their consolidated cash flows for the year ended on that date.
INDEPENDENT AUDITORS’ REPORT
CONSOLIDATED FINANCIAL STATEMENTS
ON
102 | MAJESCO LIMITED
F - 50
Other Matters
8. We have audited the special purpose financial statements of 5 foreign subsidiaries prepared for the purposes of consolidation which have
been considered in these consolidated financial statements. We are not Statutory Auditors of these companies.
We did not audit the financial statements of 3 subsidiaries, whose financial statements reflect total assets of ` 2,499.69 Lakhs and net
assets of ` 1,695.19 Lakhs as at March 31, 2016, total revenue of ` 2,463.10Lakhs, net profit of ` 53.33 Lakhs and net cash flows
amounting to ` 365.96 Lakhs for the year ended on that date, as considered in the consolidated financial statements. These financial
statements have been audited by other auditors whose reports have been furnished to us by the Management, and our opinion on the
consolidated financial statements insofar as it relates to the amounts and disclosures included in respect of these subsidiaries not
incorporated in India is based solely on the reports of the other auditors.
Our opinion on the consolidated financial statements and our report on Other Legal and Regulatory Requirements below, is not modified
in respect of the above matters with respect to our reliance on the work done and the reports of the other auditors and the financial
information certified by the Management.
Report on Other Legal and Regulatory Requirements
1. As required by sub-section 3 of Section 143 of the Act, we report, to the extent applicable, that:
(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for
the purposes of our audit of the aforesaid consolidated financial statements.
(b) In our opinion, proper books of account as required by law maintained by the Holding Company, including relevant records for
preparation of the aforesaid consolidated financial statements have been kept so far as it appears from our examination of those
books and records of Holding Company.
(c) The Consolidated Balance Sheet, the Consolidated Statement of Profit and Loss, and the Consolidated Cash Flow Statement dealt
with by this Report are in agreement with the relevant books of account maintained by the Holding Company, including relevant
records relating to the preparation of the consolidated financial statements.
(d) In our opinion, the aforesaid consolidated financial statements comply with the Accounting Standards specified under Section 133
of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.
(e) On the basis of the written representations received from the directors of the Holding Company as on March 31, 2016 and taken on
record by the Board of Directors of the Holding Company and the report of the statutory auditors of its subsidiary company
incorporated in India, none of the directors of the Holding Company and its Subsidiary in India is disqualified as on March 31, 2016
from being appointed as a director in terms of sub-section 2 of Section 164 of the Act.
(f) With respect to the adequacy of the internal financial controls over financial reporting of the holding company and the subsidiary
company incorporated in India and the operating effectiveness of such controls, refer to our separate report in “Annexure A”; and
(g) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and
Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
i . The consolidated financial statements disclose the impact, if any, of pending litigations as at March 31, 2016 on the
consolidated financial position of the Group.
ii. Provision has been made in the consolidated financial statements, as required under the applicable law or accounting
standards, for material foreseeable losses, if any, on long term contracts including derivatives contracts; and
iii. There were no amounts which were required to be transferred, to the Investor Education and Protection Fund by the Holding
Company and subsidiary companies incorporated in India, during the year ended March 31, 2016.
For VARMA & VARMA
Chartered Accountants
FRN 004532S
Partner
M No. 16043
Place: Mumbai
Date: May 18, 2016
Cherian K Baby
Corporate Overview • Statutory Reports • • Shareholders Information Financial Statements
2016 ANNUAL REPORT | 103
F - 51
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)
In conjunction with our audit of the consolidated financial statements of the Company as of and for the year ended March 31, 2016, we have
audited the internal financial controls over financial reporting of Majesco Limited (“the Holding Company”) and one of its subsidiary company
which are companies incorporated in India, as of that date.
Management’s Responsibility for Internal Financial Controls
The Respective Board of Directors of the Holding Company and its subsidiary company, which are companies incorporated in India, are
responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria
established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal
Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (“ICAI”). These responsibilities include
the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly
and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detection of
frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as
required under the Companies Act, 2013.
Auditors’ Responsibility
Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting based on our audit. We
conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the “Guidance
Note”) issued by ICAI and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act,
2013, to the extent applicable to an audit of internal financial controls, both issued by the Institute of Chartered Accountants of India. Those
Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls
operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial
reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an
understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the
auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s
internal financial controls system over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company's internal financial control over financial reporting includes those policies and procedures that
(1) Pertain to the maintenance of records that in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company;
(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and
(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls over Financial Reporting
Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper
management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any
evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control
over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
ANNEXURE – A TO THE INDEPENDENT AUDITORS’ REPORT
INDEPENDENT AUDITORS’ REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
104 | MAJESCO LIMITED
F - 52
Opinion
In our opinion, the Holding Company and one of its subsidiary company, which are companies incorporated in India, have, in all material
respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting
were operating effectively as at March 31, 2016, based on the internal control over financial reporting criteria established by the Company
considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial
Reporting issued by the ICAI.
For VARMA & VARMA
Chartered Accountants
FRN 004532S
Partner
M No. 16043
Place: Mumbai
Date: May 18, 2016
Cherian K Baby
Corporate Overview • Statutory Reports • • Shareholders Information Financial Statements
2016 ANNUAL REPORT | 105
F - 53
CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2016
Farid Kazani
Managing Director
Venkatesh Chakravarty
Non-Executive Chairman and Independent Director
Radhakrishnan Sundar
Executive Director
Kunal Karan
Chief Financial Officer
Nishant Shirke
Company Secretary
Place: Navi Mumbai
Date: May 18, 2016
Place: Navi Mumbai
Date: May 18, 2016
For and on behalf of the Board As per our report of even date
For Varma & Varma
Chartered Accountants
FRN: 004532S
Cherian K Baby
M No: 16043
Partner
(All amounts in ` Lakhs, unless otherwise stated)
As at
March 31, 2015
Note
Ref
As at
March 31, 2016
EQUITY AND LIABILITIES
27,593.51 1.97
Total 67,474.80 2.90
ASSETS
Total 67,474.80 2.90
Shareholders’ funds
Share capital 3 1,152.62 5.00
Reserves and surplus 4 26,440.89 (3.03)
Minority interest 7,228.14 -
Non-current liabilities
Long-term borrowings 5 4,585.09 -
Deferred tax liabilities 6 106.53 -
Other long-term liabilities 7 3,321.71 -
Long-term provisions 8 1,872.04 -
Current liabilities
Short-term borrowings 9 4,605.18 -
Trade payables 10 1,806.26 -
Other current liabilities 11 15,472.89 0.93
Short-term provisions 12 883.45 -
Non-current assets
Fixed assets
Tangible assets 13 (i) 3,258.53
Intangible assets 13 (ii) 3,375.03
Goodwill on consolidation 19,248.39
Capital work in progress 53.28
Non-current investments 14 239.97
Deferred tax assets 15 3,907.89
Long-term loans and advances 16 1,044.82
Other non-current assets 17 29.70 -
Current assets
Current investments 18 1,196.40 -
Trade receivables 19 15,195.02 -
Cash and bank balances 20 11,523.38 1.90
Short-term loans and advances 21 2,392.54 1.00
Other current assets 22 6,009.85 -
Company overview and significant accounting policies 1 & 2
Other notes 30 to 47
-
-
-
-
-
-
-
106 | MAJESCO LIMITED
The accompanying notes are an integral part of these consolidated financial statements.
F - 54
CONSOLIDATED PROFIT AND LOSS STATEMENT FOR THE YEAR ENDED MARCH 31, 2016(All amounts in Lakhs, unless otherwise stated)`
The accompanying notes are an integral part of these consolidated financial statements.
Farid Kazani
Managing Director
Venkatesh Chakravarty
Non-Executive Chairman and Independent Director
Radhakrishnan Sundar
Executive Director
Kunal Karan
Chief Financial Officer
Nishant Shirke
Company Secretary
Place: Navi Mumbai
Date: May 18, 2016
Place: Navi Mumbai
Date: May 18, 2016
For and on behalf of the Board As per our report of even date
For Varma & Varma
Chartered Accountants
FRN: 004532S
Cherian K Baby
M No: 16043
Partner
Note
Ref
Year ended
March 31, 2015
Year ended
March 31, 2016
Revenue from operations 23 75,715.26 -
Other income 24 908.14 -
Expenses
Employee benefits expenses 25 50,557.21
Finance costs 26 428.18
Depreciation and amortization expenses 27 1,784.94
Other expenses 28 24,167.08 2.96
Loss before exceptional items and tax (314.01) (2.96)
Exceptional items 29 457.59 -
Loss before tax (771.60) (2.96)
Tax expense / (credits):
Current tax 720.36 -
Deferred tax (credit) (Refer note 33) (1,517.35) -
Income tax refund / write back for earlier years (Refer note 33) (705.37) -
Profit / (loss) for the year 730.77 (2.96)
Minority interest 41.95 -
Profit / (loss) for the year attributable to the shareholders of the Company 688.82 (2.96)
Earnings Per Share (EPS) 30
Equity share of par value ` 5/- each (Previous year 10/-)
Basic ( ) 3.02 (12.14)
Diluted ( ) 2.80 (12.14)
Company overview and significant accounting policies 1 & 2
Other notes 30 to 47
Total Revenue 76,623.40 -
Total Expenses 76,937.41 2.96
-
-
-
`
`
`
Corporate Overview • Statutory Reports • • Shareholders Information Financial Statements
2016 ANNUAL REPORT | 107
F - 55
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2016(All amounts in ` Lakhs, unless otherwise stated)
Year ended
March 31, 2016
Year ended
March 31, 2015
Cash flows from operating activities
Net cash used in operating activities (1,497.48) (3.03)
Net cash used in investing activities (11,779.43) -
Net cash generated from financing activities 6,044.15 4.00
Net (decrease) / increase in cash and cash equivalents during the year (7,488.94) 0.97
Cash and cash equivalents at the end of the year 3,860.61 1.90
Loss before exceptional item and tax (314.01) (2.96)
Adjustments for :
Interest income on fixed deposits (322.23) -
Profit on sale of current investments (536.39) -
Profit on sale of tangible assets (net) (2.02) -
Employee stock compensation expenses 49.18 -
Finance costs 428.18 -
Depreciation and amortization 1,784.94 -
Provision for doubtful debts 160.01 -
Provision for customer claim 229.74 -
Unrealised foreign exchange loss 2.08 -
Operating profit before working capital changes 1,479.49 (2.96)
Increase in trade receivables (9,862.31) -
Increase in loans and advances and other assets (6,694.72) (1.00)
Increase in trade payables, other liabilities and provisions 14,054.32 0.93
Cash used in operations (1,023.23) (3.03)
Income taxes paid (net) (16.67) -
Net cash used in operating activities before exceptional items (1,039.90) (3.03)
Exceptional items (457.59) -
Cash flows from investing activities
Proceeds from sale of tangible assets 10.19 -
Purchase of fixed assets (3,769.15) -
Capital advances (41.45) -
Investment in fixed deposits (7,400.00) -
Increase in other deposit (60.85) -
Interest income on fixed deposits 322.23 -
Payment for acquisition of Mastek Asia Pacific Pte. Limited (Refer note 42) (180.39) -
Sale / (Purchase) of current investment (net) (660.01) -
Cash flows from financing activities
Proceeds from shares on account of exercise of ESOP 273.90 -
Proceeds from issue of shares - 4.00
Proceeds from working capital loan (net) 6,198.43 -
Interest paid on loans and on finance lease (428.18) -
Effect of changes in exchange rates for cash and cash equivalents (256.17) -
Cash and cash equivalents at the beginning of the year 1.90 0.93
Cash and cash equivalents transferred pursuant to the scheme of arrangement -
Cash and cash equivalents in subsidiaries on date of acquisition during the year 2,041.36 -
9,306.29
(Refer note 40)
(Refer note 41 and 42)
108 | MAJESCO LIMITED
F - 56
1 The above cash flow statement has been prepared under the “Indirect Method” as set out in the Accounting Standard -3 on Cash
Flow Statement issued by the Institute of Chartered Accountants of India.
2 Cash and cash equivalents - Refer note 20
3 Figures in brackets indicate cash outflow.
4 The above cash flow statement is after considering the scheme of arrangement.
5 Previous year figures have been regrouped or reclassified wherever necessary.
Corporate Overview • Statutory Reports • • Shareholders Information Financial Statements
The accompanying notes are an integral part of these consolidated financial statements.
Farid Kazani
Managing Director
Venkatesh Chakravarty
Non-Executive Chairman and Independent Director
Radhakrishnan Sundar
Executive Director
Kunal Karan
Chief Financial Officer
Nishant Shirke
Company Secretary
Place: Navi Mumbai
Date: May 18, 2016
Place: Navi Mumbai
Date: May 18, 2016
For and on behalf of the Board As per our report of even date
For Varma & Varma
Chartered Accountants
FRN: 004532S
Cherian K Baby
M No: 16043
Partner
2016 ANNUAL REPORT | 109
F - 57
1 General Information:
2 Summary of significant accounting policies:
2.1 Basis of preparation of financial statements
Majesco Limited (the ‘Company’) and its subsidiaries
(collectively referred herein under as “the Group”) are
providers of software solutions for the insurance industry. The
Group offers core software solutions for property and casualty
(“P&C”) and life and annuity (“L&A”) providers, allowing them
to manage policy administration, claims management and
billing function. The Group has operations in U.S., Canada, U.K.,
India, Malaysia, Thailand and Singapore and has its offshore
software development centres in India at Mahape, Pune and
Chennai.
The details of subsidiaries including step-down subsidiaries,
considered in these consolidated financial statements are:
These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles
(GAAP) in India under the historical cost convention on accrual
basis. GAAP comprises mandatory accounting standards as
prescribed under section 133 of the Companies Act, 2013 (“Act”)
read with Rule 7 of the Companies (Accounts) Rules, 2014, the
provisions of the act (to the extent notified) and guidelines
issued by the Securities and Exchange Board of India (SEBI). The
financial statements are prepared in accordance with the
principles and procedures required for the preparation and
presentation of consolidated financial statements as laid down
under the Accounting Standard (AS) 21, “Consolidated Financial
Statements”. The financial statements of the Company and its
subsidiaries have been combined on a line-by-line basis by
adding together the book values of like items of assets, liabilities,
income and expenses after eliminating intra group balances and
transactions and resulting unrealised gain / loss. The
consolidated financial statements have been prepared using
uniform accounting policies in use at the group. Minority
interests have been excluded. Minority interest represents that
part of net profit or loss and net assets of subsidiaries that are
not, directly or indirectly owned or controlled by the Company.
All assets and liabilities have been classified as current or non-
current as per the Group’s normal operating cycle and other
criteria set out in the Schedule III to the Companies Act, 2013.
Based on the nature of services and the time between the
acquisition of assets and their realisation in cash and cash
equivalents, the Group has ascertained its normal operating
cycle as 12 months for the purpose of classification of assets and
liabilities as current / non-current.
The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles
requires that the management make to estimates and
assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent liabilities as at the date of
the consolidated financial statements, and the reported
amounts of revenue and expenses during the period.
Accounting estimates could change from period to period.
Actual results could differ from those estimates. Appropriate
changes in estimates are made as the management become
aware of changes in circumstances surrounding the estimates.
Changes in estimates are reflected in the consolidated financial
statements in the period in which changes are made, and, if
material, their effects are disclosed in the notes to the
consolidated financial statement.
Tangible assets are stated at cost of acquisition less accumulated
depreciation and accumulated impairment losses, if any. Direct
costs are capitalized until the assets are ready for use and include
inward freight, duties, taxes and expenses incidental to
acquisition and installation. Subsequent expenditures related to
an item of tangible asset are added to its book value only if they
increase the future benefits from the existing asset beyond its
previously assessed standard of performance.
Losses arising from the retirement of, and gains or losses
arising from disposal of tangible assets which are carried at
cost are recognized in the Profit and Loss Statement.
Depreciation on tangible assets is provided on the straight line
method, on a pro rata basis, over the estimated useful lives of
assets, in order to reflect the period over which the depreciable
asset is expected to be used by the Company. The management
estimates the useful lives for the other fixed assets as follows.
2.2 Use of estimates
2.3 Tangible assets and depreciation
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2016
Name of the CompanyCountry of
Incorporation % of effective voting power
held as atMarch 31, 2016
% of effective voting power
held as atMarch 31, 2015
Subsidiary
Majesco USA 70.1% NA
Step down subsidiaries
Majesco Software and Solutions Inc.
Majesco Canada Ltd. Canada 70.1% NA
Cover-All Systems Inc.* USA 70.1% NA
Majesco (UK) Ltd. United 70.1% NA
Kingdom
Majesco Software And India 70.1% NA
Majesco Sdn Bhd.
Majesco (Thailand) Co. Ltd.
Majesco Asia Pacific Pte Ltd. #
*Acquired with effect from June 26, 2015
# Acquired with effect from November 1, 2015
(Formerly - MajescoMastek)
USA 70.1% NA
(Formerly - MajescoMastek Insurance
Software and Solutions Inc.)
(Formerly - MajescoMastek Canada Ltd.)
Solutions India Private Ltd.
Malaysia 70.1% NA
(Formerly - Mastek MSC Sdn. Bhd.)
Thailand 70.1% NA
(Formerly - Mastek MSC (Thailand) Co. Ltd.)
Singapore 70.1% NA
(Formerly - Mastek Asia Pacific Pte Ltd.)
110 | MAJESCO LIMITED
F - 58
Assets Useful Life
2.4 Intangible assets including goodwill and amortization
Assets Useful Life
2.5 Impairment of assets
Buildings 28 years
Computers 2 years
Plant and equipment 2 - 5 years
Furniture and fixtures 5 years
Vehicles 5 years
Office equipment 2 - 5 years
Leasehold land Lease Term ranging from
95-99 years
Leasehold improvements 5 years or the primary
period of lease whichever
is less
Based on technical evaluation, the management believes
that the useful lives as given above best represent the period
over which management expects to use these assets. Hence
the useful lives for these assets is different from the useful
lives as prescribed under Part C of schedule III of the
Companies Act, 2013.
Intangible assets are recorded at the consideration paid for
acquisition of such assets and are carried at cost of acquisition
less accumulated amortization and impairment, if any.
Goodwill comprises the excess of purchase consideration over
the parent’s portion of equity of the subsidiary at the date on
which investments in the subsidiary is made. Goodwill arising
on consolidation is not amortised but is tested for impairment.
Intangible assets are amortised on a straight line method over
their estimated useful lives as follows:
Goodwill 3 - 5 years
Computer software 1 - 5 years
Expenditure on research is recognized as an expense when it
is incurred. Development costs of products are also charged
to the Profit and Loss Statement unless all the criteria for
capitalisation as set out in paragraph 44 of AS 26 - ‘Intangible
Assets’ have been met by the Group.
At each Balance Sheet date, the Group assesses whether there
is any indication that an asset may be impaired. If any such
indication exists, management estimates the recoverable
amount. Recoverable amount is higher of an asset’s net selling
price and value in use. Value in use is the present value of
estimated future cash flows expected to arise from the
continuing use of an asset and from its disposal at the end of
the its useful life. If the carrying amount of the asset exceeds its
recoverable amount, an impairment loss is recognized in the
Profit and Loss Statement to the extent carrying amount
exceeds recoverable amount. Assessment is also done at each
Balance sheet date as to whether there is any indication that an
impairment loss recognized for an asset in prior accounting
periods may no longer exists or may have decreased.
2.6 Investments
2.7 Foreign currency transactions and translations
Investments that are readily realisable and are intended to be
held for not more than one year from the date on which such
investments are made, are classified as current investments.
All other investments are classified as Non-current
investments. Current investments are carried at cost or fair
value, whichever is lower. Non-current investments are carried
at cost. However, provision for diminution is made to recognise
a decline, other than temporary, in the value of the non-
current investments, such reduction being determined and
made for each investment individually. Investment property:
Investment in buildings that are not intended to be occupied
substantially for use by, or in the operations of, the Company,
have been classified as investment property. Investment
properties are carried at cost less accumulated depreciation
upto June 1, 2015, being the date on which demerger was given
effect to and accumulated impairment losses, if any.
(i) The consolidated financial statements are prepared in Indian
Rupees. The Indian Rupee is the functional currency of
Majesco Limited. However, U.S. Dollar, Pound Sterling,
Malaysian Ringgits, Thai Baht, Singapore Dollar and Canadian
Dollar are the functional currencies for its non-integral
subsidiaries located in United States of America, United
Kingdom, Malaysia, Thailand, Singapore and Canada,
respectively. Translation of foreign currency into Indian Rupees
has been carried out as under :
(a) Both monetary and non-monetary foreign currency assets
and liabilities including contingent liabilities are translated
at closing exchange rates as at the balance sheet date.
(b) Income and expenditure of non-integral foreign
operations are translated at annual closing average
exchange rates.
(c) All resulting exchange differences on translation are taken
directly to reserves under Foreign Currency Translation
Reserve until the disposal of the investment in
subsidiaries.
(ii) Foreign currency transactions of the Company are accounted
at the exchange rates prevailing on the date of the
transaction or at an average rate that approximates the
actual rate at the date of the transaction. Gains and losses
resulting from the settlement of foreign currency monetary
items and from the translation of monetary assets and
liabilities denominated in foreign currencies are recognized
in the Profit and Loss Statement.
(iii) In case of forward exchange contracts which are open on the
balance sheet date and are backed by receivables, the
premium or discount arising at the inception of such a forward
exchange contract is amortized as expense or income over the
life of the contract. The exchange difference on such contracts
is computed by multiplying the foreign currency amount of the
forward exchange contract by the difference between a) the
Corporate Overview • Statutory Reports • • Shareholders Information Financial Statements
2016 ANNUAL REPORT | 111
F - 59
foreign currency amount of the contract translated at the
exchange rate at the reporting date or the settlement date
where the transaction is settled during the reporting period,
and b) the same foreign currency amount translated at the
latter of the date of inception of the forward exchange contract
and the last reporting date. The exchange difference so
computed on such contracts is recognized in the Profit and Loss
Statement. Any profit or loss arising on cancellation or renewal
of such forward exchange contracts is recognized as income or
expense for the year.
The Group uses foreign currency forward contracts to hedge
its risks associated with foreign currency fluctuations relating
to certain firm commitments and forecasted transactions.
The Group designates these hedging instruments as cash
flow hedges.
The use of hedging instruments is governed by the policies of
the Group which are approved by its Board of Directors.
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 recognized directly in the
hedging reserve and the ineffective portion is recognized
immediately in the Profit and Loss Statement.
In respect of foreign exchange forward contract covered under
Accounting Standard (AS) 11, “The Effects of Changes in
Foreign Exchange Rates “, the premium or discount arising at
the inception of the contract is amortized as expense or income
over the life of the contract. Gains / losses on settlement of
transaction arising on cancellation or renewal of such a
forward exchange contract are recognized as income or
expense for the year.
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 recognized 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 recognized in hedging reserve is
transferred to the Profit and Loss Statement for the year.
(i) Long-term employee benefits
(a) Defined contribution plans
The Group has defined contribution plans for post
employment benefits in the form of provident fund,
employee’s state insurance, labour welfare fund and
superannuation fund in India which are administered
through Government of India and / or Life Insurance
Corporation of India (LIC). The Group also makes
2.8 Derivative instruments and hedge accounting
2.9 Employee benefits
contributions towards defined contribution plans in
respect of its subsidiaries, as applicable. Under the
defined contribution plans, the Group has no further
obligation beyond making the contributions. Such
contributions are charged to the Profit and Loss Statement
as incurred.
The Group also make payments to defined contribution
plans established and maintained in accordance with the
local laws of the United States, Canada and United
Kingdom and of the jurisdictions in which the subsidiaries
are located. The monthly contributions to all of these
plans are charged to Profit and Loss Statement in the year
they are incurred and there are no further obligations
under these plans beyond those monthly contributions.
(b) Defined benefit plans - Gratuity
The Group has defined benefit plans for post employment
benefits in the form of gratuity for its employees in India.
The gratuity scheme of the Group is administered through
Life Insurance Corporation of India (LIC). Liability for
defined benefit plans is provided on the basis of actuarial
valuations, as at the Balance Sheet date, carried out by an
independent actuary. The actuarial valuation method
used by independent actuary for measuring the liability is
the projected unit credit method. Actuarial gains and
losses are recognized immediately in the Profit and Loss
Statement as income or expense.
(c) Compensated Absences
The employees of the Group are also entitled for other
long-term benefit in the form of compensated absences as
per the policy of the Group. Leave encashment vests to
employees on an annual basis for leave balance above the
upper limit as per the Group’s policy. At the time of
retirement, death while in employment or on termination
of employment leave encashment vests equivalent to
salary payable for number of days of accumulated leave
balance subject to an upper limit as per the Group's policy.
Liability for such benefit is provided on the basis of
actuarial valuations, as at the Balance Sheet date, carried
out by an independent actuary. The actuarial valuation
method used by independent actuary for measuring the
liability is the projected unit credit method. Actuarial gains
and losses are recognized immediately in the Profit and
Loss Statement as income or expense.
(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 recognized in the year during which the
employee rendered the services. These benefits comprise
compensated absences such as paid annual leave and
performance incentives.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
112 | MAJESCO LIMITED
F - 60
(iii) Termination benefits
Termination benefits, in the nature of voluntary retirement
benefits or those arising from restructuring, are recognized in
the Profit and Loss Statement when the Group has a present
obligation as a result of past event, when a reliable estimate
can be made of the amount of the obligation and it is probable
that an outflow of resources embodying economic benefits will
be required to settle the obligations.
The Group derives revenues primarily from information
technology and related services and from the licensing of
software products. Arrangements with customers for software
development and related services are either on a fixed price,
fixed time frame or on a time and material basis. Revenue is
recognized in accordance with the terms of the contracts with
customers as the service is performed by the proportionate
completion method and when it is reasonably certain that the
ultimate collection will be made.
Revenues on time and material contracts are recognized as the
related services are rendered and related costs are incurred.
Revenue from the end of last billing to the balance sheet date is
recognized as unbilled revenues. Revenues on fixed price and
fixed time bound contracts are recognized over the life of the
contract measured by the proportion that contract costs
incurred for work performed up to the reporting date bear to
the estimated total contract costs. The cumulative impact of
any revision in estimates of the percentage of work completed
is reflected in the period in which the change becomes known.
Provisions for estimated losses on such contracts are made
during the period in which a loss becomes probable and can be
reasonably estimated. When the uncertainty, relating to the
collectability arises subsequent to the rendering of the service,
a separate provision is made to reflect the uncertainty and the
amount of revenue originally recorded is not adjusted.
Revenues from maintenance contracts are recognized on a
straight line basis over the period of the contract.
Revenues from resale of software and hardware are recognized
upon delivery of products to the customer, when the
significant risks and rewards of ownership are transferred to
the buyer and the ultimate collection is reasonably certain.
Unbilled revenue included in ‘Other current assets’, represents
amounts in respect of services performed in accordance with
contract terms, not yet billed to customers at the year end.
Unearned revenue included in ‘Other current liabilities’
represents amounts received/billed in excess of the value of
work performed in accordance with the terms of the contracts
with customers.
Dividend income from investments is recognized when the
right to receive payment is established. Interest income is
recognized on time proportion basis taking into account the
2.10Revenue recognition
2.11Other income
amount outstanding and the applicable rate of interest. Rental
income is recognized on a straight line basis over the term of
the lease as per the terms of the base contract or such other
systematic method as considered appropriate.
Assets taken on leases which transfer substantially all the risks
and rewards incidental to ownership of the assets to the leasee
i.e. finance leases, in terms of provisions of Accounting
Standard (AS) 19 – “Leases”, are capitalised. The assets
acquired under finance leases are capitalized at the lower of
the fair value at the inception of the lease and the present
value of minimum lease payments and a liability is created for
an equivalent amount. Such assets are disclosed as leased
assets under tangible assets and are depreciated in accordance
with the Group's depreciation policy described in note 2.3.
Each lease rental paid on the finance lease is allocated between
the liability and interest cost, so as to obtain a constant periodic
rate of interest on the outstanding liability for each period.
Other leases are classified as operating leases and rental
payments in respect of such leases are charged to the Profit
and Loss Statement on a straight line basis over the lease term.
Basic earnings per share (EPS) are calculated by dividing the net
loss / profit after tax for the year attributable to equity
shareholders by the weighted average number of equity shares
outstanding during the year. Diluted earnings per share is
computed by adjusting the number of shares used for basic EPS
with the weighted average number of shares that could have
been issued on the conversion of all dilutive potential equity
shares. Dilutive potential equity shares are deemed converted
as of the beginning of the year, unless they have been issued at
a later date. The diluted potential equity shares have been
adjusted for the proceeds receivable had the shares been
actually issued at fair value i.e. average market value of
outstanding shares.
The number of shares and potentially dilutive shares are
adjusted for share splits and bonus shares, as appropriate. In
calculating diluted earnings per share, the effects of anti
dilutive potential equity shares are ignored. Potential equity
shares are anti-dilutive when their conversion to equity shares
would increase earnings per share or decrease loss per share.
Tax expense for the year comprises of current tax and deferred
tax. Current tax is measured by the amount of tax expected to
be paid to the taxation authorities on the taxable profits after
considering tax allowances and exemptions and using
applicable tax rates and laws. Deferred tax is recognized on
timing differences between the accounting income and the
taxable income for the year and quantified using the tax rates
and tax laws enacted or substantively enacted as on the
Balance Sheet date.
Deferred tax assets are recognized and carried forward to the
2.12Leases
2.13Earnings per share
2.14Income taxes
Corporate Overview • Statutory Reports • • Shareholders Information Financial Statements
2016 ANNUAL REPORT | 113
F - 61
extent that there is reasonable certainty that sufficient future
taxable income will be available against which such deferred
tax assets can be realised. Deferred tax assets in respect of
unabsorbed depreciation or carry forward losses are
recognized only to the extent there is virtual certainty
supported by convincing evidence that sufficient future
taxable income will be available against which such deferred
tax assets can be realised. The carrying amount of deferred tax
assets is reviewed at each balance sheet date for any write
down or reversal, as considered appropriate.
Minimum Alternative Tax (MAT) credit is recognized as an asset
only when and to the extent there is convincing evidence that
the Company will pay normal income tax during the specified
period. Such asset is reviewed at each balance sheet date and
the carrying amount of the MAT credit asset is written down to
the extent their is no longer convincing evidence to the effect
that the Company will pay normal income tax during the
specified period.
Current tax assets and liabilities are offset when there is a
legally enforceable right to set off the recognized amount
and there is an intention to settle the asset and liability on a
net basis.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off assets against liabilities
representing the current tax and where the deferred tax assets
and liabilities relate to taxes on income levied by the same
governing taxation laws.
Provision for onerous contracts is recognized when the
expected benefits to be derived by the Group from a contract
are lower than the unavoidable costs of meeting the future
obligations under the contract. The provision is measured at
lower of the expected cost of terminating the contract and the
expected cost of fulfilling the contract.
The accounting policies adopted for segment reporting are in
conformity with the accounting policies adopted for the Group.
Revenue and expenses have been identified to segments on
the basis of their relationship to the operating activities of the
segment. Expenses, net of income, which relate to the Group
2.15Onerous contracts
2.16Segment reporting
as a whole and are not allocable to segments on a reasonable
basis, have been included under “Common unallocable
charges, net”.
Stock options granted to employees of Majesco Limited and
its subsidiaries under the stock option schemes covered by
Securities and Exchange Board of India (Share based
employee benefits) Regulations, 2014 are accounted using
the intrinsic value method prescribed in the guidance note on
Employees Share Based Payments issued by The Institute of
Chartered Accountants of India. The intrinsic value of the
option being excess of market value of the underlying share
immediately prior to date of grant over its exercise price is
considered as deferred employee compensation. The
expense on deferred employee compensation is recognized
in Profit and Loss Statement on straight line basis over the
vesting period of the option. The options that lapse are
reversed by a credit to expense, equal to the amortized
portion of value of lapsed portion.
Provisions are recognized when the Group has a present legal
obligation as a result of past events, and it is probable that an
outflow of resources embodying economic benefits will be
required to settle the obligation. Provisions are determined by
the best estimate of the outflow of economic benefits required
to settle the obligation at the reporting date. When no reliable
estimate can be made, a disclosure is made as a contingent
liability. A disclosure for a contingent liability is also made when
there is a possible obligation or a present obligation that may,
but probably will not, require an outflow of resources.
Provisions are reviewed regularly and are adjusted where
necessary to reflect the current best estimates of the
obligation. Where the Group expects a provision to be
reimbursed, the reimbursement is recognized as a separate
asset, only when such reimbursement is virtually certain.
Cash and cash equivalents include cash in hand, demand
deposits with banks and other short term highly liquid
investments with original maturities of three months or less.
2.17Accounting for employee stock options
2.18Provisions and contingent liabilities
2.19Cash and cash equivalents
114 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
F - 62
(All amounts in ` Lakhs, unless otherwise stated)
As at
March 31, 2015
3 Share capital
Total 1,500.00 5.00
Total 1,152.62 5.00
No. of shares Amount No. of shares Amount
2,30,52,401 1,152.62 50,000 5.00
No. of shares % of holding No. of shares % of holding
Authorised:
3,00,00,000 equity shares of ` 5/- each 1,500.00 5.00
(Previous year 50,000 equity shares of ` 10/- each)
Issued, subscribed and fully paid up:
2,30,52,401 equity shares of ` 5/- each 1,152.62 5.00
(Previous year 50,000 equity shares of ` 10/- each)
a. The Company has only one class of shares referred to as
equity shares having a par value of ` 5/-
(Previous year ` 10/-). Each holder of equity
shares is entitled to one vote per share.
b. The company declares and pays dividends in Indian rupees.
c. In the previous years
i) No shares were allotted as fully paid up by way of
bonus shares.
ii) No shares were bought back.
d. In the event of liquidation of the Company, the holders of
equity shares will be entitled to receive any of the remaining
assets of the Company in proportion to the number of
equity shares held by them.
e. Reconciliation of the number of shares :
Equity shares
Balance as at the beginning of the year 50,000 5.00 10,000 1.00
Add : Shares issued pursuant to the scheme of arrangement 2,28,12,795 1,140.64 - -
Less: Shares cancelled during the year (Refer note 40) (50,000) (5.00) - -
Add : Shares issued on exercise of ESOP 2,39,606 11.98 - -
Add : Shares issued during the year - - 40,000 4.00
Balance as at the end of the year
f. Details of shares held by shareholders holding more than
5% of the aggregate shares in the Company.
Equity shares of ` 5/-
(Previous year ` 10/-) each held by:
Mastek Limited - - 49,994 99.99%
Ashank Desai 30,99,552 13.45% - -
Sudhakar Venkatraman Ram 27,91,680 12.11% - -
Ketan Mehta 25,19,100 10.93% - -
Radhakrishnan Sundar 14,45,800 6.27% - -
g. Shares reserved for issue under options :
Number of unexercised options under the employee stock 30,72,633 -
option plan as at the end of the year (Refer note 35)
As at
March 31, 2016
Corporate Overview • Statutory Reports • • Shareholders Information Financial Statements
2016 ANNUAL REPORT | 115
F - 63
(All amounts in Lakhs, unless otherwise stated)`
As at
March 31, 2015
As at
March 31, 2016
4 Reserves and surplus
Total 26,440.89 (3.03)
5 Long-term borrowings
Total 4,585.09 -
Capital reserve on consolidation
Balance as at the beginning of the year -
Add: Transfer pursuant to the scheme of arrangement 5,219.41 -
Balance as at the end of the year
Securities premium account
Balance as at the beginning of the year
Add : Addition on account of exercise of shares under ESOP 261.92
Balance as at the end of the year
Employee stock options outstanding account
Balance as at the beginning of the year
Add: Transfer pursuant to the scheme of arrangement 84.07 -
Add: On account of employee stock option plans 49.81
Balance as at the end of the year (Refer note 35)
General reserve
Balance as at the beginning of the year -
Add: Transfer pursuant to the scheme of arrangement 2,805.76
Add: Transfer on account of deferred tax assets (net) (Refer note 40 (c)) 284.03
Add: On account of merger with Cover-All (Refer note 41) 1,087.45
Balance as at the end of the year
Secured:
Term loan from bank (Refer (a) below) 4,505.34 -
Long term maturities of finance lease obligations. (Refer note 32) 79.75 -
-
- -
-
- -
-
-
-
-
-
Hedging reserve account
Balance as at the beginning of the year - -
Add: Transfer pursuant to the scheme of arrangement 340.45 -
Add: Changes in the fair value of the effective cash flow hedges (223.60) -
Balance as at the end of the year
Foreign currency translation reserve
Balance as at the beginning of the year - -
Add: Transfer pursuant to the scheme of arrangement 689.59 -
Add : Exchange gain on translation during the year 2,211.66 -
Balance as at the end of the year
Surplus in Profit and Loss Statement
Balance as at the beginning of the year (3.03) (0.08)
Add: Transfer pursuant to the scheme of arrangement 16,650.72 -
Less: Transferred to minority interest arising on merger with Cover-All (Refer note 41) (3,706.17) -
Profit / (loss) for the year attributable to the shareholders of the Company 688.82 (2.96)
Balance as at the end of the year
5,219.41 -
261.92 -
133.88 -
4,177.24 -
116.85 -
2,901.25 -
13,630.34 (3.03)
116 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
F - 64
(c) The rate of interest for HSBC loan is LIBOR plus 1.5% , finance lease from Sundaram Finance Limited is 9.425% and from
Lakeland Bank is 4.25 %
(d) There has been no continuing default as on Balance Sheet date in repayment of loans and interest.
Nature of security
(a) Secured by SBDC given by HSBC Bank on the security
of bank deposits of sanctioned amount of USD 10
million out of which USD 6.8 million was drawn
down as at March 31, 2016. Balance can be drawn at
any time upto May 23, 2016
(b) Finance lease obligations are secured by hypothecation
of assets underlying the leases.
Terms of repayment
Commencing January 1,2018 and on each January 1 and July 1
thereafter, instalments of principal in the amount of USD 1.67
million shall be due and payable semi-annually, and all
principal and interest outstanding shall be due and payable by
March 1 , 2021.
Monthly payment of equated monthly instalments beginning
from the month subsequent to taking the lease.
(All amounts in ` Lakhs, unless otherwise stated)
(a) Nature of security
(i) Secured against current assets including receivables of
Majesco, USA. sanctioned maximum borrowing limit of
USD 5 million
(ii) Secured by guarantee given by the Company on behalf
of subsidiary, Majesco, USA
Terms of repayment
(i) The working capital facility is valid till May 9, 2016.
(ii) Repayable at the discretion of the Company up to the
earlier of 360 days or validity date of the facility.
As at
March 31, 2015
As at
March 31, 2016
6 Deferred tax liabilities
Total 106.53 -
7 Other long-term liabilities
Total 3,321.71 -
8 Long-term provisions
Total 1,872.04 -
9 Short-term borrowings
Total 4,605.18 -
Deferred tax liabilities
Depreciation and amortization
Less: Deferred tax assets
Net operating loss (1,857.86) -
Doubtful debts and advances (6.51) -
Other timing differences (184.88) -
Unearned revenue 2,564.19 -
Deferred consideration payable on business acquisition (Refer note 43) 757.52 -
Provision for employee benefits
Provision for leave encashment 1,872.04 -
Secured:
Working capital loan from ICICI Bank (Refer (a) below) 1,523.86 -
PCFC facility from Yes Bank Ltd (Refer (b), (c) and (d) below) 3,081.32 -
2,155.78 -
Corporate Overview • Statutory Reports • • Shareholders Information Financial Statements
2016 ANNUAL REPORT | 117
F - 65
(b) Majesco Software and Solutions India Pvt. Ltd. (“MSSIPL”), a step down subsidiary entered into a secured Pre Shipment in
Foreign Currency and Post Shipment in Foreign Currency (“PCFC”) facility with Yes Bank. The maximum borrowing limit is
` 3,600.00. The interest rate on this PCFC facility is LIBOR plus 150 basis points. This PCFC facility has a first pari passu charge
over the current assets of MSSIPL.
(c) MSSIPL has entered into a Facility Letter with Standard Chartered Bank for pre-shipment financing and overdraft facilities.
The maximum borrowing limit is ` 500.00. Interest rate on this facility is based on a base rate or LIBOR plus a margin to be
determined at the time of each draw by the lender. The outstanding balance as on March 31, 2016 under this facility is Nil.
(d) MSSIPL has entered into a Credit Arrangement Letter with ICICI Bank for packing credit in foreign currency post shipment in
foreign currency. The maximum borrowing limit is 1,550.00. Interest rate on this facility is based on a base rate or LIBOR
plus a margin to be determined at the time of each draw by the lender. The outstanding balance as on March 31, 2016 under
this facility is Nil.
`
(All amounts in ` Lakhs, unless otherwise stated)
As at
March 31, 2015
10 Trade payables
1,806.26 -
11 Other current liabilities
Total 15,472.89 0.93
12 Short-term provisions
Total 883.45 -
Trade payables
Current maturities of finance lease obligations in respect of vehicles 105.65 -
(Refer note 32(ii))
Unearned revenue
Credit balances in bank accounts 135.00 -
Other payables
Accrued salaries and benefits 4,900.29 -
Accrued expenses 2,858.29 0.93
Advance from customers 310.10 -
Interest accrued and not due 49.78 -
Deferred consideration payable on business acquisition (Refer note 43) 750.89 -
Payable for purchase of fixed assets 239.74 -
Statutory dues including provident fund and tax deducted at source 793.75 -
Others 97.74 -
(a) There is no amount due for payment to Investor Education and Protection
Fund under Section 205C of the Companies Act, 1956 as at the year end.
Section 125 of Companies Act, 2013 which corresponds to section 205C of
Companies Act, 1956 has not yet been enforced.
Provision for employee benefits
Provision for leave encashment 471.57 -
Other provisions
Provision for cost overrun on contracts 138.31 -
Provision for taxes, net of advance tax 271.23 -
Provision for mark-to-market losses on outstanding derivative contracts
(Refer note 37)
(a) The management does not foresee any material warranty cost, based on
previous experience and hence no provision has been carried in this regard.
5,231.66 -
2.34 -
As at
March 31, 2016
118 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
F - 66
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Corporate Overview • Statutory Reports • • Shareholders Information Financial Statements
2016 ANNUAL REPORT | 119
Am
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F - 67
(All amounts in ` Lakhs, unless otherwise stated)
As at
March 31, 2015
As at
March 31, 2016
14 Non-current investments
239.97 -
15 Deferred tax assets
Total 3,907.89 -
16 Long-term loans and advances
Total 1,044.82 -
17 Other non-current assets
29.70 -
Investment property (at cost less accumulated depreciation) (Refer note 13.1)
Gross block
Opening - -
Add : Transfer pursuant to the scheme of arrangement
Less : Accumulated depreciation
Opening - -
Add : Transfer pursuant to the scheme of arrangement 147.65 -
Closing 147.65 -
Net block
Aggregate amount of investment property 239.97 -
Deferred tax assets in respect of:
Doubtful debts and advances
Gratuity and leave encashment
Net operating loss
Depreciation and amortization 1,202.02 -
Research and development carryforward / carryback 427.39 -
Other timing differences 79.80 -
Unsecured, considered good, unless otherwise stated:
Capital advances
Security deposits 423.54 -
Prepaid expenses 172.77 -
Other loans and advances
Advance income tax, net of provision for tax 394.43 -
Balance held as margin money against bank guarantee (Refer note 31)
387.62 -
Closing 387.62 -
56.04 -
868.90 -
1,273.74 -
54.08 -
120 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
F - 68
(All amounts in ` Lakhs, unless otherwise stated)
As at
March 31, 2015
As at
March 31, 2016
18 Current investments
Total 1,196.40 -
19 Trade receivables
20 Cash and bank balances
At cost or market value, whichever is less:
Investment in mutual funds (quoted):
Birla Sun Life Cash Plus Fund - Growth 290.00 -
(1,19,673 units of ` 100/- each, previous year - nil)
Principal Cash Management Fund - Regular - Growth 245.34 -
(16,718 units of 1,000/- each, previous year - nil)
HDFC Liquid Fund - Growth 200.75 -
(6,742 units of 1,000/- each, previous year - nil)
Kotak Floater Short Term Fund - Growth 250.31 -
(10,113 units of 1,000/- each, previous year - nil)
Franklin Templeton India TMA - Super IP - Growth 210.00 -
(9,301 units of 1,000/- each, previous year - nil)
Aggregate amount of quoted investments 1,196.40 -
Market value of quoted investments (NAV as at the end of the year) 1,199.07 -
`
`
`
`
Receivables outstanding for a period exceeding six months from the due date
Unsecured, considered good 2.01 -
Doubtful 180.26 -
Less: Provision for doubtful debts (180.26) -
Receivables outstanding for a period less than six months from the due date
Unsecured, considered good 15,193.01 -
Doubtful 105.43 -
Less: Provision for doubtful debts (105.43) -
Cash and cash equivalents
Bank balances
In current accounts 3,606.06 1.90
Fixed deposits (with original maturity of less than 3 months) 254.55 -
3,860.61 1.90
Other bank balances
Fixed deposits (Maturity more than 3 months but less than 12 months)
- Restricted (Refer (a) and (b) below) 7,400.00 -
- Others 100.26 -
Margin money deposit (Refer (c) below) 162.51 -
7,662.77 -
(a) ` 5,000.00 under lien for stand by documentary credit (SBDC) of USD 6.8 million given
by HSBC Bank, for the term loan availed by Majesco, USA, subsidiary of the Company
(b) ` 2,400.00 with Yes Bank for PCFC facility availed by Majesco Software and Solutions
India Private Limited, step down subsidairy of the Company
(c) Fixed deposit of ` 22.00 is held as security for bank guarantee of ` 20.00 given to
Life Insurance Corporation of India in lieu of earnest money deposit.
Total 15,195.02 -
Total 11,523.38 1.90
Corporate Overview • Statutory Reports • • Shareholders Information Financial Statements
2016 ANNUAL REPORT | 121
F - 69
(All amounts in ` Lakhs, unless otherwise stated)
As at
March 31, 2015
As at
March 31, 2016
21 Short-term loans and advances
Total 2,392.54 1.00
22 Other current assets
Total 6,009.85 -
23 Revenue from operations
Total 75,715.26 -
24 Other income
Total 908.14 -
Unsecured, considered good, unless otherwise stated:
Other loans and advances
Gratuity fund - excess of fund balance over obligation 39.75 -
Service tax credit receivable 424.73 -
Advances to suppliers 495.37 -
Advances to employees 56.85 -
Security deposits
Considered good 115.89 1.00
Considered doubtful 7.87 -
Less: Provision for doubtful (7.87) -
Prepaid expenses 1,185.45 -
Others (Refer (a) below) 74.50 -
(a) Share of stamp duty against demand by the Office of the Superintendent of Stamps,
Gandhinagar, for implementation of the demerger scheme, paid under protest.
Unsecured, considered good, unless otherwise stated:
Interest accrued on fixed deposits 138.16 -
Unbilled Revenue 5,403.97 -
Mark-to-market gains receivable on outstanding derivative contracts 119.19 -
(Refer note 37)
Reimbursable expenses receivables
Considered good 348.53 -
Considered doubtful 23.53 -
Less: Provision for doubtful receivables (23.53) -
Information technology services (Refer note (a) below) 73,957.92 -
Other operating revenue
Reimbursement of expenses from customers 1,737.30
Doubtful debts recovered 20.04 -
(a) Includes revenue from products and related services
Interest income on fixed deposits 322.23 -
Profit on sale of current investments (net) 536.39 -
Profit on sale of tangible assets (net) 2.02 -
Miscellaneous income 47.50 -
Year ended
March 31, 2016
Year ended
March 31, 2015
122 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
F - 70
(All amounts in ` Lakhs, unless otherwise stated)
Year ended
March 31, 2016
Year ended
March 31, 2015
25 Employee benefits expenses
Total 50,557.21 -
26 Finance costs
Total 428.18 -
27 Depreciation and amortization expenses
Total 1,784.94 -
28 Other expenses
Total 24,167.08 2.96
Salaries, wages and performance incentives 45,924.85 -
Gratuity 47.85 -
Contribution to provident and other funds (Refer note 34 (a)) 2,730.07 -
Employee stock compensation expenses (Refer note 35) 49.18 -
Staff welfare expense 1,805.26 -
Interest expense on working capital facility 288.12 -
Interest on term loan 93.85 -
Interest on finance lease 7.54 -
Other finance charges 38.67 -
Depreciation on tangible assets 779.28 -
Amortization of intangible assets 1,005.66 -
Travelling and conveyance 5,696.03 -
Consultancy and sub-contracting charges 5,545.05 -
Professional fees (Refer (a) below) 3,781.17 0.75
Repairs and maintenance
Buildings 207.00 -
Others 1,135.44 -
Rent 1,130.60 2.02
Advertisement and publicity 903.41 -
Communication charges 685.17 -
Recruitment and training expenses 667.31 -
Rates and taxes 608.59 0.18
Insurance 479.73 -
Electricity 338.00 -
Hardware and software expenses 1,089.24 -
Membership and subscription 242.30 -
Provision for customer claim 229.74 -
Provision for doubtful debts 160.01 -
Printing and stationery 198.85 -
Hire Charges
Equipment 158.94 -
Vehicle 100.18 -
Stock exchange listing fees 91.65 -
CSR expenditure / Donations 23.70 -
Loss on foreign currency transactions and translation (net) 2.08 -
Miscellaneous expenses 692.89 -
Corporate Overview • Statutory Reports • • Shareholders Information Financial Statements
2016 ANNUAL REPORT | 123
F - 71
Year ended
March 31, 2016
Year ended
March 31, 2015
(All amounts in ` Lakhs, unless otherwise stated)
(a) Professional fees include payment to auditors :
i. Statutory audit (incuding audit of consolidated financial statements) 23.50 -
ii. Limited review 9.75 -
iii. Special Purpose financials 7.00 -
iv.Certification fees 0.45 -
v. Reimbursement of expenses 0.84 -
(b) Payments to other auditors of subsidiaries
i. Statutory audit 137.99 -
Restructuring and demerger expenses
Professional fees 346.11 -
Rates and taxes 111.48 -
The components of basic and diluted earnings per share for total operations
are as follows:
(a) Net profit attributable to equity shareholders 688.82 (2.96)
(b) Weighted average number of outstanding equity shares
Considered for basic EPS 2,28,24,721 24,356
Add : Effect of dilutive potential equity shares arising from outstanding 17,99,459 -
stock options
Considered for diluted EPS
(c) Earnings per share
(Face value per share ` 5/- (Previous year ` 10/-) each)
Basic (`) 3.02 (12.14)
Diluted (`) 2.80 (12.14)
(i) Outstanding guarantees and counter guarantees to banks in respect of 27.00 -
the bank guarantee given in favour of STPI Authorities.
(ii) B-17 Bond furnished to Customs Department 538.56 -
(iii) Guarantee given for working capital facility availed by Majesco, USA, 1,523.86 -
subsidiairy from ICICI Bank
(iv) Stand by documentary credit (SBDC) given to HSBC India on behalf of 4,505.34 -
Majesco, USA, subsidiary of the Company
(v) Performance guarantees given by Majesco Software and Solutions India
Private Limited, a step down subsidiary of the Company on behalf of the
following fellow subsidiaries :
(a)Majesco Canada Ltd. 7,684.50 -
(b)Majesco (Thailand) Co. Ltd 1,656.38 -
(vi) Contingent consideration in respect of acquisition of business of Agile 392.83 -
Technologies, LLC, USA
29 Exceptional Items
Total 457.59 -
30 Earnings per share (EPS)
2,46,24,180 24,356
As at As at
March 31, 2016 March 31, 2015
31 Contingent liabilities and commitments
124 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
F - 72
(All amounts in Lakhs, unless otherwise stated)`
As at
March 31, 2016
As at
March 31, 2015
(vii) Share of stamp duty against demand by the office of the Superintendent 171.50 -
of Stamps, Gandhinagar, for implementation of the demerger scheme.
(viii) The Company does not expect any cash outflows or any reimbursements
in respect of the above contingent liabilities.
(ix) Capital and other commitments
Capital commitments
Estimated amount of contracts remaining to be executed on capital 557.85 -
account not provided for
(i) Operating leases
(a) Future minimum lease payments under non – cancellable operating leases:
Due within one year 1,130.56 -
Due later than 1 year but not later than 5 years 3,070.40 -
Due later than 5 years 655.80 -
Total minimum lease payments
(b)Operating lease rentals recognized in the Profit and Loss Statement 1,130.60 -
(Refer note 28)
(c) Description of significant operating lease arrangements:
The Group has given refundable interest free security deposits under the
lease agreements.
All agreements contain provision for renewal at the option of either parties.
(ii) Finance leases
Total minimum finance lease payments outstanding :
Due within one year 113.55 -
Due later than 1 year but not later than 5 years 86.80 -
Total minimum lease payments 200.35 -
Less: Interest not due 14.95 -
Present value of net minimum leases payments
Disclosed under:
Long-term borrowings (Refer note 5) 79.75 -
Other current liabilities (Refer note 11) 105.65 -
The Group has accounted for the tax liabilities of its foreign subsidiaries in accordance with their respective tax legislations.
During the current year, Majesco, USA the subsidiary has obtained tax refunds relating to earlier periods and is certain of obtaining
similar refunds/ benefits for the balance earlier periods and current period. It will also be eligible for certain deductions and
amortizations after determining its tax liability under US tax laws, since virtual certainty has been established presently deferred
tax assets have been recognized in the current year in respect of all these amounts to the extent considered virtually certain.
32 Leases
4,856.76 -
Year ended Year ended
March 31, 2016 March 31, 2015
As at As at
March 31, 2016 March 31, 2015
185.40 -
185.40 -
33 Income taxes
Corporate Overview • Statutory Reports • • Shareholders Information Financial Statements
2016 ANNUAL REPORT | 125
F - 73
(All amounts in ` Lakhs, unless otherwise stated)
Year ended
March 31, 2016
Year ended
March 31, 2015
34 Employee benefits
Total (Refer note 25) 2,730.07 -
As at As at
March 31, 2016 March 31, 2015
2,060.75 -
2,100.50 -
Total 39.75 -
47.85 -
The disclosures required as per the revised Accounting Standard (AS) 15 -
Employee Benefits (revised 2005) are as under:
(a) Defined contribution plans
The Company has recognized the following amounts in the
Profit and Loss Statement for the year:
Contribution to provident fund 626.06 -
Contribution to Employees' State Insurance Corporation 6.25 -
Contribution to Maharashtra Labour Welfare Fund 0.96 -
Contribution to Superannuation fund 27.26 -
Contribution as per 401K 330.59 -
Other Funds 1,738.95 -
(b) Defined benefit plan (Gratuity)
As per the independent actuarial valuation carried out as at March 31, 2016
(i) Change in defined benefit obligations (DBO) :
Projected benefit obligation - opening - -
Service cost 223.07 -
Interest cost 145.23 -
Actuarial loss / (gain) (176.52) -
Benefits paid (94.74) -
Liability assumed as per the scheme of arrangement 1,963.71 -
Projected benefit obligation - closing
(ii) Change in fair value of assets:
Fair value of plan assets - opening - -
Expected return on plan assets 144.82 -
Employer’s contribution 87.60 -
Assets acquired as per the scheme of arrangement 1,963.71 -
Benefit paid (94.74) -
Actuarial gain/(loss) (0.89) -
Fair value of plan assets - closing
(iii) Amount recognized in the Balance Sheet :
Present value of obligations 2,060.75 -
Less: Fair value of plan assets (2,100.50) -
Less: Unrecognized Past service cost - -
Net (assets) / liability recognized (39.75) -
Included under:
Short-term loans and advances (Refer note 21) 39.75 -
(iv) Net gratuity cost for the year :
Service cost 223.07 -
Interest cost 145.23 -
Expected return on plan assets (144.82) -
Net actuarial loss / (gain) recognized in the current year (175.63) -
Net gratuity cost
(v) Asset information :
Life Insurance Corporation of India 100% -
126 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
F - 74
(All amounts in Lakhs, unless otherwise stated)`
(No. of Options)
Year ended
March 31, 2016
Year ended
March 31, 2015
(vi) Assumptions used in accounting for the gratuity plan:
Discount rate ( p.a. ) 8.00% -
Return on plan assets (p.a.) 8.85% -
Salary escalation rate ( p.a. ) 9.00% -
Retirement age 60 years -
The estimates of salary escalation, considered in actuarial valuation,
takes into account inflation, seniority, promotions and other relevant factors,
such as demand and supply in the employment market.
(vii) Expected contribution to the fund in the next year
Gratuity 210.00 -
(viii)Amounts recognized in current year and previous year:
Defined benefit obligation (2,060.75) -
Plan assets 2,100.50 -
Surplus / (deficit )
Experience adjustments
On plan liabilities - -
On plan assets 0.89 -
(c) Leave encashment charged under salaries and wages during the year
amounted to ` 981.07.
(a) Nature and extent of employee share-based payment plans that existed during the year:
Plan I
The company introduced the employee stock option scheme as a part of the scheme of arrangement, approved by the Hon’ble
High Court of Gujarat and Hon’ble High Court of Bombay. The shareholders of Mastek Limited approved the Scheme of
Arrangement in the Court Convened meeting held on March 05, 2015, and the shareholders of Majesco Limited approved the
scheme of arrangement through consent letter. The Company introduced the scheme for granting upto 80,00,000 stock
options to the employees, each option representing one equity share of the Company. The exercise price is to be determined
by the Nomination and Remuneration Committee ("Committee") and such price may be the face value of the share from time
to time or may be the market price or any other price as may be decided by the Committee and will be governed by the
Securities and Exchange Board of India (SEBI) (Share based employee benefits) Regulations, 2014 and accounted in
accordance with the guidance note on Employees Share Based Payments issued by the Institute of Chartered Accountants of
India using the intrinsic value. The first vesting of the stock options shall happen only on completion of one year from the date
of grant and the options are exercisable within seven years from the date of vesting. As per the SEBI guidelines, the excess of
market price of the underlying equity shares as of the date of the grant of the options over the exercise price of the option is to
be recognized and amortized on a straight line basis over the vesting period. Consequently, the amortized compensation cost
for the exercisable option is ` 49.18 (net of reimbursement received from Mastek) and have been charged to the Profit and
Loss Statement during the year.
Opening Balance - -
Granted pursuant to the scheme of arrangement 25,75,177 -
Granted during the year 9,91,000 -
Exercised during the year (2,39,606) -
Lapsed / reversed during the year (37,397) -
Cancelled during the year (2,16,541) -
Balance unexercised options
39.75 -
35 Employee Stock Option Scheme
Year ended Year ended
March 31, 2016 March 31, 2015
30,72,633 -
Corporate Overview • Statutory Reports • • Shareholders Information Financial Statements
2016 ANNUAL REPORT | 127
F - 75
(All amounts in ` Lakhs, unless otherwise stated)
(b) The Company has adopted the intrinsic value method as permitted by the SEBI Guidance Note on Accounting for Employee
Share Based Payment issued by the Institute of Chartered Accountants of India for measuring the cost of stock options
granted. The Company's net profit and earnings per share would have been as under, had the compensation cost for
employees stock options been recognized based on the fair value at the date of grant in accordance with Black Scholes
model.
Profit after taxation 688.82 (2.96)
Less : Employee stock compensation expenses based on fair value (674.36) -
(Includes expenses relating to employee stock options
granted to empoyees of Mastek)
Add: Employee stock compensation expenses based on intrinsic value 49.18 -
Profit / (loss) after taxation as per fair value method
Basic earnings per share (EPS)
Number of shares 2,28,24,721 24,356
Basic EPS as reported (`) 3.02 (12.14)
Proforma basic EPS (`) 0.28 (12.14)
Diluted earnings per share (EPS)
Number of shares 2,46,24,180 24,356
Diluted EPS as reported (`) 2.80 (12.14)
Proforma diluted EPS (`) 0.26 (12.14)
(c) Stock options exercised during the year:
Number of options exercised during the year 2,39,606 -
Weighted average share price at the date of exercise (`) 111.20 -
(d) For stock options outstanding at the end of the year,
the range of exercise prices and weighted average
remaining contractual life
(vesting period + exercise period)
As at March 31, 2016
Range of Exercise Price (`)
5-100 10,59,846 68.65 7.78
101-200 10,53,287 132.27 7.75
Above 200 9,59,500 378.34 10.25
(e) Information on stock options granted during the year :
Number of options granted during the year 2,39,606 -
Option pricing model used
Weighted average share price (`) 385.67 -
Exercise price (`) 380.62 -
Expected volatility (%) 48.94% -
Option life (vesting period + exercise period) 6 years -
Dividend yield (%) 0.00% -
Risk free interest rate (%) 7.75% -
The risk free interest rates are determined based on the zero-coupon yield curve for government securities. The volatility is
determined based on annualized standard deviation of stock price on NSE over the time to maturity of the option. The
expected dividend yield is taken as Nil as there is no history of declaration of dividend by the Company.
Year ended Year ended
March 31, 2016 March 31, 2015
63.64 (2.96)
Options Weighted average Weighted average
outstanding exercise remaining
price (`) contractual
life (years)
Total 30,72,633 187.16 8.54
Year ended Year ended
March 31, 2016 March 31, 2015
Market price as defined by SEBI /
Discounted price as per the scheme
128 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
F - 76
(All amounts in ` Lakhs, unless otherwise stated)
(f) Effect of share-based payment plan on the Balance Sheet and
Profit and Loss Statement :
Employee stock options outstanding account (Refer note 4) 133.88 -
Employee stock compensation expenses (Refer note 25) 49.18 -
The Group has accounted net foreign exchange loss from transactions and translations under "Other expenses" in accordance with
the Guidance Note on Schedule III to the Companies Act, 2013 issued by the Institute of Chartered Accountants of India. Further,
‘Income from operations’ includes net realised foreign exchange gain arising from currency hedges relating to certain firm
commitments and forecasted sales transactions. The table below shows the impact of the net foreign exchange gain on the Groups
profit for the year.
Loss on foreign currency transactions and translation (net) 2.08 -
Net realised foreign exchange gain arising from hedging accounted under 156.28 -
Income from operations - Information technology services
The Group, in accordance with its risk management policies and procedures, enters into foreign currency forward contracts to
hedge against foreign currency exposures relating to highly probable forecast transactions. The Company does not enter into any
derivative instruments for trading or speculative purposes. The counter party is generally a bank. These contracts are for a period
between one day and two years.
The following “sell ” foreign exchange forward contracts are outstanding:
Mark-to-market losses
Mark-to-market losses provided for - -
Mark-to-market (gains) reported in hedging reserve account (Refer note 4) (116.85) -
Mark-to-market (gains) / losses (net)
Classified as Short term provision (Refer note 12) 2.34 -
Classified as Other current assets (Refer note 22) 119.19 -
Foreign exchange exposure not hedged by derivative instruments or otherwise (net):
Year ended Year ended
March 31, 2016 March 31, 2015
36
Year ended Year ended
March 31, 2016 March 31, 2015
37 Derivative financial instruments
As at As at
March 31, 2016 March 31, 2015
(116.85) -
Liabilities
Payables (trade & others) USD 1.07 71.13 - -
Borrowings (PCFC) USD 46.51 3,081.32 - -
Total payables 47.58 3,152.45 - -
Unhedged payables 47.58 3,152.45 - -
(FC in Lakhs) ( in Lakhs)`Currency (FC in Lakhs) (` in Lakhs)
As at
March 31, 2016
As at
March 31, 2015
No. of
Contracts
Amount of
Forward
contracts
(FC in Lakhs)
Amount of
Forward
contracts
(` in Lakhs)
No. of
Contracts
Amount of
Forward
contracts
(FC in Lakhs)
Amount of
Forward
contracts
(` in Lakhs)
As at
March 31, 2016
Foreign
Currency
( FC )
USD 37 106.60 7,381.18 - - -
As at
March 31, 2015
Corporate Overview • Statutory Reports • • Shareholders Information Financial Statements
2016 ANNUAL REPORT | 129
F - 77
(All amounts in ` Lakhs, unless otherwise stated)
38 Related Party Disclosures
Year ended Year ended
March 31, 2016 March 31, 2015
39 Segment reporting
Year ended Year ended
March 31, 2016 March 31, 2015
Total 75,715.26 -
Key Management Personnel
Ketan Mehta Chief Executive Officer
Radhakrishnan Sundar Executive Director
Farid Kazani Managing Director
Lori Stanley General Counsel, North America
Edward Ossie Chief Operating Officer
Manish Shah President and CEO
Prateek Kumar Executive Vice President - Global Sales
William Freitag Executive Vice President - Insurance Consulting
Chad Hersh Executive Vice President - Life and Annuity
Tilakraj Panjabi Executive Vice President - P&C Delivery
Anil Chitale Sr. Vice President – P&C (Resigned on March 31,2015)
Vidyesh V Khanolkar Vice President - UK
Kunal Karan Chief Financial Officer
Nishant Shirke Company Secretary
Disclosure of transactions with key management personnel during the year:
i. Total Remuneration paid/payable:
Ketan Mehta 234.05 -
Radhakrishnan Sundar 27.21 -
Farid Kazani 147.77 -
Lori Stanley 135.44 -
Edward Ossie 235.13 -
Manish Shah 221.99 -
Prateek Kumar 274.78 -
William Freitag 220.41 -
Chad Hersh 203.22 -
Tilakraj Panjabi 27.52 -
Vidyesh V Khanolkar 194.18 -
Kunal Karan 27.11 -
Nishant Shirke 8.07 -
ii. Consideration received on exercise of options
Farid Kazani 10.28 -
Vidyesh V Khanolkar 8.87 -
Group follows AS 17, ‘Segment Reporting’ issued by the Institute of Chartered Accountants of India, which requires disclosures
of financial and descriptive information about Majesco’s reportable segments, both primary and secondary. The Group has
identified geographic segments as primary segments and industry verticals as secondary segments. Group’s operations relate
to providing IT services, delivered to customers globally. The organisational and reporting structure of the Group is based on
Strategic Business Units (SBU) concept. The SBU’s are primarily geographical segments. SBU’s are the operating segments for
which separate financial information is available and for which operating results are evaluated regularly by management in
deciding how to allocate resources and in assessing performance. These SBU’s provide end-to-end information technology
solutions on time and material contracts or fixed bid contracts, entered into with customers. The Group’s primary reportable
segments consist of the following SBUs, which are based on the risks and returns in different geographies and the location of
the customers: North America Operations, UK Operations, and Others. ‘Others’ include operations of the Group in other parts
of the world including India.
a. Primary geographical segmental reporting on the basis of location of customers:
Segment Revenue
North America 66,149.07 -
UK 5,864.69 -
Others 3,701.50 -
130 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
F - 78
(All amounts in Lakhs, unless otherwise stated)`
Year ended Year ended
March 31, 2016 March 31, 2015
(771.60) -
Segment Assets Segment Liabilities
As at As at
March 31, 2016 March 31, 2016
Total Assets/ Liabilities 67,474.81 32,653.15
Year ended Year ended
March 31, 2016 March 31, 2015
Total 3,715.85 -
Total 1,784.94 -
Segment Result
North America 1,309.77 -
UK 1,395.85 -
Others 434.13 -
Total 3,139.75 -
Common unallocable charges, net 3,933.72 -
Finance costs 428.18 -
Other income (908.14) -
Loss before exceptional item and tax (314.01) -
Exceptional items 457.59 -
Loss before tax
Revenues and expenses directly attributable to segments are reported under each reportable segment. All other costs i.e.
corporate costs and support function costs, which are not directly attributable or allocable to segments have been disclosed as
common unallocable charges.
A major portion of the Group’s tangible fixed assets are primarily located at its off shore centres in India and are commonly
used by various SBUs. These fixed assets are therefore not directly identifiable to any particular reportable segment and have
been allocated to SBUs on the basis of man-months used by these SBUs. Consequently, capital expenditure incurred and
depreciation and amortization are similarly allocated to SBUs.
Other Primary Segment information :
North America 49,449.06 26,085.58
UK 2,508.09 1,068.55
Others 2,634.99 656.46
Segmental Assets/Liabilities 54,592.14 27,810.59
Unallocated 12,882.67 4,842.57
Capital expenditure incurred
North America 3,538.91 -
UK 46.72 -
Others 75.85 -
Unallocated 54.37 -
Depreciation and amortization
North America 1,711.29 -
UK 26.27 -
Others 26.92 -
Unallocated 20.46 -
Corporate Overview • Statutory Reports • • Shareholders Information Financial Statements
2016 ANNUAL REPORT | 131
F - 79
40 Demerger from Mastek Limited and slump sale to Majesco Software and Solutions India Private Limited
41 Acquisition of Cover-All Technologies Inc., USA
42 Acquisition of Mastek Asia Pacific Pte. Limited
(a) Pursuant to a Scheme of Arrangement (the “scheme”) under section 391 to 394 read with Section 100 to 103 and other
applicable provision of the Companies Act, 1956 and other applicable provision of the Companies Act, 2013, the Board of
Directors of Mastek Limited (“Mastek”), at its meeting held on September 15, 2014, had approved the demerger of the
Insurance Products and Services business of Mastek, into the Company (Formerly known as Minefields Computers Limited),
followed by transfer by the Company of the offshore insurance operations business in India to Majesco Software and Solution
India Private Ltd (“MSSIPL”) a wholly owned subsidiary of Majesco Software and Solution Inc., USA (“MSSUS”) a subsidiary of
the company, retaining the domestic operations with the Company. The appointed date of the scheme was April 1, 2014 and
the appointed date for transfer of the offshore insurance operation business transfer was November 1, 2014. Mastek obtained
necessary approvals for the Scheme under clause 24(f) of the Listing Agreement with the BSE and NSE from SEBI on December
9, 2014. The Scheme has also been approved by the Hon’ble High Court of Bombay and Hon’ble High Court of Gujarat and on
filing with the Registrar of Companies (“ROC”) the said scheme become effective from June 1, 2015. As specified in the
scheme, Mastek shareholders have been issued one equity share in the Company for every share held in Mastek, while
retaining their existing Mastek share. Existing 50,000 equity shares of `10/- each of the Company (Formerly known as
Minefields Computers Limited) were cancelled on June 1, 2015.
The shares of the Company were listed on August 19, 2015 on the BSE and NSE, where Mastek is listed. The demerger has
resulted in the transfer of the assets, liabilities, other reserves and surplus, employee stock options outstanding account and
hedging reserve account relating to the demerged entity from Mastek and accordingly have been given effect to in these
consolidated financial statements.
The difference in book value of the above assets net of liabilities and specific reserves and the Capital Reserve on
Consolidation as on March 31, 2015 aggregating to ̀ 16,650.72 have been credited to Surplus in Profit and Loss Account. The
comparatives as at March 31, 2015 and for the year ended March 31, 2015, as given in the various financial statements and
notes are that of the Minefields Computers Limited before giving effect to the scheme of demerger as above.
(b) The deferred tax assets arising from difference between the book value of depreciable fixed assets and of their written down
value for tax purpose and timing difference of certain expenses relating to the period prior to April 1, 2015 aggregating to
` 284.02 has been credited to General Reserve.
On December 14, 2014, Majesco USA a subsidiary of Majesco Limited (“the Company” or Majesco) entered into a definitive
agreement plan of merger with Cover-All Technologies Inc. (“Cover-All”) pursuant to which Cover-All will merge with and into
Majesco USA, with Majesco USA surviving the merger in a 100% stock for stock transaction pursuant to which Cover-All’s stock
holders will receive 16.50% of the outstanding shares in the combined company. During the time, Cover-All common stock was
listed on the NYSE MKT in the USA.
The shareholders of Cover-All approved the merger at the meeting of shareholders held on June 22, 2015. Majesco USA
consummated the merger on June 26, 2015 and its common stock got listed on NYSE MKT and began trading on June 29, 2015.
For the purpose of these consolidated financial statements Majesco has accounted for the acquisition of Cover-All using the
pooling of interest method as required under Accounting Standard 14 – Accounting for Amalgamation” wherein the assets,
liabilities and reserves of Cover-All are recorded at their existing carrying amounts, after making adjustments for significant
differences in the account policies followed by Cover-All and Majesco to align the accounting policy of the company.
On October 31, 2015, Majesco SDN BHD, a company incorporated under the laws of Malaysia (“Majesco Malaysia”) a step down
subsidiary of Majesco Limited (“the Company” or Majesco) entered into a share purchase agreement with Mastek Limited
(Mastek), pursuant to which Majesco Malaysia agreed to purchase from Mastek all of the issued and outstanding shares of Mastek
Asia Pacific Pte. Limited, a company incorporated under the laws of Singapore for a total cash purchase consideration of 381,800
Singapore Dollars (` 180.39). The acquisition was completed on November 1, 2015 and goodwill of ̀ 39.00 has been recognized on
consolidation. Subsequently the name of the company was changed to Majesco Asia Pacific Pte. Limited.
(All amounts in ` Lakhs, unless otherwise stated)
132 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
F - 80
(All amounts in Lakhs, unless otherwise stated)`
43 Acquisition of business of Agile Technologies, LLC
44 New Zealand Branch
45 Minority Interest
During the year ended March 31, 2015, Majesco USA, a subsidiary of Majesco Limited had acquired the insurance industry focused
IT consulting business of Agile technologies, LLC (“Agile”) with effect from January 01, 2015. On acquisition, goodwill of USD 3.89
million (` 2,577.32) was recognized in the book and amortized equally over a period of five years.
In addition, the terms of purchase provides for payment of contingent consideration to the selling shareholders, payable over
three years and calculated based on achievement of specific targets, The contingent consideration is payable in cash and cannot
exceed USD 4.20 million (` 2,625.00).During the year, Majesco USA, settled contingent consideration for first year and paid an
amount of USD 1.01 million (` 664.63) which is added to the goodwill.
Majesco USA also signed an amendment to the initial agreement and converted 50% of the remaining contingent consideration
into deferred consideration and capitalized additional USD 1.17 million (` 772.98) as goodwill.
On March 23, 2016, Majesco USA a subsidary of the company has incorporated a branch in New Zealand. As on March 31, 2016, no
revenue has been generated through the branch.
As at March 31, 2016, the Company held 70.10% of the shares of its subsidiary “Majesco, USA”. Accordingly minority interest has
been computed and shown separately in the consolidated financial statements of the company.
During the year Majesco, USA, adopted the Majesco 2015 Equity Incentive Plan, under which option may be granted to the
employees, consultants and directors. As of March 31, 2016, 1,63,390 options were exercisable.
Majesco USA has also issued warrants to purchase its shares to the lenders of Cover- All (subsidiary of the Company) and advisor to
Majesco. As at March 31, 2016, 3,09,064 excisable warrants were outstanding. On exercise of the option and warrants the share of
minority interest of the Group will increase.
Corporate Overview • Statutory Reports • • Shareholders Information Financial Statements
2016 ANNUAL REPORT | 133
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(Signatures to Note 1 to 47)
For and on behalf of the Board
Farid Kazani
Managing Director
Venkatesh Chakravarty
Non-Executive Chairman and Independent Director
Radhakrishnan Sundar
Executive Director
Kunal Karan
Chief Financial Officer
Nishant Shirke
Company Secretary
Place: Navi Mumbai
Date: May 18, 2016
Place: Navi Mumbai
Date: May 18, 2016
As per our report of even date
For Varma & Varma
Chartered Accountants
FRN: 004532S
Cherian K Baby
M No: 16043
Partner
46 Disclosures mandated by Schedule III of Companies Act, 2013 by way of additional information
Parent Entity
Majesco Limited 91.44% 25,232.19 87.89% 605.42
Subsidiary
Indian
Majesco Software And Solutions India Private Ltd. 1.44% 397.84 -10.89% (75.03)
Foreign
Majesco (Formerly - Majesco Mastek) -11.52% (3,179.77) -273.73% (1,885.46)
Majesco Software and Solutions Inc. 10.98% 3,029.24 38.12% 262.55
Cover-All Systems Inc. 9.26% 2,555.86 203.67% 1,402.87
Majesco Canada Ltd. -6.26% (1,727.07) 43.17% 297.38
Majesco (UK) Ltd. 0.86% 236.97 27.32% 188.22
Majesco Sdn Bhd. 0.14% 37.76 13.27% 91.38
Majesco (Thailand) Co. Ltd. -2.28% (628.20) -4.43% (30.50)
Majesco Asia Pacific Pte Ltd. 0.00% 0.13 -1.11% (7.63)
Minority Interest -26.20% (7,228.14) -0.15% (41.95)
Intercompany elimination and consolidation adjustments 32.13% 8,866.70 -17.19% (118.43)
Total 100.00% 27,593.51 100.00% 688.82
47 Previous year's figures have been regrouped or reclassified wherever necessary.
consolidatedprofit or loss
As % of AmountAs % of consolidated
net assets
Name of the entity
Amount
As at March 31, 2016
Net Assets i.e., total assets minus total liabilities
Share in profit / (loss)
Year ended March 31, 2016
(All amounts in ` Lakhs, unless otherwise stated)
134 | MAJESCO LIMITED
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
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MAJESCO
CONSOLIDATED UNAUDITED FINANCIAL
INFORMATION
SEPTEMBER 30, 2017
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MAJESCO INC.
Consolidated Balance Sheets (Unaudited)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Majesco and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
September 30, March 31,
2017 2017
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 10,268 $ 11,635
Short term investments 701 829
Restricted cash 53 53
Accounts receivables, net 15,505 12,227
Unbilled accounts receivable 10,656 8,563
Prepaid expenses and other current assets 7,113 5,961
Total current assets 44,296 39,268
Property and equipment, net 3,082 3,659
Intangible assets, net 7,577 8,708
Deferred income tax assets 9,202 5,874
Other assets 96 289
Goodwill 32,216 32,216
Total Assets $ 96,469 $ 90,014
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Capital lease obligations $ 137 $ 310
Loans from banks 7,983 2,561
Accounts payable 2,569 2,923
Accrued expenses and other liabilities 17,269 14,911
Deferred revenue 10,830 10,982
Total current liabilities 38,788 31,687
Capital lease obligations, net of current portion 197 288
Term loan – bank 10,000 10,000
Other 2,284 2,191
Total Liabilities $ 51,269 $ 44,166
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Preferred stock, par value $0.002 per share – 50,000,000 shares authorized as of
September 30, 2017 and March 31, 2017, NIL shares issued and outstanding as
of September 30, 2017 and March 31, 2017 $ - $ -
Common stock, par value $0.002 per share – 450,000,000 shares authorized as of
September 30, 2017 and March 31, 2017; 36,536,724 shares issued and
outstanding as of September 30, 2017 and 36,508,203 shares issued and
outstanding as of March 31, 2017 73 73
Additional paid-in capital 72,890 71,343
Accumulated deficit (27,648 ) (25,282 )
Accumulated other comprehensive loss (115 ) (286 )
Total Stockholders’ Equity 45,200 45,848
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 96,469 $ 90,014
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Majesco and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
Three
Months
ended
September 30,
2017
Three
Months
ended
September 30,
2016
Six
Months
ended
September 30,
2017
Six
Months
ended
September 30,
2016
Revenue $ 30,347 $ 31,046 $ 58,269 $ 63,600
Cost of revenue 16,738 15,589 32,754 33,391
Gross profit $ 13,609 $ 15,457 $ 25,515 $ 30,209
Operating expenses
Research and development expenses $ 4,206 $ 4,532 $ 8,135 $ 9,060
Selling, general and administrative expenses 10,432 10,654 20,745 21,313
Total operating expenses $ 14,638 $ 15,186 $ 28,880 $ 30,373
Income/(Loss) from operations $ (1,029 ) $ 271 $ (3,365 ) $ (164 )
Interest income 8 10 13 18
Interest expense (146 ) (134 ) (267 ) (342 )
Other income (expenses), net - 16 (44 ) 14
Income /(Loss) before provision for income
taxes $ (1,167 ) $ 163 $ (3,663 ) $ (474 )
(Benefit)/Provision for income taxes (451 ) (54 ) (1,297 ) (141 )
Net Income/(Loss) $ (716 ) $ 217 $ (2,366 ) $ (333 )
Earnings (Loss) per share:
Basic $ (0.02 ) $ 0.01 $ (0.06 ) $ (0.01 )
Diluted $ (0.02 ) $ 0.01 $ (0.06 ) $ (0.01 )
Weighted average number of common shares
outstanding
Basic 36,527,666 36,474,139 36,518,768 36,462,934
Diluted 36,527,666 38,386,634 36,518,768 36,462,934
See accompanying notes to the Consolidated Financial Statements.
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Majesco and Subsidiaries
Consolidated Statements of Comprehensive Income (Unaudited)
(All amounts are in thousands of US Dollars)
Three
Months
ended
September 30,
2017
Three
Months
ended
September 30,
2016
Six
Months
ended
September 30,
2017
Six
Months
ended
September 30,
2016
Net Income/(Loss) $ (716 ) $ 217 $ (2,366 ) $ (333 )
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments 107 (164 ) 296 (369 )
Unrealized gains/(loss) on cash flow hedges (134 ) 54 (125 ) (34 )
Other comprehensive income (loss) $ (27 ) $ (110 ) $ 171 $ (403 )
Comprehensive Income/(Loss) $ (743 ) $ 107 $ (2,195 ) $ (736 )
Comprehensive income attributable to the non-
controlling interest $ — $ — $ — $ —
Comprehensive Income/(Loss) attributable to
Majesco $ (743 ) $ 107 $ (2,195 ) $ (736 )
See accompanying notes to the Consolidated Financial Statements.
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Majesco and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(All amounts are in thousands of US Dollars)
Six Months
ended
September 30,
2017
Six Months
ended
September 30,
2016
Net cash flows from operating activities
Net Loss $ (2,366 ) $ (333 )
Adjustments to reconcile net loss to net cash (used) provided by operating
activities:
Depreciation on property and equipment 1,145 1,838
Amortization of intangibles 1,419 399
Stock-based compensation 1,432 634
Profit on sale of assets (13 ) (6 )
Unrealised cash flow hedges (125 ) (34 )
Deferred income taxes (3,332 ) (520 )
Change in Assets and Liabilities:
Decrease / (increase) in accounts receivable, billed and unbilled (4,878 ) 4,949
Decrease / (increase) in prepaid expenses and other current assets (1,168 ) 312
Decrease / (increase) in other non-current assets 192 (58 )
Increase / (decrease) in accounts payable (351 ) (519 )
Increase / (decrease) in accrued expenses and other liabilities 2,095 (2,144 )
(Increase) / decrease in deferred revenue and other non-current liabilities (90 ) 1,103
Net cash (used) provided by operating activities $ (6,040 ) $ 5,621
Net cash flows from investing activities
Purchase of property and equipment $ (597 ) $ (1,310 )
Purchase of intangible assets (286 ) (165 )
Proceeds from sale of tangible assets 35 66
Proceeds from the sale of (purchase of) investments 139 (1,915 )
Decrease in restricted cash - (1 )
Net cash (used) by investing activities $ (709 ) $ (3,325 )
Net cash flows from financing activities
Payment of capital lease obligations $ (263 ) $ (69 )
Repayment of loans (1,957 ) (7,351 )
Receipt of loan proceeds 7,392 10,600
Net cash provided by financing activities $ 5,172 $ 3,180
Effect of foreign exchange rate changes on cash and cash equivalents 210 (201 )
Net (decrease)/increase in cash and cash equivalents $ (1,367 ) $ 5,275
Cash and cash equivalents, beginning of the period 11,635 5,520
Cash and cash equivalents at end of the period $ 10,268 $ 10,795
See accompanying notes to the Consolidated Financial Statements.
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Majesco and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
1. DESCRIPTION OF BUSINESS
Majesco is a global provider of core insurance software, consulting services and other insurance technology
solutions for business transformation for the insurance industry. We offer core insurance software solutions for
property and casualty/general insurance (“P&C”), life and annuity (“L&A”) and pensions group/employee benefits
providers, allowing them to manage policy administration, claims management and billing functions. In addition,
we offer a variety of other technology-based solutions that are designed to enable organizations to automate and
innovate business processes across the end-to-end insurance value chain and comply with policies and regulations
across their organizations. Our solutions enable customers to respond to evolving market needs and regulatory
changes, while improving the efficiency of their core operations, thereby increasing revenues and reducing costs.
Majesco’s customers are insurers, managing general agents and other risk providers from the P&C, L&A and group
insurance segments worldwide.
Majesco was previously 100% owned (directly or indirectly) by Mastek Ltd., a publicly traded limited company
domiciled in India whose equity shares are listed on the Bombay Stock Exchange and the National Stock Exchange
(India). Mastek Ltd. underwent a demerger through a scheme of arrangement under India’s Companies Act, 1956,
pursuant to which its insurance related business was separated from Mastek Ltd.’s non-insurance related business
and the insurance related operations of Mastek Ltd. that were not directly owned by Majesco were contributed to
Majesco (the “Reorganization”). The Reorganization was completed on June 1, 2015.
Majesco, along with its subsidiaries, operates in the United States, Canada, Mexico, the United Kingdom, Malaysia,
Singapore, Thailand and India (hereinafter referred to as the “Group”).
Merger with Cover-All Technologies Inc.
On June 26, 2015, Cover-All Technologies Inc. (“Cover-All”), an insurance software company listed on NYSE
MKT, merged with and into Majesco in a 100% stock-for-stock merger, with Majesco surviving the merger.
In connection with the merger, Majesco’s common stock was listed on the NYSE MKT and began trading on the
NYSE MKT on June 29, 2015. Pursuant to the merger, Cover-All’s stockholders and holders of its options and
restricted stock units received equity or equity interests in Majesco representing approximately 16.5% of the total
capitalization of the combined company in the merger.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation
The accompanying unaudited consolidated financial statements were prepared in accordance with accounting
principles generally accepted in the United States of America, or U.S. GAAP, for interim financial information and
with the instructions to Form 10-Q and Article 10 of SEC Regulation S-X. The March 31, 2017 consolidated
balance sheet was derived from our audited consolidated financial statements included in our Annual Report on
Form 10-K for the fiscal year ended March 31, 2017 filed with the SEC on June 16, 2017 (the “Annual Report”),
but does not include all disclosures required by U.S. GAAP. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments except as otherwise noted, considered necessary for a fair statement
of results of operations and financial position have been included. The results for the interim periods presented are
not necessarily indicative of the results expected for any future period. The following information should be read in
conjunction with the audited financial statements and notes thereto included in our Annual Report.
Mastek Ltd. maintained benefit and stock-based compensation programs at the parent company level. After the
demerger of Mastek Ltd., which became effective on June 1, 2015, the Group employees who participated in those
programs were allotted options of Majesco’s parent company, Majesco Limited, in the same proportion in addition
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to the existing options of Mastek Ltd., which these employees already had. The consolidated balance sheets do not
include any outstanding equity related to the stock-based compensation programs of Mastek Ltd., but include
outstanding equity related to the equity-based compensation programs of Majesco Limited.
b. Significant Accounting Policies
For a description of all significant accounting policies, see Note 2, Summary of Significant Accounting Policies, of
the Notes to the consolidated financial statements included in our Annual Report. There have been no material
changes to our significant accounting policies since the filing of the Annual Report.
c. Principles of Consolidation
The Group’s consolidated financial statements include the accounts of Majesco and its wholly owned subsidiaries,
Cover-All Systems, Inc., Majesco Canada Ltd., Majesco Software and Solutions Inc. (“MSSI”), Majesco Sdn. Bhd.,
Majesco UK Limited, Majesco (Thailand) Co., Ltd., Majesco Software and Solutions India Private Limited and
Majesco Asia Pacific Pte Ltd. as of September 30, 2017. All material intercompany balances and transactions have
been eliminated in consolidation.
d. Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates. On an on-going basis, we evaluate our estimates,
including those related to revenue recognition, cash equivalents and marketable securities, accounts receivable,
income taxes, goodwill, and stock-based compensation.
3. RECENT ACCOUNTING PRONOUNCEMENTS
Recent Accounting and Auditing Development
Improvements on Employee Share-Based Payment Accounting
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2016-09, “Improvements on Employee Share-Based Payment Accounting (Topic 718)” (“ASU 2016-09”),
which simplifies several aspects of the accounting for employee share-based payment transactions for both public
and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding
requirements, as well as classification in the statement of cash flows. The new standard is effective for annual
periods beginning after December 15, 2016 and interim periods within those years. The standard became effective
for the Company on April 1, 2017. The adoption of this update did not have a material impact on the Company’s
consolidated financial statements.
Revenue from Contracts with Customers
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which
provides guidance for revenue recognition. This ASU affects any entity that either enters into contracts with
customers to transfer goods or services or enters into contracts for the transfer of non-financial assets. This ASU
will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific
guidance.
In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606):
Deferral of the Effective Date”, deferring the effective date of this standard. As a result, the ASU and related
amendments will be effective for the Company for its fiscal year beginning April 1, 2018, including interim periods
within that fiscal year.
Subsequently, the FASB issued ASU No. 2016-08, “Principal Versus Agent Consideration (or Reporting Revenue
Gross versus Net)” in March 2016, ASU No. 2016-10, Identifying Performance Obligations and Licensing in
April 2016, and ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients in May 2016. These
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amendments clarified certain aspects of Topic 606 and will also be effective for the Company for its fiscal year
beginning April 1, 2018.
The core principle of Topic 606 is to recognize revenues when promised goods or services are transferred to
customers in an amount that reflects the consideration that is expected to be received for those goods or services.
Topic 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment
and estimates may be required within the revenue recognition process than are required under existing GAAP,
including identifying performance obligations in the contract, estimating the amount of variable consideration to
include in the transaction price and allocating the transaction price to each separate performance obligation, among
others. Topic 606 also provides guidance on the recognition of costs related to obtaining customer contracts.
Preliminarily, the Company plans to adopt these ASUs (collectively, Topic 606) on April 1, 2018. Topic 606
permits two methods of adoption: retrospectively to each prior reporting period presented (the “Full Retrospective
Method”), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of
initial application (the “Modified Retrospective Method”). The Company currently intends to apply the Modified
Retrospective Method. Although the Company does not expect a material impact on revenues upon adoption, we
expect that the new standard will expand disclosure, specifically around the quantitative and qualitative information
about the Company’s underlying performance obligations.
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Business Combinations (Topic 805): Clarifying the Definition of a Business
In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805)”: Clarifying the Definition
of a Business, which provides a more robust framework to use in determining when a set of assets and activities is a
business. The standard will be effective for the Company beginning April 1, 2018. Based on its current assessment,
the Company does not expect the adoption of this update to have a material impact on its consolidated financial
statements.
Statement of Cash Flows (Topic 230): Restricted Cash
In November 2016, the FASB issued ASU 2016-18,” Statement of Cash Flows (Topic 230)”: Restricted Cash,
which requires the statement of cash flows to report changes in cash, cash equivalents, and restricted cash. The
standard will be effective for the Company beginning August 1, 2018. Based on its current assessment, the
Company does not expect the adoption of this update to have a material impact on its consolidated financial
statements.
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230)”: Classification of Certain
Cash Receipts and Cash Payments (ASU 2016-15), which clarifies how companies present and classify certain cash
receipts and cash payments in the statement of cash flows. The standard will be effective for the Company
beginning April 1, 2018. Based on its current assessment, the Company does not expect the adoption of this update
to have a material impact on its consolidated financial statements.
Income Tax Consequences of an Intra-Entity Transfer of Assets Other Than Inventory (Topic 740)
In October 2016, the FASB issued ASU 2016-16, “Income Taxes — Intra-Entity Transfers of Assets Other Than
Inventory (Topic 740)”, which requires entities to recognize the income tax consequences of an intra-entity transfer
of an asset other than inventory when the transfer occurs. The new standard must be adopted using a modified
retrospective transition method which is a cumulative-effective adjustment to retained earnings as of the beginning
of the first effective reporting period. The standard will be effective for the Company beginning April 1, 2018.
Based on its current assessment, the Company does not expect the adoption of this update to have a material impact
on its consolidated financial statements.
Accounting for Leases (Topic 842)
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which requires
lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner
similar to current practice. ASU 2016-02 states that a lessee would recognize a lease liability for the obligation to
make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. The
standard will be effective for the Company beginning April 1, 2019. The Company is currently evaluating the
impact this update will have on its consolidated financial statements.
Simplifying the Test for Goodwill Impairment (Topic 350)
In January 2017, the FASB issued Accounting Standards Update No. 2017-04, “Intangibles — Goodwill and Other
(Topic 350)”: Simplifying the Test for Goodwill Impairment, which removes the requirement for an entity to
calculate the implied fair value of goodwill (as part of step 2 of the current goodwill impairment test) in measuring a
goodwill impairment loss. The standard will be effective for the Company beginning April 1, 2020. Early adoption
is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The
Company is currently evaluating the impact this update will have on its consolidated financial statements.
Emerging Growth Company
The Group is an “emerging growth company” under the federal securities laws and is subject to reduced public
company reporting requirements. In addition, Section 107 of the JOBS Act also provides that an “emerging growth
company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act
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of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. In other
words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards
would otherwise apply to private companies. The Group has taken advantage of the extended transition period for
complying with new or revised accounting standards. As a result, our financial statements may not be comparable to
those of companies that comply fully with public company accounting standards effective dates.
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4. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Group’s financial instruments consist primarily of cash and cash equivalents, short term investments in time
deposits, restricted cash, derivative financial instruments, accounts receivable, unbilled accounts receivable,
accounts payable, contingent consideration liability and accrued liabilities. The carrying amounts of cash and cash
equivalents, short term investments in time deposits, restricted cash, accounts receivable, unbilled accounts
receivable, accounts payable and accrued liabilities as of the reporting date approximate their fair market value due
to the relatively short period of time of original maturity tenure of these instruments.
Basis of Fair Value Measurement
Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a
liability in the principal or most advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. Valuation techniques used to measure fair value must maximize the
use of observable inputs and minimize the use of unobservable inputs. The current accounting guidance for fair
value measurements defines a three-level valuation hierarchy for disclosures as follows:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level I that are observable, unadjusted quoted prices in
markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3: Unobservable inputs that are supported by little or no market activity, which require the Group to develop
its own assumptions.
The following table sets forth the financial assets, measured at fair value, by level within the fair value hierarchy as
of September 30, 2017 and March 31, 2017:
As of
September 30, 2017 March 31, 2017
Assets
Level 2
Derivative financial instruments (included in the following line items in the
Consolidated Balance Sheets)
Prepaid expenses and other current assets $ 80 $ 99
Other assets $ 18 -
Other liabilities (79 ) (10 )
Accrued expenses and other liabilities (120 ) -
$ (101 ) $ 89
Level 3
Contingent consideration
Other liabilities $ - $ -
Accrued expenses and other liabilities (793 ) (756 )
$ (793 ) $ (756 )
Total $ (894 ) $ (667 )
The following table presents the change in level 3 instruments:
As of and for the three months ended
September 30, 2017 September 30, 2016
Opening balance $ (774 ) $ (630 )
Additions - -
Total losses recognized in Statement of Operations (19 ) (40 )
Settlements - -
Closing balance $ (793 ) $ (670 )
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As of and for the six months ended
September 30, 2017 September 30, 2016
Opening balance $ (756 ) $ (593 )
Additions - -
Total losses recognized in Statement of Operations (37 ) (77 )
Settlements - -
Closing balance $ (793 ) $ (670 )
Contingent consideration pertaining to the acquisition of the consulting business of Agile Technologies, LLC, a
New Jersey limited liability company (“Agile”), as of December 31, 2015 has been classified under level 3 as the
fair valuation of such contingent consideration has been calculated using one or more of the significant inputs which
are not based on observable market data. The fair value of the contingent consideration was estimated using a
discounted cash flow technique with significant inputs that are not observable in the market. The significant inputs
not supported by market activity included the Group’s probability assessments of expected future cash flows related
to its acquisition of the consulting business of Agile during the earn-out period, appropriately discounted
considering the uncertainties associated with the obligation, and calculated in accordance with the terms of the asset
purchase agreement (the “Agile Agreement”) dated December 12, 2014, as amended on January 26, 2016.
The total losses attributable to changes in the estimated contingent consideration payable for the acquisition of the
consulting business of Agile were $(19) and $(37) for the three and six months ended September 30, 2017,
respectively, and $(163) for the fiscal year ended March 31, 2017. The Group paid $1.1 million to Agile as earn-out
consideration in the fiscal year ended March 31, 2017. The Group paid $1.5 million to Agile as earn-out
consideration in the fiscal year ended March 31, 2016.
We use foreign currency forward contracts and par forward contracts to hedge our risks associated with foreign
currency fluctuations related to certain commitments and forecasted transactions. The use of hedging instruments is
governed by our policies which are approved by our Board of Directors. We designate these hedging instruments as
cash flow hedges. Derivative financial instruments we enter into that are not designated as hedging instruments in
hedge relationships are classified as financial instruments at fair value in the statement of operations.
The fair value of derivative financial instruments is determined based on observable market inputs and valuation
models. The derivative financial instruments are valued based on valuations received from the relevant counter-
party (i.e., bank). The fair value of the foreign exchange forward contract and foreign exchange par forward
contract not valued by a bank has been determined as the difference between the forward rate on the reporting date
and the forward rate on the original transaction, multiplied by the transaction’s notional amount (with currency
matching).
5. CAPITAL LEASE OBLIGATIONS
The Group leases furniture under capital leases which are stated at the present value of the minimum lease
payments. The gross stated amounts for such capital leases are nil and $101 and related accumulated depreciation
recorded under capital leases are nil and $42, respectively, as of September 30, 2017 and March 31, 2017. At the
termination of the leases, the Group has an option to receive title to the assets at no cost or for a nominal payment.
Depreciation expenses in respect of assets held under capital leases were $5 and $5 for the three and six months
ended September 30, 2017 compared to $7 and $14 for the three and six months ended September 30, 2016,
respectively.
The following is a schedule of the future minimum lease payments under capital leases, together with the present
value of the net minimum lease payments as of September 30, 2017.
Period ended September 30, Amount
2018 $ 1
Total minimum lease payments $ 1
Less: Interest portion -
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Present value of net minimum capital leases payments $ 1
The Group acquired software under a hire purchase arrangement which is stated at the present value of the
minimum instalment payments. The gross stated amount for such software is $431 and $428 and related
accumulated depreciation is $64 and $21, respectively, as of September 30, 2017 and Mach 31, 2017.
Depreciation expenses in respect of assets held under hire purchase were $43 and nil for the three and six months
ended September 30, 2017, compared to $nil and $nil for the three and six months September 30, 2016,
respectively.
The following is a schedule of the future minimum installment payments under hire purchase, together with the
present value of the net minimum installment payments as of September 30, 2017.
Period ended September 30, Amount
2018 $ 209
2019 139
Total minimum installment payments of hire purchase $ 348
Less: Interest portion 14
Present value of net minimum installments of hire purchase $ 334
6. BORROWINGS
Line of Credit
On March 25, 2011, the Group entered into a secured revolving working capital line of credit facility (the “Credit
Facility”) with ICICI Bank Limited (“ICICI”) under which the maximum borrowing limit was $5,000. The interest
rate on the credit facility at March 31, 2016 was the three-month LIBOR plus 350 basis points and increased to the
three-month LIBOR plus 375 basis points with the second extension of this facility described below. The credit
facility was guaranteed by Mastek Ltd., subject to the terms and conditions set forth in the guarantee. The credit
facility initially matured on November 11, 2015. On November 20, 2015, the Group extended this line of credit to
February 11, 2016. The facility was further extended to May 9, 2016 and again extended to May 15, 2017. Majesco
paid a processing fee of $12.50 in connection with the second extension and a processing fee of $50.83 in
connection with the third extension. In connection with these extensions of the Majesco line of credit, Mastek Ltd.
also extended its guarantee of such line of credit. Majesco has agreed to pay a fee and indemnify Mastek Ltd.
against any payments made by Mastek Ltd. in connection with this guarantee. On January 20, 2017, the Group paid
in full the balance under this facility with proceeds from a new $10,000 receivables purchase facility with HSBC
Bank USA, National Association (“HSBC”) described below, and this facility was terminated. On repayment of this
facility, the guarantee by Mastek Ltd. of this facility was also terminated and the Group’s liability to Mastek Ltd.
regarding this guarantee also ceased to exist. The interest rate on the credit facility was 4.75% at January 20, 2017.
This facility was secured by a continuing first priority lien on and security interest in, among other things, all of
Majesco’s personal property and assets (both tangible and intangible), including accounts receivable, cash,
certificated and uncertificated securities and proceeds of any insurance or indemnity payable to the Group with
respect to the collateral. This facility contained financial covenants, as well as restrictions on, among other things,
the ability of the Group to incur debt or liens; make loans and investments; enter into mergers, acquisitions and
other business combinations; engage in asset sales; or amend its governing documents. This facility also restricted
the Group from paying dividends upon and during the continuation of an event of default.
MSSIPL Facilities
On June 30, 2015, the Group’s subsidiary, Majesco Software and Solutions India Pvt. Ltd. (“MSSIPL”), entered
into a secured Pre Shipment in Foreign Currency and Post Shipment in Foreign Currency (“PCFC”) facility with
Yes Bank under which MSSIPL may request 3 months pre-export advances and advances against export collection
bills. The maximum borrowing limit was initially 300 million Indian rupees. The interest rate on this PCFC facility
was initially LIBOR plus 275 basis points. The interest rate on this PCFC facility is determined at the time of each
advance This PCFC facility is secured by a first pari passu charge over the current assets of MSSIPL. Excess
outstanding beyond 100 million Indian rupees is to be backed by 100% goodwill fixed deposit receipts in MSSIPL
or Majesco Limited. On September 27, 2016, MSSIPL extended this PCFC facility to June 17, 2017.
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On September 13, 2017, MSSIPL entered into an addendum facility letter (the “2017 Addendum”) to its addendum
facility letter dated September 27, 2016 with respect to the PCFC facility with Yes Bank dated June 30, 2015. The
2017 Addendum further extended the maturity date of the PCFC facility to May 22, 2018 and reduced the
maximum borrowing limit from 300 million Indian rupees to 130 million Indian rupees, or approximately $1,991
based upon the exchange rate on September 30, 2017. There is no outstanding balance against this loan as of
September 30, 2017.
In addition, the 2017 Addendum also amended the interest rate of the PCFC facility to LIBOR plus 150 basis points
plus 2%. The interest rate on the PCFC facility is determined at the time of each advance.
As of September 30, 2017, the Group was in compliance with the terms of this facility.
On May 9, 2017, MSSIPL and Standard Chartered Bank entered into an Export Invoice Financing Facility,
Working Capital Overdraft Facility, Short Term Loans Facility, Bonds and Guarantees Facility and Pre Shipment
Financing Under Export Orders Facility (the “Combined Facility”) pursuant to which Standard Chartered Bank
agreed to a Combined Facility of up to 200 million Indian rupees (or approximately $3,063 at exchange rates in
effect on September 30, 2017). The Export Invoice Financing Facility is for the financing of MSSIPL’s sale of
goods, as evidenced by MSSIPL’s invoice to the customer. Each amount drawn is required to be repaid within 90
days. The interest on this facility is based on the marginal cost of funds based lending rate (“MCLR”) plus a margin
to be agreed with Standard Chartered Bank at the time of each drawdown. The MCLR is to be determined on the
date of each disbursement and be effective until repayment. Interest will accrue from the utilization date to the date
of repayment or payment of that utilization. The Working Capital Overdraft Facility and the Short Term Loans
Facility are for working capital purposes and subject to sub-limits. The interest on these facilities is based on the
MCLR plus a margin to be agreed with Standard Chartered Bank at the time of each borrowing. The MCLR is to be
determined on the date of each disbursement and be effective until repayment or maturity. Interest will accrue from
the draw down date up to the repayment or maturity date. The Bonds and Guarantees Facility is for the issuance of
guarantees and subject to commissions as agreed with Standard Chartered Bank from time to time. The Pre
Shipment Financing Under Export Orders Facility is for the purchase of raw material, processing, packing,
transportation, warehousing and other expenses and overheads incurred by MSSIPL to ready goods for sale. The
interest on this facility is based on the MCLR plus a margin to be agreed with Standard Chartered Bank at the time
of each borrowing. The MCLR is to be determined on the date of utilization and be effective until repayment.
Interest will accrue from the utilization date up to the repayment date.
The interest under the Combined Facility may be changed by Standard Chartered Bank upon the occurrence of
certain market disruption events. The Combined Facility is secured by a first pari passu security interest over the
current assets of MSSIPL. MSSIPL was in compliance under the terms of this Combined Facility as of September
30, 2017.
The outstanding loan balance under this Combined Facility as of September 30, 2017 is as follows:
Date of loan Repayable on
September 30,
2017
Rate of
Interest
(LIBOR + 2%)
September 20, 2017 December 19, 2017 $ 3,032 3.326 %
Term Loan Facility
On March 23, 2016, Majesco entered into a Loan Agreement (the “Loan Agreement”) with HSBC pursuant to
which HSBC agreed to extend loans to Majesco in the amount of up to $10,000 and Majesco issued a promissory
note to HSBC in the maximum principal amount of $10,000 or any lesser amount borrowed under the Loan
Agreement (the “Note”, and together with the “Loan Agreement”, the “Facility”). The outstanding principal balance
of the loan bears interest based on LIBOR plus a margin in effect on the first day of the relevant interest period.
Until January 1, 2018, only interest will be payable under the loan. Commencing on January 1, 2018, and on each
January 1 and July 1 thereafter until July 1, 2020, installments of principal in the amount of $1,667 shall be due and
payable semi-annually. All principal and interest outstanding under the Note shall be due and payable on March 1,
2021. The Facility is unsecured and supported by a letter of credit issued by a bank of $10,000, which is secured by
a cash pledge of the Group’s parent company, Majesco Limited. As of September 30, 2017, the Group had $10,000
outstanding under this Facility.
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The Facility contains affirmative covenants that require Majesco to furnish financial statements to HSBC and cause
Majesco Limited to maintain (1) a Net Debt-to-EBITDA Ratio (as defined in the Loan Agreement) of not more than
(a) 5.00 to 1.00 as of the last day of its 2017 fiscal year and (b) 2.50 to 1.00 as of the last day of each fiscal year
thereafter, and (2) a Debt Service Coverage Ratio (as defined in the Loan Agreement) of not less than 1.50 to 1.00
as of the last day of each fiscal year. The Facility contains restrictive covenants on Majesco, including restrictions
on declaring or paying dividends upon and during the continuation of an event of default, incurring additional
indebtedness, selling material portions of its assets or undertaking other substantial changes to the business,
purchasing or holding securities for investment, and extending credit to any person outside the ordinary course of
business. The Facility also restricts any transfer or change in, or assignment or pledge of the ownership or control of
Majesco which would cause Majesco Limited to directly own less than fifty one percent (51%) of the issued and
outstanding equity interests in Majesco. The Facility also restricts Majesco Limited from incurring any Net Debt (as
defined in the Loan Agreement) in excess of $25,000 at any time prior to April 1, 2017. The Facility also contains
customary events of default provision and indemnification provisions whereby Majesco will indemnify HSBC
against all losses or damages related to the Facility; provided, however, that Majesco shall not have any
indemnification obligations to HSBC for any claims caused by HSBC’s gross negligence or willful misconduct.
Majesco may use the loan proceeds solely for the purpose of refinancing existing indebtedness, capital expenditures
and working capital and other general corporate purposes.
Receivable Purchase Facility
On January 13, 2017, Majesco and its subsidiaries Majesco Software and Solutions Inc. (“MSSI”), and Cover-All
Systems, jointly and severally entered into a Receivable Purchase Agreement with HSBC pursuant to which HSBC
may advance funds against receivables at an agreed advance rate. The outstanding aggregate amount of all advances
may not exceed a $10,000 facility limit. The facility bears interest at two (2%) per cent plus the ninety (90) day
LIBOR rate. HSBC will also receive an arrangement fee equal to 0.20% of the facility limit and a facility review fee
equal to 0.20% of the facility limit. Majesco will serve as HSBC’s agent for the collection of receivables, and
Majesco will collect and otherwise enforce payment of the receivables. The term of the Receivable Purchase
Agreement is for a minimum period of twelve (12) months and shall continue unless terminated by either party.
Either party may terminate the Receivable Purchase Agreement at any time upon sixty (60) days’ prior written
notice to the other party. The Receivable Purchase Agreement will provide additional liquidity to the Group for
working capital and other general corporate purposes. As of September 30, 2017, Majesco had $4,950 outstanding
under this Facility. Majesco used proceeds from this facility to refinance the ICICI facility described above, to fund
capital expenditures and for working capital and other general corporate purposes.
7. DERIVATIVE FINANCIAL INSTRUMENTS
The following table provides information of fair values of derivative financial instruments:
Asset Liability
Noncurrent* Current* Noncurrent* Current*
As of September 30, 2017
Designated as hedging instruments under Cash
Flow Hedges
Foreign exchange forward contracts $ 18 $ 80 $ 79 $ 120
Total $ 18 $ 80 $ 79 $ 120
As of March 31, 2017
Designated as hedging instruments under Cash
Flow Hedges
Foreign exchange forward contracts $ - $ 99 $ 10 $ -
$ - $ 99 $ 10 $ -
The noncurrent and current portions of derivative assets are included in ‘Other assets’ and ‘Prepaid expenses and
other current assets,’ respectively, and the noncurrent and current portions of derivative liabilities are included in
‘Other liabilities’ and ‘Accrued expenses and other liabilities,’ respectively, in the consolidated balance sheet.
Cash Flow Hedges and Other Derivatives
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We use foreign currency forward contracts and par forward contracts to hedge our risks associated with foreign
currency fluctuations related to certain commitments and forecasted transactions. The use of hedging instruments is
governed by our policies which are approved by our Board of Directors. We designate these hedging instruments as
cash flow hedges. Derivative financial instruments we enter into that are not designated as hedging instruments in
hedge relationships are classified as financial instruments at fair value in the statement of operations.
The aggregate contracted USD principal amounts of the Group’s foreign exchange forward contracts (sell)
outstanding amounted to $19,800 and nil as of September 30, 2017 and March 31, 2017, respectively. The
aggregate contracted Great Britain Pound (“GBP”) principal amounts of the Group’s foreign exchange forward
contracts (sell) outstanding amounted to GBP 1,815 and GBP 2,080 as of September 30, 2017 and March 31, 2017,
respectively.
The outstanding forward contracts as of September 30, 2017 mature between one month and 24 months. As of
September 30, 2017, the Group estimates that $66, net of tax, of the net gains related to derivatives designated as
cash flow hedges recorded in accumulated other comprehensive income (loss) is expected to be reclassified into
earnings within the next 24 months.
The related cash flow impacts of all of our derivative activities are reflected as cash flows from operating activities.
The following table provides information on the amounts of pre-tax gains/(losses) recognized in and reclassified
from Accumulated Other Comprehensive Income “AOCI” of derivative instruments designated as cash flow
hedges:
Amount of
Gain/(Loss)
recognized in
AOCI (effective
portion)
Amount of
Gain/(Loss)
reclassified
from AOCI to
Statement of
Operations
(Revenue)
For the six months ended September 30, 2017
Foreign exchange forward contracts $ (112 ) $ (78 )
Total $ (112 ) $ (78 )
For the six months ended September 30, 2016
Foreign exchange forward contracts $ 77 $ (128 )
Total $ 77 $ (128 )
8. ACCUMULATED OTHER COMPREHENSIVE INCOME
Changes in accumulated other comprehensive income by component was as follows:
Three months ended
September 30, 2017
Three months ended
September 30, 2016
Before
tax
Tax
effect
Net of
Tax
Before
tax
Tax
effect
Net of
Tax
Other comprehensive income
Foreign currency translation
adjustments
Opening balance $ (155 ) $ - $ (155 ) $ 17 $ — $ 17
Change in foreign currency translation
adjustments 106 - 106 (164 ) — (164 )
Closing balance $ (49 ) $ - $ (49 ) $ (147 ) $ — $ (147 )
Unrealized gains/(losses) on cash
flow hedges
F - 98
Opening balance $ 103 $ (35 ) $ 68 $ 43 $ (60 ) $ (17 )
Unrealized gains/(losses) on cash flow
hedges (147 ) 50 (97 ) 130 (26 ) 103
Reclassified to Revenue (57 ) 20 (37 ) (48 ) 43 (4 )
Net change $ (204 ) $ 70 $ (134 ) $ 82 $ 17 $ 99
Closing balance $ (101 ) $ 35 $ (66 ) $ 125 $ (43 ) $ 82
Six months ended
September 30, 2017
Six months ended
September 30, 2016
Before
tax
Tax
effect
Net of
Tax
Before
tax
Tax
effect
Net of
Tax
Other comprehensive income
Foreign currency translation
adjustments
Opening balance $ (345 ) $ - $ (345 ) $ 222 $ — $ 222
Change in foreign currency translation
adjustments 296 - 296 (369 ) — (369 )
Closing balance $ (49 ) $ - $ (49 ) $ (147 ) $ — $ (147 )
Unrealized gains/(losses) on cash
flow hedges
Opening balance $ 89 $ (30 ) $ 59 $ 176 $ (60 ) $ 116
Unrealized gains/(losses) on cash flow
hedges (112 ) 38 (74 ) 77 (26 ) 51
Reclassified to Revenue (78 ) 27 (51 ) (128 ) 43 (85 )
Net change $ (190 ) $ 65 $ (125 ) $ (51 ) $ 17 $ (34 )
Closing balance $ (101 ) $ 35 $ (66 ) $ 125 $ (43 ) $ 82
9. INCOME TAXES
The Group recognized income tax benefits of $(451) and $(1,297), respectively, for the three and six months ended
September 30, 2017 and recognized income tax benefits of $(54) and $(141), respectively, for the three and six
months ended September 30, 2016. For the six months ended September 2017, the deferred tax benefit primarily
relates to the Company recognizing an increase in deferred tax assets from the anticipated future realization of net
operating loss carryforwards and the reduction of deferred tax liabilities related to the amortization of intangible
assets.
The effective tax rate of 39% and 35%, respectively, for the three and six months ended September 30, 2017 differs
from the statutory US federal income tax rate of 39.3% mainly due the impact of different tax jurisdictions.
10. EMPLOYEE STOCK OPTION PLAN
Majesco 2015 Equity Incentive Plan
In the three and six months ended September 30, 2017, we recognized $428 and $783, respectively, in equity-based
compensation expense in our consolidated financial statements compared to $312 and $634, respectively, in the
three and six months ended September 30, 2016.
In June 2015, Majesco adopted the Majesco 2015 Equity Incentive Plan (the “2015 Plan”). Under the 2015 Plan,
options and stock awards for the purchase of up to 3,877,263 shares may be granted by the Compensation
Committee of the Board of Directors to our employees, consultants and directors at an exercise or grant price
determined by the Compensation Committee of the Board of Directors on the date of grant. Options may be granted
as incentive or nonqualified stock options with a term of not more than ten years. The 2015 Plan allows the grant of
restricted or unrestricted stock awards or awards denominated in stock equivalent units or any combination of the
foregoing, which may be paid in common stock or other securities, in cash, or in a combination of common stock or
other securities and cash. On September 30, 2017, an aggregate of 567,374 shares were available for grant under the
2015 Plan.
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Majesco uses the Black-Scholes-Merton option-pricing model (“Black-Scholes”) to measure fair value of the share-
based awards. The Black-Scholes model requires us to make significant judgments regarding the assumptions used
within the model, the most significant of which are the expected stock price volatility, the expected life of the
option award, the risk-free interest rate of return and dividends during the expected term.
- Expected volatilities are based on peer entities as the historical volatility of Majesco’s common stock is
limited.
- In accordance with ASC 718, Majesco uses the simplified method for estimating the expected term when
measuring the fair value of employee stock options using the Black-Scholes option pricing model. Majesco
believes the use of the simplified method is appropriate due to the employee stock options qualifying as
“plain-vanilla” options under the criteria established by SAB Topic 14.
- The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury
yields for an equivalent term at the time of grant.
- Majesco does not anticipate paying dividends during the expected term.
As of September 30,
Variables (range) 2017 2016
Expected volatility 41%–50 % 41%–50 %
Weighted-average volatility 41 % 41 %
Expected dividends 0 % 0 %
Expected term (in years) 3-5 3-5
Risk-free interest rate 0.46 % 0.46 %
As of September 30, 2017, there was $3,819 of total unrecognized compensation costs related to non-vested share-
based compensation arrangements previously granted by Majesco. That cost is expected to be recognized over a
weighted-average period of 2.8 years.
A summary of the outstanding common stock options under the 2015 Plan is as follows:
Shares Exercise Price
Per Share
Weighted-Average
Remaining
Contractual Life Weighted-Average
Exercise Price
Balance, April 1, 2017 2,868,642 $ 4.79 – 7.72 8.91years $ 5.34
Granted 545,000 4.85-5.55 — 4.90
Exercised (2,083 ) 4.92 — 4.92
Cancelled (108,000 ) 4.92 – 6.22 — 5.76
Expired - - — -
Balance, September 30, 2017 3,303,559 $ 4.79 – 7.72 8.42 years $ 5.25
Of the stock options outstanding, an aggregate of 1,136,586 were exercisable as of September 30, 2017.
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options
which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input
of highly subjective assumptions including the expected stock price volatility. Because our employee stock options
have characteristics significantly different from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of our employee stock options.
We follow FASB Accounting Standards Codification (“ASC”) 718, Accounting for Stock Options and Other Stock-
Based Compensation. Among other items, ASC 718 requires companies to record the compensation expense for
share-based awards issued to employees and directors in exchange for services provided. The amount of the
compensation expense is based on the estimated fair value of the awards on their grant dates and is recognized over
the required service periods. Our share-based awards include stock options and restricted stock awards. For
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restricted stock awards, the calculation of compensation expense under ASC 718 is based on the intrinsic value of
the grant.
Warrants
As of September 30, 2017, there were warrants to purchase 25,000 shares of common stock outstanding. A
summary of the terms of the outstanding warrants as of September 30, 2017 is as follows:
Outstanding
and Exercisable
Warrants
Exercise Price
Per Warrant
Weighted-Average
Remaining
Contractual Life
Weighted-Average
Exercise Price
Balance, September 30, 2017 25,000 $ 7.00 2.9 $ 7.00
On September 1, 2015, Majesco issued to Maxim Partners LLC a five year warrant to purchase 25,000 shares of
common stock of Majesco at an exercise price of $7.00 per share. The warrant was issued in connection with the
engagement of the holder to perform certain advisory services to the Group. The number of shares issuable upon
exercise of the warrant may be reduced under certain circumstances of non-performance under the services
agreement. The warrant may be exercised at any time after September 1, 2016 and will expire, if unexercised, on
September 1, 2020. The warrant contains certain anti-dilution adjustment protection in case of certain future
issuances of securities, stock dividends, split and other transactions affecting Majesco’s securities. The holder of the
warrant is entitled to piggyback registration rights in case of certain registered securities offerings by Majesco.
Employee Stock Option Scheme of Majesco Limited — Plan 1
Certain employees of the Group participate in the Group’s parent company Majesco Limited’s employee stock
option plan. The plan, termed as “ESOP plan 1,” became effective June 1, 2015, the effective date of the demerger
from Mastek Ltd. Group employees who were issued options in the earlier ESOP plans of Mastek Ltd. were given
options of Majesco Limited following the demerger. Under the plan, Majesco Limited also grants newly issued
options to the employees of MSSIPL from time to time. During the three months ended September 30, 2017, 15,000
options were granted under ESOP plan 1 of Majesco Limited. The options were granted at the market price on the
grant date.
As of September 30, 2017, the total future compensation cost related to non-vested options not yet recognized in the
Statement of Operations was $1,958 and the weighted average period over which these awards are expected to be
recognized was 2.43 years. The weighted average remaining contractual life of options expected to vest as of
September 30, 2017 is 9.44 years.
Majesco Limited calculated the fair value of each option grant on the date of grant using the Black-Scholes pricing
method with the following assumptions:
2017 2016
Weighted-average volatility 49.47 % 51.02 %
Expected dividends 0.00 % 0.00 %
Expected term (in years) 6 Years 6 Years
Risk-free interest rate 6.59 % 7.46 %
The summary of outstanding options of Majesco Limited as of September 30, 2017 is as follows:
No of Options
Outstanding Exercise Price
Per Share
Weighted-Average
Remaining
Contractual Life Weighted-Average
Exercise Price
Balance, September 30, 2017 907,213 $0.1 - $3 6.99 1.42
708,625 $3.1 - $6 9.40 5.08
80,750 $6.1 - $7 9.39 8.72
1,696,588
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Of the stock options of Majesco Limited outstanding and held by Group employees, an aggregate of 1,049,497 are
currently exercisable.
Majesco Performance Bonus Plan
Majesco established the Majesco Performance Bonus Plan (the “Performance Bonus Plan”). The Performance
Bonus Plan is administered by the Compensation Committee of the Board of Directors of Majesco. The purpose of
the Performance Bonus Plan is to benefit and advance the interests of the Group by rewarding selected employees
of the Group for their contributions to the Group’s financial success and thereby motivate them to continue to make
such contributions in the future by granting them performance-based awards that are fully tax deductible to the
Group.
During the three and six months ended September 30, 2017, we accrued $1,179 and $1,174, respectively, in
incentive compensation expense in our consolidated financial statements compared to $1,765 and $3,092,
respectively, during the three and six months ended September 30, 2016.
Majesco Employee Stock Purchase Plan
Majesco established the Majesco Employee Stock Purchase Plan (the “ESPP”). The ESPP is intended to be
qualified under Section 423 of the Internal Revenue Code. If a plan is qualified under Section 423, employees who
participate in the ESPP enjoy certain tax advantages. The ESPP allows employees to purchase shares of Majesco
common stock at a discount, without being subject to tax until they sell the shares, and without having to pay any
brokerage commissions with respect to the purchases.
The purpose of the ESPP is to encourage the purchase of Majesco common stock by our employees, to provide
employees with a personal stake in our business and to help us retain our employees by providing a long range
inducement for such employees to remain in our employ.
The ESPP provides employees with the right to purchase shares of common stock through payroll deductions. The
total number of shares available for purchase under the ESPP is 2,000,000. The ESPP Plan became effective
January 1, 2016. As of September 30, 2017, we had issued and sold 83,284 shares under the ESPP.
11. EARNINGS PER SHARE
The basic and diluted earnings/(loss) per share were as follows:
Three months ended September 30, Six months ended September 30,
2017 2016 2017 2016
Net Income/ (Loss) $ (716 ) $ 217 $ (2,366 ) $ (333 )
Basic weighted average outstanding
equity shares 36,527,666 36,474,139 36,518,768 36,462,934
Adjustment for dilutive potential
ordinary shares
Options under Majesco 2015 Equity
Incentive Plan 0 1,912,495 0 0
Dilutive weighted average outstanding
equity shares 36,527,666 38,386,634 36,518,768 36,462,934
Earnings per share:
Basic $ (0.02 ) $ 0.01 $ (0.06 ) $ (0.01 )
Diluted $ (0.02 ) $ 0.01 $ (0.06 ) $ (0.01 )
Basic earnings per share amounts are calculated by dividing net income for the three and six months ended
September 30, 2017 and 2016 attributable to common shareholders by the weighted average number of ordinary
shares outstanding during the same periods.
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Diluted earnings per share amounts are calculated by dividing the net income attributable to common shareholders
by the sum of the weighted average number of ordinary shares outstanding during the three and six months periods
plus the weighted average number of common shares that would be issued on the conversion of all the dilutive
potential common shares into common shares.
The calculation of diluted earnings per share excluded 3,303,559 shares and 3,303,559 options for the three and six
months ended September 30, 2017 and 575,816 shares and 2,629,975 options for the three and six months ended
September 30, 2016 granted to employees, as their inclusion would have been antidilutive.
12. RELATED PARTIES TRANSACTIONS
Reimbursement of Expenses
The following tables summarize the liabilities to or by related parties:
As of
September 30,
2017
As of
March 31,
2017
Net reimbursable expenses payable to Majesco Limited or Mastek Ltd.(1) $ (307 ) $ (622 )
(1) The net reimbursable expenses payable at September 30, 2017 and March 31, 2017 include employee stock
option charges of Majesco Limited and various expenses which are recurring in nature and attributable to
shared resources with Majesco Limited or Mastek Ltd. that are in the process of being separated after the
Reorganization, including air travel, travel insurance, telephone costs, water charges, insurance costs,
administrative personnel costs, software and hardware costs and third party license costs, less receivables
from Majesco Limited or Mastek Limited for similar expenses.
Leases
MSSIPL entered into an operating lease for its operation facilities in Mahape, India, as lessee, with Majesco
Limited, Majesco’ s parent company, as lessor. The approximate aggregate annual rent payable to Majesco Limited
under this lease agreement is $1,303. The lease became effective on June 1, 2015 and expires on May 31, 2020.
MSSIPL also entered into a lease for facilities for its operations in Pune, India, with Mastek Ltd. as lessor. The
lease became effective on June 1, 2015 and expires on May 31, 2020. MSSIPL has also entered into a
supplementary lease for its operations in Pune, India, with Mastek Ltd. as lessor. The supplementary lease became
effective on April 1, 2016 and expires on May 31, 2020. The approximate aggregate annual rent payable to Mastek
Ltd. under the foregoing lease agreements is $409.
As of
September 30,
2017
As of
March 31,
2017
Security deposits paid to Majesco Limited by MSSIPL for use of Mahape
premises $ 643 $ 648
Security deposits paid to Mastek Ltd. by MSSIPL for use of Pune premises $ 202 $ 224
Rental expenses paid by MSSIPL to Majesco Limited for use of premises for the three and six months ended
September 30, 2017 were $326 and $653, respectively. Rental expenses paid by MSSIPL to Mastek Ltd. for use of
premises for the three and six months ended September 30, 2017 were $102 and $205, respectively.
Joint Venture Agreement
On September 24, 2015, MSSIPL and Mastek (UK) Limited, a wholly owned subsidiary of Mastek Ltd. (“Mastek
UK”), entered into a Joint Venture Agreement (the “Joint Venture Agreement”) pursuant to which the two
companies agreed to work together to deliver services to third parties, which services comprise the delivery of
development, integration and support services to third parties by use of Mastek Ltd.’s development, integration and
support methodologies and tools. The Joint Venture Agreement became effective on September 24, 2015 and will
F - 103
remain in force, unless terminated by either party upon three months’ notice in writing to the other of its intention to
terminate the Joint Venture Agreement. The consideration for each party’s performance of its obligations under the
Joint Venture Agreement is the performance of the other’s obligations under the same agreement, being services to
the other. The services comprise, in the case of Mastek Ltd., Mastek Ltd.’s development, integration and support
methodologies and tools and business development services. In the case of MSSIPL, the services comprise the
provision of leading edge technical expertise and advice. The parties will also exchange technical and business
information.
Services Agreements
On December 2, 2015, Majesco UK Limited, a company registered in England and Wales wholly owned by
Majesco (“Majesco UK”), entered into a Services Agreement (the “UK Services Agreement”) with Mastek UK,
pursuant to which Mastek UK provides certain corporate and operational support services to Majesco UK, including
managed office accommodation and facilities; managed office IT infrastructure and networks; and corporate
support services, insurance coverage and subscription to professional associations and publications. The charges for
these core services consist of a monthly charge of 13 UK Pounds (USD $20) and a pass through of actual costs of
providing the services. Any support services by Mastek UK staff not included in the core services are charged on a
basis to be determined separately between both parties but before provision of such services. Either party may at
any time, by notice in writing to the other party, terminate the UK Services Agreement for breach or if the other
party becomes subject to insolvency issues. Either party for any reason or no reason may also terminate the UK
Services Agreement by providing the other party written notice of the termination ninety (90) days in advance. The
UK Services Agreement contains customary representations, warranties and indemnities of the parties. The
effective date of the UK Services Agreement is January 1, 2015. The charge by Majesco UK to Mastek UK under
the UKServices Agreement for the three and six months ended September 30, 2017 was nil and nil, respectively,
and $51 and $107, respectively, for the three and six months ended September 30, 2016.
On March 1, 2016, Majesco, and Digility Inc., a Delaware corporation (“Digility”) and wholly-owned by Mastek
UK, entered into a Services Agreement (the “Digility Services Agreement”), pursuant to which Majesco will
provide certain management and operational support services to Digility, including managed office accommodation
and facilities, managed office IT infrastructure and networks, and corporate support services. The charges for these
services consist of an initial set-up fee of $1, a monthly fee of $4 and a pass through of actual costs of providing
the services incurred in excess of the monthly fee. Either party may at any time, by notice in writing to the other
party, terminate the Digility Services Agreement for breach or if the other party becomes subject to insolvency
issues. Either party for any reason or no reason may terminate the Digility Services Agreement by providing the
other party written notice of the termination thirty (30) days in advance. The Digility Services Agreement contains
customary representations, warranties and indemnities of the parties. The effective date of the Digility Services
Agreement is March 1, 2016. Service charges received from Digility for the three and six months ended
September 30, 2017 were $8 and $19, respectively, and $11 and $0, respectively, for the three and six months ended
September 30, 2016.
On August 2, 2016, Majesco Limited and MSSIPL entered into a master service agreement, effective as of June 30,
2016, pursuant to which MSSIPL will provide software development services to Majesco Limited. Under this
agreement, MSSIPL will charge Majesco Limited cost plus a margin for the services rendered. Software
development charges charged by MSSIPL under the agreement for the three and six months ended September 30,
2017 were $269 and $530, respectively, and $261 and $493 for the three and six months ended September 30, 2016,
respectively.
Sublease
On March 1, 2016, Majesco and Digility entered into a Sublease Agreement (the “Sublease Agreement”), pursuant
to which Majesco sublets the premises located on the first floor of 685 Route 202/206, Bridgewater, New Jersey to
Digility. Digility will pay monthly $1 for rent to Majesco during the term of the Sublease Agreement. Digility will
also reimburse Majesco for any costs charged by the landlord, Route 206 Associates, a New Jersey partnership, for
additional services requested by Digility. The term of the Sublease Agreement commenced on March 1, 2016 and
expired on July 31, 2017. Either party for any reason or no reason may terminate the Sublease Agreement by
providing the other party written notice of the termination thirty (30) days in advance. The Sublease Agreement
contains customary representations, warranties and indemnities of the parties. Rental charges received from Digility
F - 104
for the three and six months ended September 30, 2017 were $1 and $5, respectively, and for the three and six
months ended September 30, 2016 were $4 and $8, respectively.
Guarantee
During the three and six months ended September 30, 2017, Majesco paid $13 and $25, respectively, to Majesco
Limited as arrangement fees and guarantee commission for the guarantee given by Majesco Limited to HSBC for
the facilities taken by Majesco and its subsidiaries. During the three and six months ended September 30, 2016,
Majesco paid $76 and $286, respectively, to Majesco Limited as arrangement fees and guarantee commission for
the guarantee given by Majesco Limited to HSBC and ICICI Bank for the facilities taken by Majesco and its
subsidiaries.
Intellectual Property License
On August 2, 2016, Majesco Limited and MSSIPL entered into a Memorandum of Understanding (the “MOU”)
pursuant to which MSSIPL granted Majesco Limited a perpetual, royalty-free right to use the intellectual property
rights of MSSIPL in “Elixir”, including any improvements and upgrades, in connection with Majesco Limited’s
India insurance business.
13. STOCKHOLDERS EQUITY
Majesco’s amended and restated certificate of incorporation allows it to issue 50,000,000 shares of preferred stock.
The preferred stock may be issued in one or more series with such rights, preferences and privileges and restrictions
as the board of directors of Majesco may determine from time to time. Presently, Majesco does not have plans to
issue any shares of preferred stock.
14. SEGMENT INFORMATION
The Group operates in one segment as software solutions provider for the insurance industry. The Group’s chief
operating decision maker (the “CODM”) is its Chief Executive Officer. The CODM manages the Group’s
operations on a consolidated basis for purposes of allocating resources. When evaluating the Group’s financial
performance, the CODM reviews all financial information on a consolidated basis. A majority of the Group’s
principal operations and decision-making functions are located in the United States
The following table sets forth revenues by country based on the billing address of the customer:
Three months
ended
September 30, 2017
Three months
ended
September 30, 2016
USA $ 27,264 $ 26,813
UK 1,397 2,311
Canada 179 675
Malaysia 1,180 916
Thailand - -
Others 327 331
$ 30,347 $ 31,046
Six months
ended
September 30, 2017
Six months
ended
September 30, 2016
USA $ 52,100 $ 55,534
UK 2,877 4,695
Canada 402 1,015
Malaysia 2,282 1,675
Thailand - -
Others 608 681
F - 105
$ 58,269 $ 63,600
The following table sets forth the Group’s property and equipment, net by geographic region:
As of
September 30, 2017
As of
March 31, 2017
USA $ 1,518 $ 1,812
India 1,537 1,835
Canada 18 -
UK 8 11
Malaysia 1 1
$ 3,082 $ 3,659
We provide a significant volume of services to a number of significant customers. Therefore, the loss of a
significant customer could materially reduce our revenues. The Group had no and no customer for the three and six
months ended September 30, 2017, and no and one customer for the three and six months ended September 30,
2016 that accounted for 10% or more of total revenue. The Group had one customer as of September 30, 2017 and
one customer as of September 30, 2016 that accounted for 10% or more of total accounts receivable and unbilled
accounts receivable. Presented in the table below is information about our major customers:
Three months ended
September 30, 2017
Three months ended
September 30, 2016
Amount
% of
combined
revenue Amount
% of
combined
revenue
Customer A
Revenue $ 2,627 9 % $ 2,648 9 %
Accounts receivable and unbilled accounts
receivable $ 2,632 10 % $ 2,397 10 %
Customer B
Revenue $ 1,828 6 % $ 2,155 7 %
Accounts receivable and unbilled accounts
receivable $ 1,606 6 % $ 502 2 %
Six months ended
September 30, 2017
Six months ended
September 30, 2016
Amount
% of
combined
revenue Amount
% of
combined
revenue
Customer A
Revenue $ 3,822 7 % $ 6,346 10 %
Accounts receivable and unbilled accounts
receivable $ 2,632 10 % $ 2,397 10 %
Customer B
Revenue $ 3,398 6 % $ 3,773 6 %
Accounts receivable and unbilled accounts
receivable $ 1,606 6 % $ 502 2 %
15. COMMITMENTS
Capital Commitments
The Group had outstanding contractual commitments of $152 and $358 as of September 30, 2017 and March 31,
2017, respectively, for capital expenditures relating to the acquisition of property, equipment and new network
infrastructure.
Operating Leases
F - 106
The Group leases certain office premises under operating leases. Many of these leases include a renewal option on a
periodic basis at the Group’s option, with the renewal periods ranging from 2 to 5 years. Rental expense for
operating leases amounted to $835 and $ 1,699 for the three and six months ended September 30, 2017,
respectively, compared to $902 and $1,666 for the three and six months ended September 30, 2016, respectively.
The schedule for future minimum rental payments over the lease term in respect of operating leases is set out below.
Year ending March 31, Amount
2018 $ 1,736
2019 3,086
2020 3,172
2021 732
2022 289
Thereafter 728
Total minimum lease payments $ 9,743
Facility Leases
Our subsidiary in India, MSSIPL, has entered into a lease for its operations in Mahape, India, as lessee, with
Majesco Limited as lessor. The approximate aggregate annual rent payable to Majesco Limited under this lease
agreement is $1,303. The lease became effective on June 1, 2015 and expires on May 31, 2020. MSSIPL paid
Majesco Limited $326 and $653, respectively, in rent under the lease during the three and six months ended
September 30, 2017, and $325 and $651, respectively, during the three and six months ended September 30, 2016.
MSSIPL may terminate the lease after three years with six months’ prior written notice to Majesco Limited.
Majesco Limited may terminate the lease after five years with six months’ prior written notice to MSSIPL.
MSSIPL also entered into a lease for its operations in Pune, India, with Mastek Ltd. as lessor. The approximate
aggregate annual rent payable to Mastek Ltd. under this lease agreement is $294. The lease became effective on
June 1, 2015 and expires on May 31, 2020. MSSIPL has also entered into a supplementary lease for its operations in
Pune, India, with Mastek Ltd. as lessor. The approximate aggregate annual rent payable to Mastek Ltd. under this
supplementary lease agreement is $115. The lease became effective on April 1, 2016 and expires on May 31, 2020.
MSSIPL paid Mastek Ltd. $102 and $205, respectively, in rent under the lease during the three and six months
ended September 30, 2017 and $149 and $220, respectively, in rent under the lease during the three months ended
September 30, 2016. MSSIPL may terminate the lease after three years with six months’ prior written notice to
Mastek Ltd. Mastek Ltd. may terminate the lease after five years.
16. ACQUISITION
On December 14, 2014, Majesco entered into a definitive merger agreement with Cover-All. The merger was
completed on June 26, 2015. Cover-All licenses and maintains software products for the property/casualty insurance
industry throughout the United States and Puerto Rico. Majesco merged with Cover-All to expand its insurance
business in the United States.
The following table summarizes the consideration paid in the merger of Cover-All into Majesco and the amounts of
identified assets acquired and liabilities assumed at the merger date:
Fair value of consideration transferred
Common stock $ 12
Additional paid-in capital 29,708
Total consideration $ 29,720
The merger of Cover-All and Majesco was a stock-for-stock merger with each share of Cover-All common stock
issued and outstanding immediately prior to the merger converted into the right to receive the number of shares of
Majesco common stock multiplied by the exchange ratio. The exchange ratio in the merger was 0.21641.
Accordingly, at the closing of the merger, Cover-All in the aggregate represented 16.5% of the total capitalization
of the combined company.
F - 107
In the merger, 5,844,830 shares of Majesco common stock were issued to the shareholders of Cover-All and
197,081 equity incentives were issued to the holders of options and restricted stock units of Cover-All.
Consequently, common stock of Majesco was increased by $12 and additional paid in capital was increased by
$29,708.
Recognized amount of identifiable assets acquired and liabilities assumed
Amount
Cash $ 2,990
Accounts receivable 1,592
Prepaid expenses and other current assets 629
Property, plant and equipment 454
Other assets 148
Customer contracts 2,410
Customer relationships 4,460
Technology 3,110
Defer tax asset on NOL 459
Accounts payable (1,120 )
Accrued expenses (623 )
Deferred revenue (2,515 )
Capital lease liability (294 )
Total fair value of assets acquired 11,700
Fair value of consideration paid 29,720
Goodwill $ 18,020
The goodwill of $18,020 arising from the merger consists largely of the synergies and economies of scale expected
from combining the operations of Majesco and Cover-All. Further, though workforce has been valued, it is not
recognized separately, but subsumed in goodwill. Goodwill deductible for tax purpose amounts to nil.
On October 31, 2015, Majesco Sdn. Bhd. (“MSC”) entered into a Share Purchase Agreement with Mastek Ltd. for
the purchase of the issued and authorized shares of Mastek Asia Pacific Pte Limited.
Recognized amount of identifiable assets acquired and liabilities assumed
Amount
Cash $ 212
Accounts receivable 18
Other assets 1
Accrued expenses (14 )
Total fair value of assets acquired 217
Fair value of consideration paid 276
Goodwill $ 59
The following table summarizes the consideration paid to Mastek Ltd. and the amounts of identified assets acquired
and liabilities assumed at the effective date:
The changes in the varying amount of goodwill are as follows:
Changes in carrying amount of the goodwill
As of September
30, 2017
As of March
31, 2017
Opening value $ 32,216 $ 32,275
Addition on account of currency fluctuation - 1
F - 108
Impairment of Goodwill - (60 )
Closing value $ 32,216 $ 32,216
Due to uncertainty in the future business of Majesco Asia Pacific Pte. Limited, which indicated the potential
impairment of goodwill, the Group decided to impair the amount of goodwill recognized earlier in the acquisition of
this entity as at March 31, 2017.
Details of identifiable intangible assets acquired are as follows:
Weighted
average
amortization
period (in
years)
Amount
assigned
Residual
value
Customer contracts 3 $ 2,410 -
Customer relationships 8 4,460 -
Technology 6 3,110 -
Total 6 $ 9,980 -
Revenues and earnings specific to the Cover-All business for the period June 26, 2015 to June 30, 2015 were $233
and $47, respectively. Revenues and earnings specific to the Cover-All business for the period July 1, 2015 to
March 31, 2016 were $17,636 and $1,260, respectively.
F - 109
MAJESCO
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEAR ENDED MARCH 31, 2017
F - 110
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Majesco:
We have audited the accompanying consolidated balance sheets of Majesco (“the Company”) as of
March 31, 2017 and 2016, and the related consolidated and combined statements of operations,
comprehensive income, changes in stockholders’ equity, and cash flows for the fiscal years ended March 31,
2017, 2016 and 2015. These consolidated and combined financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these consolidated and combined
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated and combined financial statements are free of
material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated and combined financial
statements, assessing the accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated and combined financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated and combined financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of March 31, 2017 and 2016, and the results
of their operations and their cash flows for the fiscal years ended March 31, 2017, 2016 and 2015, in
conformity with U.S. generally accepted accounting principles.
As discussed in Note 2, the accompanying combined financial statements for fiscal 2015 have been
derived from the consolidated financial statements and accounting records of Mastek Ltd. and include
allocations of certain costs from Mastek Ltd. As a result, these allocations may not be reflective of the
actual costs that would have been incurred had Majesco operated as a separate entity apart from Mastek
Ltd.
/s/ MSPC
Certified Public Accountants and Advisors,
A Professional Corporation
Cranford, New Jersey
June 16, 2017
F - 111
ASSETS
Consolidated and Combined Balance Sheets (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
March 31,
2017 2016
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,635 $ 5,520
Short term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 829 634
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 257
Accounts receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,227 22,503
Unbilled accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,563 7,379
Deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,018 1,847
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,961 6,195
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,286 44,335
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,659 3,462
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,708 10,483
Deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,856 3,586
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289 480
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,216 32,275
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 90,014 $ 94,621
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Loan from Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,561 $ 6,951
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,923 3,659
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,911 16,701
Capital lease obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310 159
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,982 11,200
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,687 38,670
Capital lease obligation, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . 288 120
Term loan − bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 6,800
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,191 3,474
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44,166 $ 49,064
Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —
STOCKHOLDERS’ EQUITY
Preferred stock, par value $0.002 per share – 50,000,000 share authorized as of
March 31, 2017 and March 31, 2016; NIL shares issued and outstanding as of
March 31, 2017 and March 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ —
Common stock, par value $0.002 per share – 450,000,000 shares authorized as of
March 31, 2017 and 450,000,000 shares authorized as of March 31, 2016;
36,508,203 shares issued and outstanding as of March 31, 2017 and 36,451,357
shares issued and outstanding as of March 31, 2016 . . . . . . . . . . . . . . . . . . . . . 73 73
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,343 69,505
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25,282) (24,360)
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (286) 339
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,848 45,557
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . . $ 90,014 $ 94,621
F - 112
Majesco
Consolidated and Combined Statements of Operations (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
Year ended March 31,
2017
Year ended March 31,
2016
Year ended March 31,
2015
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 121,768 $ 113,302 $ 79,282
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,461 62,832 48,776
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,307 $ 50,470 $ 30,506
Operating expenses
Research and development expenses . . . . . . . . . . . . . . . . . $ 17,236 $ 16,267 $ 10,344
Selling, general and administrative expenses . . . . . . . . . . . . 41,310 38,204 21,000
Restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 465 1,120
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,546 $ 54,936 $ 32,464
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (239)
$ (4,466)
$ (1,958)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 24 185
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (612) (596) (200)
Other income (expenses),net . . . . . . . . . . . . . . . . . . . . . . . (15) 289 1,181
Loss before provision for income taxes . . . . . . . . . . . . . . . . . . $ (825) $ (4,749) $ (792)
(Benefit)/Provision for income taxes . . . . . . . . . . . . . . . . . 97 (1,187) (141)
Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (922) $ (3,562) $ (651)
Less: Net income/(loss) attributable to Non-controlling
Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
$ —
$ 15
Owners of the Company . . . . . . . . . . . . . . . . . . . . . . . . . — (3,562) (666)
$ (922) $ (3,562) $ (651)
Earnings (Loss) per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (0.02)
$ (0.10)
$ (0.02)
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.02) $ (0.10) $ (0.02)
Weighted average number of common shares outstanding(1)
Basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,477,774 35,055,000 30,575,000
(1) The common stock shares for 2016 and 2015 periods presented reflect the one-for-six reverse stock split
which took effect on June 26, 2015.
F - 113
Majesco
Consolidated and Combined Statements of Comprehensive Income (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
Year ended March 31,
2017
Year ended March 31,
2016
Year ended March 31,
2015
Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss), net of tax:
$ (922) $(3,562) $(651)
Foreign currency translation adjustments . . . . . . . . . . . . . . . . (567) (1,662) (325)
Unrealized (loss)/gains on cash flow hedges . . . . . . . . . . . . . . (58) (243) 60
Other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (625) $(1,905) $(265)
Comprehensive Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,547) $(5,467) $(916)
Less: Comprehensive income attributable to the
non-controlling interest . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
$ —
$ 15
Comprehensive (Loss)/Income attributable to Owners of
the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,547) $(5,467) $(931)
F - 114
Majesco
Consolidated and Combined Statements of Changes in Stockholders’ Equity (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
Common Stock Additional
paid-in
Accumulated
Accumulated
other
comprehensive
Non-
controlling
Total
Stockholders’
Shares Amount capital deficit income interests equity
Balance as of April 1, 2014 . . . . . . . . . . . . . 30,575,000 $61 $38,718 $(20,823) $ 2,509 $ 73 $20,538
Stock based compensation . . . . . . . . . . . . — — 248 — — — 248
Net (loss)/income . . . . . . . . . . . . . . . . . — — — (666) — 15 (651)
Reorganization . . . . . . . . . . . . . . . . . . — — — 691 — — 691
Foreign currency translation adjustments . . . — — — — (325) — (325)
Unrealized gains on cash flow hedges . . . . . — — — — 60 — 60
Non-controlling interest bought back . . . . . — — 83 — — (88) (5)
Balance as of March 31, 2015 . . . . . . . . . . . . 30,575,000 $61 $39,049 $(20,798) $ 2,244 — $20,556
Stock based compensation . . . . . . . . . . . . — — 748 — — — 748
Cover-All Merger . . . . . . . . . . . . . . . . . 5,876,357 12 29,708 — — — 29,720
Net (loss)/income . . . . . . . . . . . . . . . . . — — — (3,562) — — (3,562)
Foreign currency translation adjustments . . . — — — — (1,662) — (1,662)
Unrealized gains on cash flow hedges . . . . . — — — — (243) — (243)
Balance as of March 31, 2016 . . . . . . . . . . . . 36,451,357 $73 $69,505 $(24,360) $ 339 $ — $45,557
Net (loss)/income . . . . . . . . . . . . . . . . . — — — (922) — — (922)
Issue of stock under ESOP and ESPP . . . . . 56,846 — 260 — — — 260
Stock based compensation . . . . . . . . . . . . — — 1,578 — — — 1,578
Foreign currency translation adjustments . . . — — — — (567) — (567)
Unrealized gains on cash flow hedges . . . . . — — — — (58) — (58)
Balance as of March 31, 2017 . . . . . . . . . . . . 36,508,203 $73 $71,343 $(25,282) $ (286) $ — $45,848
F - 115
Majesco
Consolidated and Combined Statements of Cash Flows (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
Year ended March 31,
2017
Year ended March 31,
2016
Year ended March 31,
2015
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (922) $ (3,562) $ (651)
Adjustments to reconcile net (loss) to net cash provided by
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,720 3,843 2,425
Share based compensation expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 1,578 748 248
Impairment of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 — —
Provision/(recovery) for doubtful receivables . . . . . . . . . . . . . . . . . . . . . 984 (149) 340
Deferred tax (benefit)/expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (429) (2,227) (877)
Accounts receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,049 (13,135) 2,173
Unbilled accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,399) (1,615) 2,402
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . 428 (1,355) (72)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (751) 2,097 (53)
Accrued expenses and other liabilities – Others . . . . . . . . . . . . . . . . . . . (1,459) 6,215 (2,019)
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (215) 3,859 (1,439)
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,283) (470) 1,211
Net cash generated (used in) from operating activities . . . . . . . . . . . . . . . . . $ 10,361 $ (5,751) $ 3,688
Cash flows from investing activities:
Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,104) $ (2,875) $ (775)
Purchase of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (955) (268) (744)
Sale of tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 60 —
Acquisition of Agile Technologies, LLC assets, net of $158 cash acquired . — — (2,842)
Cash acquired on business combination . . . . . . . . . . . . . . . . . . . . . . . . — 3,203 —
Consideration paid on acquisition of Majesco Singapore . . . . . . . . . . . . — (276) —
(Purchase) of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (223) (364) 2,755
Payment to related party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (5,907)
Payment to Majesco as reorganization consideration . . . . . . . . . . . . . . . — (3,520) —
(Increase)/decrease in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . 205 48 (3)
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,938) $ (3,992) $(7,516)
Cash flows from financing activities:
Payment of capital lease obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 318 $ (62) $ (29)
Receipt of term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,404 43,340 3,000
Repayment of loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,553) (34,060) —
Payment for buy back of non-controlling Interest . . . . . . . . . . . . . . . . . — — (5)
Net cash (used in)/provided by financing activities . . . . . . . . . . . . . . . . . . . . $ (831) $ 9,218 $ 2,966
Effect of foreign exchange rate changes on cash and cash equivalents . . . . . .
(477)
(217)
108
Net (decrease)/increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . $ 6,115 $ (742) $ (754)
Cash and cash equivalents, beginning of the period . . . . . . . . . . . . . . . . . . . 5,520 6,262 7,016
Cash and cash equivalents at end of the period . . . . . . . . . . . . . . . . . . . . . . $ 11,635 $ 5,520 $ 6,262
Supplementary disclosure of non-cash items
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 510 $ 510 $ 200
Cash paid for income taxes (net of refunds received) . . . . . . . . . . . . . . . 614 1,257 1,278
Supplementary disclosure of non-cash items
Non-cash items – Assets acquired under Capital leases . . . . . . . . . . . . . . $ 484 $ 40 $ 12
F - 116
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
1 DESCRIPTION OF BUSINESS
Majesco is a global provider of core insurance software, consulting and services for business
transformation for the insurance industry. Majesco offers core software solutions for property and casualty
(“P&C”), life and annuity (“L&A”) and Pensions Group Employee Benefits providers, allowing them to
manage policy administration, claims management and billing functions. In addition, Majesco offers a
variety of other technology-based solutions that enable organizations to automate business processes and
comply with policies and regulations across their organizations. Majesco’s solutions enable customers to
respond to evolving market needs and regulatory changes, while improving the efficiency of their core
operations, thereby increasing revenues and reducing costs.
Majesco’s customers are insurers, managing general agents and other risk providers from the P&C,
L&A and group insurance segments worldwide. Majesco delivers proven software solutions, consulting and
services in the core insurance areas such as policy, billing, claims, distribution management, business
intelligence/analytics, digital, application management, cloud and more.
Majesco was previously 100% owned (directly or indirectly) by Mastek Ltd. (“Mastek Ltd.”), a
publicly traded limited company domiciled in India whose equity shares are listed on the Bombay Stock
Exchange and the National Stock Exchange (India). Mastek Ltd. underwent a demerger through a scheme
of arrangement under India’s Companies Act, 1956 pursuant to which its insurance related business was
separated from Mastek Ltd.’s non-insurance related business and the insurance related operations of
Mastek Ltd. that were not directly owned by Majesco were contributed to Majesco (the “Reorganization”).
The Reorganization was completed on June 1, 2015.
Majesco, along with its subsidiaries, operates in the United States, Canada, Mexico, the United
Kingdom, Malaysia, Singapore, Thailand and India (hereinafter referred to as the “Group”).
Merger with Cover-All Technologies Inc.
On June 26, 2015, Cover-All Technologies Inc. (“Cover-All”), an insurance software company listed on
NYSE MKT, merged into Majesco in a 100% stock-for-stock merger, with Majesco surviving the merger.
In connection with the merger, Majesco’s common stock was listed on the NYSE MKT and began
trading on the NYSE MKT on June 29, 2015. Pursuant to the merger, Cover-All’s stockholders and holders
of its options and restricted stock units received equity or equity interests in Majesco representing
approximately 16.5% of the total capitalization of the combined company in the merger.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements presented herein represent (i) periods prior to March 31, 2015 when Majesco
was a wholly owned subsidiary of Mastek Ltd. (referred to as “Combined Financial Statements”) and
(ii) the period as of and subsequent to March 31, 2015 when Majesco became a separate publicly-traded
company (referred to as “Consolidated Financial Statements”).
The combined financial statements for fiscal 2014 have been prepared on a ‘carve-out’ basis (assuming
the Reorganization had been effected as of July 1, 2012) and are derived from the historical consolidated
financial statements and accounting records of Mastek. All material inter-company balances and
transactions have been eliminated on combination. The combined financial statements reflect the Group’s
financial position, results of operations and cash flows in conformity with accounting principles generally
accepted in the United States (“GAAP”). The combined Balance Sheet, combined Statement of Operations
and combined Statement of cash flows of the Group may not be indicative of the Group had it been a
separate operation during the periods presented, nor are the results stated herein indicative of what the
Group’s financial position, results of operations and cash flows may be in the future.
F - 117
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
These combined financial statements include assets and liabilities that are specifically identifiable or
have been allocated to the Group. Costs directly related to the Group have been included in the
accompanying financial statements. The Group historically received service and support functions from
Mastek Ltd. The costs associated with these support functions have been allocated relative to Mastek Ltd.
in its entirety, which is considered to be the most meaningful under the circumstances. The costs were
allocated to the Group using various allocation inputs, such as head count, services rendered, and assets
assigned to the Group. These allocated costs are primarily related to corporate administrative expenses,
employee related costs, including gratuity and other benefits, and corporate and shared employees. These
allocated costs only apply to the combined financial statements for the period ended March 31, 2015.
The Group considers the expense allocation methodology and results to be reasonable for the year
ended March 31, 2014. These allocations may not be indicative of the actual expenses the Group may have
incurred as a separate independent public company during the periods presented.
Mastek Ltd. maintained benefit and stock-based compensation programs at the parent company level.
After the demerger of Mastek Ltd., which became effective with effect from June 1, 2015, the Group
employees who participated in those programs were allotted options of Majesco’s parent company, Majesco
Limited, in the same proportion in addition to the existing options of Mastek Ltd. which these employees
already had. The consolidated Balance Sheets do not include any outstanding equity related to the
stock-based compensation programs of Mastek Ltd. but include outstanding equity related to the
stock-based compensation programs of Majesco Limited.
The Group’s acquisition costs for the insurance related businesses of Mastek Ltd. under the
Reorganization has been reflected under ‘Accrued expenses and other liabilities — Related Parties’ and
‘Other liabilities — Related Parties’ in the consolidated Balance Sheet as of March 31, 2015. Such costs
were paid on July 1, 2015.
Use of estimates
The preparation of the consolidated and combined financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and contingent liabilities as of the date of the financial
statements, and the reported amount of revenues and expenses during the reported period.
Significant estimates used in preparing these consolidated and combined financial statements include
revenue recognition based on the percentage of completion method of accounting for fixed bid contracts
applied to the expected contract cost to be incurred to complete various engagements, allowances for
doubtful debts, provisions for losses on uncompleted contracts, valuation allowances for deferred taxes,
identification and measurement of unrecognized tax benefit, provision for uncertain tax positions, future
obligations under employee benefit plans, expected future cash flows used to evaluate the recoverability of
long-lived assets, estimated fair values of long-lived assets used to record impairment charges related to
intangible assets and goodwill, allocation of purchase price in business combinations, useful lives and
residual value of property and equipment and intangible assets, valuation of derivative financial
instruments, goodwill, contingent liabilities and assumptions used in valuing stock-based compensation
expense.
Although the Group regularly assesses these estimates, actual results could differ materially from these
estimates. Changes in estimates are recorded in the period in which they become known. The Group bases
its estimates on historical experience and various other assumptions that it believes to be reasonable under
the existing circumstances. Actual results may differ from management’s estimates if these results differ
from historical experience or other assumptions do not turn out to be substantially accurate, even if such
assumptions were reasonable when made.
F - 118
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
Foreign Currency Translation
The functional currency of Majesco is the US dollar. However, Indian Rupee, Great Britain Pounds,
US Dollars, Mexican Peso, Malaysian Ringgit, Thai Baht, Canadian dollar, and Singapore dollar are the
functional currencies for the Group entities operating in India, the UK, the US, Mexico, Malaysia,
Thailand, Canada, and Singapore, respectively.
Adjustments resulting from the translation of functional currency financial statements to reporting
currency are accumulated and reported as a part of Accumulated other comprehensive income, a separate
component of Stockholders’ equity.
Transactions in foreign currency are recorded at the exchange rate prevailing on the date of the
transaction. Monetary assets and liabilities denominated in foreign currency are expressed in functional
currency at the exchange rates in effect at the balance sheet date. Non-Monetary assets and liabilities
denominated in foreign currency are expressed in functional currency at the historical exchange rates.
Gains/(losses) resulting from foreign currency transactions amounting to $(108), $122, $187 for the years
ended March 31, 2017, March 31, 2016 and March 31, 2015 are included in the Consolidated and
Combined Statement of Operations under the “Other income (expenses), net” caption.
Cash and cash equivalents, investments and restricted cash
Cash and cash equivalents are comprised of cash and highly liquid investments with an original
maturity of three months or less. Cash equivalents are stated at amortized cost, which approximates their
fair value due to the short maturity of the investments.
The Group’s short-term investment portfolio is comprised primarily of time deposits. Time deposits
with banks are valued at amortized cost, which approximates their fair value.
Interest income is recognized over time on a proportionate basis.
Cash and claims to cash that are restricted as to withdrawal or use in the ordinary course of business
are disclosed separately as restricted cash, unless they are to be utilized for other than current operations in
which case they will be separately classified as noncurrent assets.
Property and equipment
Property and equipment are stated at actual cost less accumulated depreciation. Depreciation is
computed using the straight-line method over the estimated useful lives. The cost and the accumulated
depreciation for premises and equipment sold, retired or otherwise disposed of are removed from the stated
values and the resulting gains and losses are included in the consolidated and combined Statement of
Operations. Maintenance and repairs are recognized when incurred. Advance paid towards acquisition of
long-lived assets and cost of assets not put to use before the balance sheet date are disclosed under the
caption “capital work in progress”.
F - 119
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
The estimated useful lives of assets are as follows:
Leasehold Improvements 5 years or over the primary period of lease whichever is less
Computers 2 years
Plant and Equipment 2 – 5 years
Furniture and Fixtures 5 years
Vehicles 5 years
Office Equipment 2 – 5 years
Goodwill and other intangible assets
Goodwill represents the cost of the acquired businesses in excess of the estimated fair value of assets
acquired, identifiable intangible assets and liabilities assumed. Goodwill is not amortized but is tested for
impairment at the reporting unit level at least annually or as circumstances warrant. If impairment is
indicated and the carrying value of the goodwill of a reporting unit exceeds the implied fair value of that
goodwill, then goodwill is written-down. There are no indefinite-lived intangible assets.
Intangible assets other than goodwill are amortized over their estimated useful lives on a straight line
basis. The estimated useful life of an identifiable intangible asset is based on a number of factors, including
the effects of obsolescence, demand, competition, the level of maintenance expenditures required to obtain
the expected future cash flows from the asset and other economic factors (such as the stability of the
industry, known technological advances, etc.).
The estimated useful lives of intangible assets are as follows:
Non-compete agreements 3 years
Leasehold benefit Ascertainable life or primary period of lease whichever is less
Internal-use Software 1 – 5 years
Intellectual Property Rights 1 – 5 years
Customer Contracts 1 – 3 years
Customer Relationships 6 – 8 years
Technology 6 years
Software development costs
The costs incurred for the development of software that will be sold, leased or otherwise marketed are
capitalized when technological feasibility has been established. In certain situations in which technological
feasibility is established by completing a working model, substantially all development costs could be
expensed when costs qualifying for capitalization are not material. Current engineering costs related to
routine updates, customer support issues, and other modifications that do not extend the life or improve the
marketability of the existing software are expensed as incurred.
Impairment of long-lived assets and intangible assets
The Group reviews long-lived assets and certain identifiable intangible assets subject to amortization
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. During this review, the Group re-evaluates the significant assumptions used in
determining the original cost and estimated lives of long-lived assets. Although the assumptions may vary
from asset to asset, they generally include operating results, changes in the use of the asset, cash flows and
F - 120
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
other indicators of value. Management then determines whether the remaining useful life continues to be
appropriate or whether there has been an impairment of long-lived assets based primarily upon whether
expected future undiscounted cash flows are sufficient to support the assets’ recovery. If impairment exists,
the Group would adjust the carrying value of the asset to fair value, generally determined by a discounted
cash flow analysis.
Concentration of credit risk
Financial instruments that potentially subject the Group to concentrations of credit risk consist of cash
and cash equivalents, time deposits, derivative financial instruments and accounts receivables. The Group
maintains its cash and cash equivalents, time deposits, derivative financial instruments with banks having
good reputation, good past track record, and who meet the minimum threshold requirements under the
counterparty risk assessment process, and reviews their credit-worthiness on a periodic basis. Accounts
receivables of the Group are typically unsecured. As there is no independent credit rating of the customer
available with the Group, Management reviews the creditworthiness of customers based on their financial
position, past experience and other factors. The Group entities perform ongoing credit evaluations of their
customers’ financial condition and monitor the creditworthiness of their customers to which they grant
credit terms in the normal course of business. Refer to note 20 on ‘Segment information’ for details relating
to customers with revenue that accounted for 10% or more of total revenue and their outstanding total
accounts receivables and unbilled accounts receivable as of March 31, 2017 and 2016.
Accounts receivables and allowance for accounts receivables
Accounts receivables are recorded at invoiced amounts, net of the Group’s estimated allowances for
doubtful accounts. The Group performs ongoing credit evaluations of its customers. Allowance for
doubtful receivables is established in amounts considered to be appropriate based primarily upon write-off
history, historical collections experience, aging analysis and management’s specific evaluation of potential
losses in the outstanding receivable balances. There is judgment involved with estimating the Group’s
allowance for doubtful accounts and if the financial condition of its customers were to deteriorate, resulting
in their inability to make the required payments, the Group may be required to record additional allowances
or charges against revenues. The Group writes-off accounts receivables against the allowance when it
determines a balance is uncollectible and no longer actively pursues collection of the receivable. Amounts
recovered, if any, from such debtors written off are accounted on receipt basis and disclosed as Other
income. The Group’s accounts receivables are not collateralized by any security.
Revenue recognition
Revenues are recognized when all of the following general revenue recognition criteria are met:
• Persuasive evidence of an arrangement exists: Evidence of an arrangement consists of a written
contract signed by both the customer and management prior to the end of the reporting period.
• Delivery or performance has occurred: The Group’s software product has met the milestones
contained in the software development contract, professional services are rendered, and any
customer acceptance provisions have been satisfied.
• Fees are fixed or determinable: Fees from customer arrangements are generally at a contractually
fixed price or based upon agreed upon time and material rates.
• Collectability is probable: Collectability is assessed on a customer-by-customer basis, based
primarily on creditworthiness as determined by credit checks and analysis, as well as customer
F - 121
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
payment history. If it is determined prior to revenue recognition that collection of an arrangement
fee is not probable, revenues are deferred until collection becomes probable or cash is collected,
assuming all other revenue recognition criteria are satisfied.
License revenues sometimes may not be accounted for separately from software services revenues if
professional services are essential to the software functionality and include significant modification or
customization to or development of the underlying software code. Since these software arrangements do
not qualify as a separate unit of accounting, the software license revenues are recognized using the
percentage of completion method. When contracts contain multiple software and software-related elements
(for example, software license, and maintenance and professional services) wherein Vendor-Specific
Objective (“VSOE”) exists for all undelivered elements, we account for the delivered elements in accordance
with the “Residual Method”. VSOE of fair value for post-contract customer support services is established
by a stated renewal rates charged in stand-alone sales. VSOE of fair value of hosting services is based upon
stand-alone sales of those services.
Time and material contracts — Professional services revenue consists primarily of revenue received for
assisting with the development, implementation of the Group’s software, on-site support, and other
professional consulting services. In determining whether professional services revenue should be accounted,
we review the nature of the Group’s software products; whether they are ready for use by the customer
upon receipt; the nature of the Group’s implementation services, which typically do involve significant
customization to or development of the underlying software code; and whether milestones or acceptance
criteria exist that affect the realization of the services rendered. Substantially all of the Group’s professional
services arrangements are billed on a time and materials basis and, accordingly, are recognized as the
services are performed. If there is significant uncertainty about the project completion or receipt of
payment for professional services, revenue is deferred until the uncertainty is sufficiently resolved. Payments
received in advance of rendering professional services are deferred and recognized when the related services
are performed. Work performed and expenses incurred in advance of invoicing are recorded as unbilled
receivables. These amounts are billed in the subsequent month.
Fixed price contracts — For arrangements that do not qualify for separate accounting for the license
and professional services revenues, including arrangements that involve significant modification or
customization of the software, that include milestones or customer specific acceptance criteria that may
affect collection of the software license fees or where payment for the software license is tied to the
performance of professional services, software license revenue is generally recognized together with the
professional services revenue using the percentage-of-completion method. Under the percentage-of
completion method, revenue recognized is equal to the ratio of costs expended to date to the anticipated
total contract costs, based on current estimates of costs to complete the project. If there are milestones or
acceptance provisions associated with the contract, the revenue recognized will not exceed the most recent
milestone achieved or acceptance obtained. If the total estimated costs to complete a project exceed the
total contract amount, indicating a loss, the entire anticipated loss would be recognized in the current
period.
The Group also enters into multiple element revenue arrangements in which a customer may purchase a
combination of a software license, hosting services, maintenance, and professional services. For multiple
element arrangements that contain non-software related elements, for example the Group’s hosting services,
the Group allocates revenue to each element based upon VSOE of the undelivered elements and the Group
accounts for the delivered elements in accordance with the “Residual Method”. VSOE of fair value for the
hosting, maintenance, and other post-contract customer support services (“PCS”) is established by a stated
renewal rate charged in stand-alone renewals of each type of PCS.
F - 122
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
Revenue is shown net of applicable service tax, sales tax, value added tax and other applicable taxes.
The Group has accounted for reimbursements received for out of pocket expenses incurred as revenues in
the combined Statement of Operations.
Employee benefits
i) Provident fund and other contribution plans: In accordance with Indian law, generally all employees
in India are entitled to receive benefits under the Provident Fund, which is a defined contribution
plan. Both the employee and the employer make monthly contributions to the plan at a
predetermined rate (presently at 12% each) of the employees’ basic salary. These contributions
are made to the fund which is administered and managed by the Government of India. The
Group also makes payments to defined contribution plans established and maintained in
accordance with the local laws of its Group entities. The Group’s monthly contributions to all of
these plans are charged to the combined Statement of Operations in the year they are incurred
and there are no further obligations under these plans beyond those monthly contributions. The
Group contributed $1,378, $1,292 and $921 towards all these contribution plans during the years
ended March 31, 2017, March 31, 2016, and March 31, 2015, respectively.
ii) Superannuation plan: The senior employees of the Indian Group entity are entitled to
superannuation, a defined contribution plan (the “Superannuation Plan”). The Group makes a
yearly contribution to the Superannuation Plan, which is administered and managed by the Life
Insurance Corporation of India based on a specified percentage (presently at 12.5% to 15%
depending on the grade of the employee) of each covered employee’s basic salary. The Group
contributed $42, $33 and $31 towards the Superannuation Plan during the fiscal years ended
March 31, 2017, March 31, 2016, and March 31, 2015, respectively.
iii) Pension commitments: The Group pays contributions to a defined contribution pension scheme
covering its employees for employees of the Group. The assets of the scheme are held separately
from those of the Group in an independently administered fund. The pension cost charge
represents contributions payable by the Group to the fund and amounted to $30, $25 and $33 for
the fiscal years ended March 31, 2017, March 31, 2016, and March 31, 2015, respectively.
iv) Gratuity plan: The Group provides for gratuity obligation, a defined benefit retirement plan (the
“Gratuity Plan”) covering all employees in India who are eligible under the terms of their
employment, and governed by India’s Payment of Gratuity Act, 1972. The Gratuity Plan provides
a lump sum payment to vested employees at retirement or upon termination of employment based
on the respective employee’s salary and the years of employment with the Group. The Group
determines its liability towards the Gratuity Plan on the basis of actuarial valuation. Actuarial
gains and losses arising from experience adjustments, and changes in actuarial assumptions are
recognized immediately in the combined Statement of Operations as income or expense. These
obligations are valued by independent qualified actuaries. The Group evaluates these critical
actuarial assumptions at least annually. If actual results differ significantly from the Group’s
estimates, the Group’s gratuity expense and its results of operations could be materially impacted.
The Group’s aggregate obligations under the Gratuity Plan were $(136) for fiscal 2017.
v) Leave encashment: The Group has obligations with respect to the encashment of leave balances
of certain of our employees in India and other countries. Leave encashment benefit comprises of
encashment of leave balances is recognized using the accrual method. The Group’s aggregate
obligations under provision for accrued vacation (leave encashment) were $1,735 for fiscal 2017.
The Group’s total obligations under leave encashment was $4,201, as of March 31, 2017.
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Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
Financing costs
The Group amortizes financing costs and premiums, and accretes discounts, over the remaining life of
the related debt using the effective interest amortization method. The expense is included in “Interest
expense” in the combined Statements of Operations. We record discounts or premiums as a direct
deduction from, or addition to, the amount of the related borrowing.
Stock-based compensation
Stock-based compensation represents the cost related to stock-based awards granted to employees. The
Group measures stock-based compensation costs at the grant date, based on the estimated fair value of the
award and recognizes the cost on a straight-line basis (net of estimated forfeitures) over the employee’s
requisite service period for the entire award. Forfeitures are estimated on the date of grant and revised if
actual or expected forfeiture activity differs materially from the original estimates. The Group estimates the
fair value of stock options using a Black-Scholes valuation model. The cost is recorded in Cost of
Revenues, Selling, General and Administrative expenses and Research and Development expenses in the
Consolidated and Combined Statement of Operations based on the employees’ respective function.
Advertising and sales commission costs
Advertising and promotion related expenses are charged to the combined Statement of Operations in
the period incurred. Advertising expense for the years ended March 31, 2017, March 31, 2016 and
March 31, 2015 was approximately $1,032, $1,350 and $1,196, respectively.
Sales commissions are recognized as an expense when earned by the sales representative, generally
occurring at the time the customer order is signed.
Derivative instruments
All derivative instruments are recorded in the Consolidated Balance Sheet as either an asset or liability
at their fair value. The Group normally enters into foreign exchange forward contracts and par forward
contracts where the counter party is generally a bank, to mitigate its foreign currency risk on foreign
currency denominated inter-company balances. For derivative financial instruments to qualify for hedge
accounting, the following criteria must be met: (1) the hedging instrument must be designated as a hedge;
(2) the hedged exposure must be specifically identifiable and expose the Group to risk; and (3) it is expected
that a change in fair value of the derivative financial instrument and an opposite change in the fair value of
the hedged exposure will have a high degree of correlation. The changes in the Group’s derivatives’ fair
values are recognized in the consolidated and combined Statement of Operations unless specific hedge
accounting and documentation criteria are met (i.e., the instruments are accounted for as hedges).
For items to which hedge accounting is applied, the Group records the effective portion of derivative
financial instruments that are designated as cash flow hedges in Accumulated other Comprehensive Income,
a separate component of Stockholders’ equity, and an amount is reclassified out of accumulated other
comprehensive income into earnings to offset the earnings impact that is attributable to the risk being
hedged. Any ineffectiveness or excluded portion of a designated cash flow hedge is recognized in the
statement of operations. The related cash flow impacts of derivative activities are reflected as cash flows
from operating activities.
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 recognized in shareholders’ funds is retained there until
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Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative
gain or loss recognized in hedging reserve is transferred to the consolidated and combined Statement of
Operations for the year.
For derivative financial instruments that do not qualify for hedge accounting, realized gains or losses
and changes in the estimated fair value of these derivative financial instruments are recorded in Other
Income/(Expenses).
The fair value of derivatives expiring within 12 months is classified as current assets or liabilities, and
of those with longer maturity is classified as non-current assets or liabilities.
Income taxes
Income taxes are accounted for under the asset and liability method. Deferred income taxes reflect the
tax effect of temporary differences between asset and liability amounts that are recognized for financial
reporting purposes and the amounts that are recognized for income tax purposes. These deferred taxes are
measured by applying currently enacted tax laws. The effect on deferred tax assets and liabilities of a change
in enacted tax rates is recognized in the Statement of Operations in the year of change.
Valuation allowances are recognized to reduce deferred tax assets to the amount that will more likely
than not be realized. In assessing the need for a valuation allowance, management considers all available
evidence for each jurisdiction including past operating results, estimates of future taxable income and the
feasibility of ongoing tax planning strategies. When the Group changes its determination as to the amount
of deferred tax assets that can be realized, the valuation allowance is adjusted with a corresponding impact
to income tax expense in the period in which such determination is made.
The Group recognizes tax liabilities when, despite the Group’s belief that its tax return positions are
supportable, the Group believes that certain positions may not be fully sustained upon review by the tax
authorities. Benefits from tax positions are measured at the largest amount of benefit that is greater than 50
percent likely of being realized upon settlement. To the extent that new information becomes available
which causes the Group to change its judgment regarding the adequacy of existing tax liabilities, such
changes to tax liabilities will impact income tax expense in the period in which such determination is made.
Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in
income tax expense.
Business combination
The purchase price of an acquisition is allocated to the underlying assets acquired and liabilities
assumed based upon their estimated fair values at the date of acquisition. To the extent the purchase price
exceeds the fair value of the net identifiable tangible and intangible assets acquired and liabilities assumed,
such excess is allocated to goodwill. The Group determines the estimated fair values after review and
consideration of relevant information, including discounted cash flows, and estimates made by
management. Acquisition-related costs are recognized separately from the acquisition and are expensed as
incurred. The cost of an acquisition also includes the fair value of any contingent consideration. Any
subsequent changes to the fair value of contingent consideration classified as liabilities are recognized in the
Statement of operations.
Earnings per share
Basic and diluted earnings/(losses) per share are computed as net income/(loss) divided by the
weighted-average number of common shares outstanding for the period.
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Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
3 RECENT ACCOUNTING PRONOUNCEMENTS
Recently Issued Accounting Standards
Improvements on Employee Share-Based Payment Accounting
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) No. 2016-09, “Improvements on Employee Share-Based Payment Accounting (Topic
718)” (“ASU 2016-09”), which simplifies several aspects of the accounting for employee share-based
payment transactions for both public and nonpublic entities, including the accounting for income taxes,
forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash
flows. The new standard is effective for annual periods beginning after December 15, 2016 and interim
periods within those years. Early adoption is permitted. The standard will be effective for the Company
beginning April 1, 2017. As required, the Company will make a cumulative-effect adjustment to
shareholders’ equity as of April 1, 2017 for unrecognized excess tax benefits or tax deficiencies that exist as
of that date. In addition, beginning April 1, 2017, excess tax benefits and tax deficiencies will be reflected as
income tax benefit or expense in the Company’s consolidated statement of operations and could result in a
material impact. The extent of the excess tax benefits or tax deficiencies are subject to variation in our stock
price and the timing of RSU vesting and employee stock option exercises.
Revenue from Contracts with Customers
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic
606)”, which provides guidance for revenue recognition. This ASU affects any entity that either enters into
contracts with customers to transfer goods or services or enters into contracts for the transfer of
non-financial assets. This ASU will supersede the revenue recognition requirements in Topic 605, Revenue
Recognition, and most industry-specific guidance.
In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic
606): Deferral of the Effective Date”, deferring the effective date of this standard. As a result, the ASU and
related amendments will be effective for the Company for its fiscal year beginning April 1, 2018, including
interim periods within that fiscal year.
Subsequently, the FASB issued ASU No. 2016-08, Principal Versus Agent Consideration (or Reporting
Revenue Gross versus Net) in March 2016, ASU No. 2016-10, Identifying Performance Obligations and
Licensing in April 2016, and ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients in
May 2016. These amendments clarified certain aspects of Topic 606 and will also be effective for the
Company for its fiscal year beginning April 1, 2018.
The core principle of Topic 606 is to recognize revenues when promised goods or services are
transferred to customers in an amount that reflects the consideration that is expected to be received for
those goods or services. Topic 606 defines a five-step process to achieve this core principle and, in doing so,
it is possible more judgment and estimates may be required within the revenue recognition process than are
required under existing GAAP, including identifying performance obligations in the contract, estimating
the amount of variable consideration to include in the transaction price and allocating the transaction price
to each separate performance obligation, among others. Topic 606 also provides guidance on the
recognition of costs related to obtaining customer contracts.
Preliminarily the Company plans to adopt these ASUs (collectively, Topic 606) on April 1, 2018. Topic
606 permits two methods of adoption: retrospectively to each prior reporting period presented (the “Full
Retrospective Method”), or retrospectively with the cumulative effect of initially applying the guidance
recognized at the date of initial application (the “Modified Retrospective Method”). The Company
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Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
3 RECENT ACCOUNTING PRONOUNCEMENTS continued
currently intends to apply the Modified Retrospective Method. Although the Company does not expect a
material impact on revenues upon adoption, the Company is currently evaluating the impact the adoption
will have on its consolidated financial statements.
The Company is continuing to evaluate the impact to its revenues related to its pending adoption of
Topic 606 and its preliminary assessments are subject to change. It is also continuing to evaluate the
provisions of Topic 606 related to costs for obtaining customer contracts.
Business Combinations (Topic 805): Clarifying the Definition of a Business
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the
Definition of a Business, which provides a more robust framework to use in determining when a set of
assets and activities is a business. The standard will be effective for the Company beginning April 1, 2018.
Based on its current assessment, the Company does not expect the adoption of this update to have a
material impact on its consolidated financial statements.
Statement of Cash Flows (Topic 230): Restricted Cash
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted
Cash, which requires the statement of cash flows to report changes in cash, cash equivalents, and restricted
cash. The standard will be effective for the Company beginning April 1, 2018. Based on its current
assessment, the Company does not expect the adoption of this update to have a material impact on its
consolidated financial statements.
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification
of Certain Cash Receipts and Cash Payments (ASU 2016-15), which clarifies how companies present and
classify certain cash receipts and cash payments in the statement of cash flows. The standard will be
effective for the Company beginning April 1, 2018. Based on its current assessment, the Company does not
expect the adoption of this update to have a material impact on its consolidated financial statements.
Income Tax Consequences of an Intra-Entity Transfer of Assets Other Than Inventory
In October 2016, the FASB issued ASU 2016-16, Income Taxes — Intra-Entity Transfers of Assets
Other Than Inventory, which requires entities to recognize the income tax consequences of an intra-entity
transfer of an asset other than inventory when the transfer occurs. The new standard must be adopted using
a modified retrospective transition method which is a cumulative-effective adjustment to retained earnings
as of the beginning of the first effective reporting period. The standard will be effective for the Company
beginning April 1, 2018. Based on its current assessment, the Company does not expect the adoption of this
update to have a material impact on its consolidated financial statements.
Accounting for Leases
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which
requires lessees to put most leases on their balance sheets but recognize the expenses on their income
statements in a manner similar to current practice. ASU 2016-02 states that a lessee would recognize a lease
liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying
asset for the lease term. The standard will be effective for the Company beginning April 1, 2019. The
Company is currently evaluating the impact this update will have on its consolidated financial statements.
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Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
3 RECENT ACCOUNTING PRONOUNCEMENTS continued
Simplifying the Test for Goodwill Impairment
In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles — Goodwill
and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which removes the requirement for
an entity to calculate the implied fair value of goodwill (as part of step 2 of the current goodwill
impairment test) in measuring a goodwill impairment loss. The standard will be effective for the Company
beginning April 1, 2020. Early adoption is permitted for interim or annual goodwill impairment tests
performed on testing dates after January 1, 2017. The Company is currently evaluating the impact this
update will have on its consolidated financial statements.
Emerging growth company
The Group is an “emerging growth company” under the federal securities laws and is subject to reduced
public company reporting requirements. In addition, Section 107 of the JOBS Act also provides that an
“emerging growth company” can take advantage of the extended transition period provided in Section
7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an
“emerging growth company” can delay the adoption of certain accounting standards until those standards
would otherwise apply to private companies. The Group has taken the advantage of the extended transition
period for complying with new or revised accounting standards. As a result, the Group’s financial statements
may not be comparable to those of companies that comply with public company accounting standards
effective dates.
4 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Group’s financial instruments consist primarily of cash and cash equivalents, short term
investments in time deposits, restricted cash, derivative financial instruments, accounts receivables, unbilled
accounts receivable, accounts payable, contingent consideration liability and accrued liabilities. The carrying
amount of cash and cash equivalents, short term investments in time deposits, restricted cash, accounts
receivables, unbilled accounts receivable, accounts payable and accrued liabilities as of the reporting date
approximates their fair market value due to the relatively short period of time of original maturity tenure of
these instruments.
Basis of Fair Value Measurement
Fair value is defined as the exchange price that would be received for an asset or an exit price paid to
transfer a liability in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. Valuation techniques used to measure
fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The
current accounting guidance for fair value measurements defines a three-level valuation hierarchy for
disclosures as follows:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level I that are observable, unadjusted
quoted prices in markets that are not active, or other inputs that are observable or can be
corroborated by observable market data.
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Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
4 FAIR VALUE OF FINANCIAL INSTRUMENTS continued
Level 3: Unobservable inputs that are supported by little or no market activity, which require the
Group to develop its own assumptions. The following table sets forth the financial assets,
measured at fair value, by level within the fair value hierarchy as of March 31, 2017 and 2016:
As of March 31,
2017 2016
Assets
Level 2
Derivative financial instruments (included in the following line items in
the Combined balance sheet)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
(10)
$ —
—
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . 99 180
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . — (4)
$ 89 $ 176
Level 3 Contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
$(229)
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . (756) (364)
$(756) $(593)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(667) $(417)
The following table presents the change in level 3 instruments:
As of March 31,
2017 2016 2015
Opening balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(593) $(1,712) $ (628)
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (1,610)
Total (Losses)/gains recognized in Statement of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (163) (344) 526
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,463 —
Closing balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(756) $ (593) $(1,712)
Contingent consideration pertaining to the acquisition of the consulting business of Agile
Technologies, LLC, a New Jersey limited liability company (“Agile”), as of December 31, 2015 has been
classified under level 3 as the fair valuation of such contingent consideration has been done using one or
more of the significant inputs which are not based on observable market data. The fair value of the
contingent consideration was estimated using a discounted cash flow technique with significant inputs that
are not observable in the market. The significant inputs not supported by market activity included the
Group’s probability assessments of expected future cash flows related to its acquisition of the consulting
business of Agile during the earn-out period, appropriately discounted considering the uncertainties
associated with the obligation, and calculated in accordance with the terms of the asset purchase agreement
(the “Agile Agreement”), dated December 12, 2014, as amended on January 26, 2016. The total (losses)/
gains attributable to contingent consideration payable for the acquisition of the Agile business were $(163)
and $(344) for the fiscal years ended March 31, 2017 and March 31, 2016.
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Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
4 FAIR VALUE OF FINANCIAL INSTRUMENTS continued
The fair value of Derivative financial instruments is determined based on observable market inputs and
valuation models. The Derivative financial instruments are valued based on valuations received from the
relevant counter-party (i.e., bank). The fair value of the foreign exchange forward contract and foreign
exchange par forward contract has been determined as the difference between the forward rate on the
reporting date and the forward rate on the original transaction, multiplied by the transaction’s notional
amount (with currency matching). The Group paid $1.1 million to Agile as earn-out consideration in the
fiscal year ended March 31, 2017. The Group paid $1.5 million to Agile as earn-out consideration in the
fiscal year ended March 31, 2016. The Group paid $0 to Agile as earn-out consideration in the fiscal year
ended March 31, 2015.
5 PROPERTY AND EQUIPMENT
Property and equipment consist of the following: As of March 31,
2017 2016
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 549 $ 389
Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,444 5,202
Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,506 2,942
Furniture and Fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,469 2,423
Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260 215
Office Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 971 815
Capital Work in Progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 80
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,199 $12,066
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,540) (8,604)
Property and Equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,659 $ 3,462
As of March 31, 2017 and 2016, the Group has hypothecated assets with net carrying value amounting
to $59 and $67, respectively. Depreciation expense was $1,955, $1,080 and $859 for the fiscal years ended
March 31, 2017, March 31, 2016, and March 31, 2015, respectively.
6 INTANGIBLE ASSETS
Intangible assets consist of the following:
Weighted
As of March 31, 2017 As of March 31, 2016
Average
amortization
period (in years)
Gross
carrying
amount
Accumulated
amortization
Net
carrying
value
Gross
carrying
amount
Accumulated
amortization
Net
carrying
value
Customer contracts . . . . . . . 3 $ 2,950 $ (1,955) $ 995 $ 2,950 $(1,155) $ 1,795
Customer relationships . . . . 6 6,720 (1,828) 4,892 6,720 (891) 5,829
Intellectual Property
Rights . . . . . . . . . . . . . . 3 2,299 (2,299) — 2,251 (2,251) —
Technology . . . . . . . . . . . . . 6 3,110 (907) 2,203 3,110 (394) 2,716
Software . . . . . . . . . . . . . . 3 4,165 (3,547) 618 3,272 (3,129) 143
Total . . . . . . . . . . . . . . . . . 4 $19,244 $(10,536) $8,708 $18,303 $(7,820) $10,483
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Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
6 INTANGIBLE ASSETS continued
All the intangible assets have finite lives and as such are subject to amortization. Amortization expense
was $2,764, $2,762 and $1,566 for the fiscal years ended March 31, 2017, March 31, 2016, and March 31,
2015, respectively.
The estimated aggregate amortization expense for the next five fiscal years and thereafter is as follows:
Future Year ended March 31, Amortization
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,261
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,643
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,457
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,358
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,708
7 ACCOUNTS RECEIVABLES AND ALLOWANCE FOR DOUBTFUL DEBTS
As of March 31,
2017 2016
Customers (trade) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,627 $22,930
Less: Allowance for doubtful receivables . . . . . . . . . . . . . . . . . . . . . . . . (1,400) (427)
Accounts receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,227 $22,503
The Group’s credit period for its customers generally ranges from 30 – 45 days. The Group has
collectively and individually evaluated all of its accounts receivables for collectability.
As of March 31,
2017 2016
Opening balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 427 $ 564
Current period provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,017 519
Reversals during current period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32) (668)
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . (12) 12
Closing balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,400 $ 427
The Group entities perform ongoing credit evaluations of their customers’ financial condition and
monitor the credit worthiness of their customers to which they grant credit terms in the normal course of
business. In their evaluation, they use certain factors like historical experience and use management
judgment in assessing credit quality.
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Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
8 PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
As of March 31
2017 2016
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,941 $2,020
Advance for expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419 715
Loans and advance to employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 83
Derivative financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 180
Advance tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,530 1,122
Rent Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,263 1,191
Service tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 453 566
Other advances and receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 318
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,961 $6,195
Advance for expenses includes foreign currency advances, travel advances and advances to suppliers.
Other advances and receivables mainly include amount recoverable from statutory authorities and
miscellaneous advances.
9 CAPITAL LEASE OBLIGATIONS
The Group leases vehicles under capital leases which are stated at the present value of the minimum
lease payments. The gross stated amounts for such capital leases are $101 and $86 and related accumulated
depreciation recorded under capital leases are $42 and $19, respectively as of March 31, 2017 and 2016. At
the termination of the leases, the Group has an option to receive title to the assets at no cost or for a
nominal payment.
Depreciation expenses in respect of assets held under capital leases were $25, $21 and $19 for the years
ended March 31, 2017, March 31, 2016, and March 31, 2015, respectively.
The following is a schedule of the future minimum lease payments under capital leases, together with
the present value of the net minimum lease payments as of March 31, 2017.
Year ended March 31, Amount
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $118
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $154
Less: Interest portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Present value of net minimum capital leases payments . . . . . . . . . . . . . . . . . . . . . . . $137
The Group acquired software under a hire purchase arrangement which are stated at the present value
of the minimum installment payments. The gross stated amount for such software are $ 459 and nil and
related accumulated depreciation recorded are $ 23 and nil, respectively as of March, 2017 and 2016.
Depreciation expenses, in respect of assets held under hire purchase were $23 and nil for the fiscal
years ended March 31, 2017, March 31, 2016 respectively.
F - 132
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
9 CAPITAL LEASE OBLIGATIONS continued
The following is a schedule of the future minimum installment payment under hire purchase, together
with the present value of the net minimum installment payments as of March 31, 2017.
Year ended March 31, Amount
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $278
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
Total minimum installment payments of hire purchase . . . . . . . . . . . . . . . . . . . . . . . $487
Less: Interest portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Present value of net minimum installments of hire purchase . . . . . . . . . . . . . . . . . . . $461
10 BORROWINGS
Line of Credit
On March 25, 2011, the Group entered into a secured revolving working capital line of credit facility
(the “Credit Facility”) with ICICI Bank Limited (“ICICI”) under which the maximum borrowing limit is
$5,000. The interest rate on the credit facility at March 31, 2016 was three-month LIBOR plus 350 basis
points and increased to three-month LIBOR plus 375 basis points with the second extension of this facility
described below. The interest rate was 4.75% at March 31, 2017 and 4.13% at March 31, 2016. In case of
unhedged foreign currency exposure, if any, ICICI reserves the right to increase the pricing of this facility.
The credit facility is guaranteed by Mastek Ltd., subject to the terms and conditions set forth in the
guarantee. The credit facility initially matured on November 11, 2015.
On November 20, 2015, the Group extended this line of credit to February 11, 2016. The facility was
further extended to May 9, 2016 and again extended to May 15, 2017. Majesco paid a processing fee of
$12.50 in connection with the second extension and a processing fee of $50.83 in connection with the third
extension. In connection with these extensions of the Majesco line of credit, Mastek Ltd. also extended its
guarantee of such line of credit. Majesco has agreed to pay a fee and indemnify Mastek Ltd. against any
payments made by Mastek Ltd. in connection with this guarantee.
This facility is secured by a continuing first priority lien on and security interest in, among other
things, all of Majesco’s personal property and assets (both tangible and intangible), including accounts
receivable, cash, certificated and uncertificated securities and proceeds of any insurance or indemnity
payable to the Group with respect to the collateral. This facility contains financial covenants, as well as
restrictions on, among other things, the ability of the Group to incur debt or liens; make loans and
investments; enter into mergers, acquisitions and other business combinations; engage in asset sales; or
amend its governing documents. This facility also restricts the Group from paying dividends upon and
during the continuation of an event of default.
On January 20, 2017, the Group paid in full the balance under this facility with proceeds from the new
$10,000 receivables purchase facility with HSBC Bank USA, National Association (“HSBC”), and this
facility was terminated. On payment, the guarantee by Mastek Ltd. of this facility was also terminated and
the Group’s liability to Mastek Ltd. regarding this guarantee also ceased to exist.
PCFC Facilities
On June 30, 2015, the Group’s subsidiary, Majesco Software and Solutions India Pvt. Ltd.
(“MSSIPL”), entered into a secured Pre Shipment in Foreign Currency and Post Shipment in Foreign
Currency (“PCFC”) facility with Yes Bank under which MSSIPL may request 3 months pre-export
advances and advances against export collection bills. The maximum borrowing limit is 300 million Indian
F - 133
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
10 BORROWINGS continued
rupees, or approximately $4,416 at the exchange rate in effect on March 31, 2017. The interest rate on this
PCFC facility is LIBOR plus 275 basis points. The interest rate on this PCFC facility is determined at the
time of each advance. This PCFC facility is secured by a first pari passu charge over the current assets of
MSSIPL. Excess outstanding beyond 100 million Indian rupees is to be backed by 100% goodwill fixed
deposit receipts in MSSIPL or Majesco Limited. As of March 31, 2017, the Group was in compliance with
the terms of this facility. On September 27, 2016, MSSIPL extended this PCFC facility to June 17, 2017.
The outstanding loans as on March 31, 2017 and 2016 are as follows: Outstanding as of
Date of loan Repayable on
March 31, 2017
March 31, 2016
January 19, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . April 19, 2017 $1,957 $4,651
Term Loan Facility
On March 23, 2016, Majesco entered into a Loan Agreement (the “Loan Agreement”) with HSBC
pursuant to which HSBC agreed to extend loans to Majesco in the amount of up to $10,000 and Majesco
issued a promissory note to HSBC in the maximum principal amount of $10,000 or any lesser amount
borrowed under the Loan Agreement (the “Note”, and together with the “Loan Agreement”, the
“Facility”). The outstanding principal balance of the loan bears interest based on LIBOR plus a margin in
effect on the first day of the relevant interest period. Until January 1, 2018, only interest will be payable
under the loan. Commencing on January 1, 2018, and on each January 1 and July 1 thereafter until July 1,
2020, installments of principal in the amount of $1,667 shall be due and payable semi-annually. All
principal and interest outstanding under the Note shall be due and payable on March 1, 2021. The Facility
is unsecured and supported by a letter of credit issued by a bank of $10,000, which is secured by a cash
pledge of the Group’s parent company, Majesco Limited. As of March 31, 2017, the Group had $10,000
outstanding under this Facility.
The Facility contains affirmative covenants that require Majesco to furnish financial statements to
HSBC and cause Majesco Limited to maintain (1) a Net Debt-to-EBITDA Ratio (as defined in the Loan
Agreement) of not more than (a) 5.00 to 1.00 as of the last day of its 2017 fiscal year and (b) 2.50 to 1.00 as
of the last day of each fiscal year thereafter, and (2) a Debt Service Coverage Ratio (as defined in the Loan
Agreement) of not less than 1.50 to 1.00 as of the last day of each fiscal year. The Facility contains
restrictive covenants on Majesco, including restrictions on declaring or paying dividends upon and during
the continuation of an event of default, incurring additional indebtedness, selling material portions of its
assets or undertaking other substantial changes to the business, purchasing or holdings securities for
investment, and extending credit to any person outside the ordinary course of business. The Facility also
restricts any transfer or change in, or assignment or pledge of the ownership or control of Majesco which
would cause Majesco Limited to directly own less than fifty one percent (51%) of the issued and
outstanding equity interests in Majesco. The Facility also restricts Majesco Limited from incurring any Net
Debt (as defined in the Loan Agreement) in excess of $25,000 at any time prior to April 1, 2017. The
Facility also contains customary events of default provision and indemnification provisions whereby
Majesco will indemnify HSBC against all losses or damages related to the Facility, provided, however, that
Majesco shall not have any indemnification obligations to HSBC for any claims caused by HSBC’s gross
negligence or willful misconduct. Majesco may use the loan proceeds solely for the purpose of refinancing
existing indebtedness, capital expenditures and working capital and other general corporate purposes.
F - 134
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
10 BORROWINGS continued
Majesco used the proceeds from the Facility to refinance its $3,000 term loan with Punjab National
Bank (International), to fund capital expenditures and for working capital and other general corporate
purposes.
Receivable Purchase Facility
On January 13, 2017, Majesco and its subsidiaries MSSI, and Cover-All Systems, jointly and severally
entered into a Receivable Purchase Agreement with HSBC pursuant to which HSBC may advance funds
against receivables at an agreed advance rate. The outstanding aggregate amount of all advances shall not
exceed the facility limit. The facility also bears interest at two (2%) per cent plus the ninety (90) day LIBOR
rate. HSBC will also receive an arrangement fee equal to .20% of the facility limit and a facility review fee
equal to .20% of the facility limit. Majesco will serve as HSBC’s agent for the collection of receivables, and
Majesco will collect and otherwise enforce payment of the receivables. The term of the Receivable Purchase
Agreement is for a minimum period of twelve (12) months and shall continue unless terminated by either
party. Either party may terminate the Receivable Purchase Agreement at any time upon sixty (60) days’
prior written notice to the other party. The Receivable Purchase Agreement will provide additional liquidity
to us for working capital and other general corporate purposes. As of March 31, 2017, Majesco had $604
outstanding under this Facility. Majesco used proceeds from this facility to refinance the ICICI facility
described above, to fund capital expenditures and for working capital and other general corporate purposes.
11 ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following:
As of March 31,
2017 2016
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,826 $ 4,719
Statutory payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,423 780
Provision for taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,298 1,214
Leave encashment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,130 1,954
Derivative financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,739 7,972
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495 58
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . $14,911 $16,701
12 DERIVATIVE FINANCIAL INSTRUMENTS
The following table provides information of fair values of derivative financial instruments:
Asset Liability
Noncurrent* Current* Noncurrent* Current*
As of March 31, 2017
Designated as hedging instruments under Cash Flow Hedges
Foreign exchange forward contracts . . . . . . . . . . . . . . . . . . $— $99 $10 $—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0 $99 $10 $—
F - 135
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
12 DERIVATIVE FINANCIAL INSTRUMENTS continued
As of March 31, 2016
Designated as hedging instruments under Cash Flow Hedges
Asset Liability
Noncurrent* Current* Noncurrent* Current*
Foreign exchange forward contracts . . . . . . . . . . . . . . . . . . $0 $180 $0 $4
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0 $180 $0 $4
* The noncurrent and current portions of derivative assets are included in ‘Other assets’ and ‘Prepaid
expenses and other current assets’, respectively and of derivative liabilities are included in ‘Other
liabilities’ and ‘Accrued expenses and other liabilities’, respectively in the Combined Balance Sheet.
Cash Flow Hedges and Other derivatives
The Group uses foreign currency forward contracts and par forward contracts to hedge its risks
associated with foreign currency fluctuations relating to certain commitments and forecasted transactions.
The Group designates these hedging instruments as cash flow hedges. The use of hedging instruments is
governed by the policies which are approved by Board of Directors of the Group.
Derivative financial instruments entered into by the Group that are not designated as hedging
instruments in hedge relationships are classified in Financial instruments at fair value through profit or loss.
The aggregate contracted USD principal amounts of the Group’s foreign exchange forward contracts
(sell) outstanding as of March 31, 2017 amounted to nil and as of March 31, 2016 amounted to $10,660.
The aggregate contracted GBP principal amounts of the Group’s foreign exchange forward contracts
(sell) outstanding as of March 31, 2017 amounted to GBP 2,080 and as of March 31, 2016 amounted to nil.
The outstanding forward contracts as of March 31, 2017 mature between 1 to 12 months. As of
March 31, 2017, the Group estimates that $59, net of tax, of the net gains/(losses) related to derivatives
designated as cash flow hedges recorded in accumulated other comprehensive income (loss) is expected to
be reclassified into earnings within the next 12 months.
The related cash flow impacts of all of the Group’s derivative activities are reflected as cash flows from
operating activities.
F - 136
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
12 DERIVATIVE FINANCIAL INSTRUMENTS continued
The following table provides information of the amounts of pre-tax gains/(losses) recognized in and
reclassified from AOCI of derivative instruments designated as cash flow hedges:
For the year ended March 31, 2017
Amount of
Gain/(Loss)
recognized in AOCI (effective portion)
Amount of
Gain/(Loss)
reclassified from
AOCI to
Statement of
Operations
(Revenue)
Foreign exchange forward contracts . . . . . . . . . . . . . . . . . $ 167 $(254)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 167 $(254)
For the year ended March 31, 2016
Foreign exchange forward contracts . . . . . . . . . . . . . . . . . $(167) $(202)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(167) $(202)
For the year ended March 31, 2015
Foreign exchange forward contracts . . . . . . . . . . . . . . . . . $ 633 $ 543
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 633 $ 543
13 RETIREMENT BENEFIT OBLIGATION — GRATUITY
Employees of the Group who are in India, participate in a gratuity employee benefit plan sponsored by
MSSIPL, which is a defined benefit plan. In India, gratuity is governed by the Payment of Gratuity Act,
1972. This plan is accounted for as multi-employer benefit plan in these combined financial statements and,
accordingly, the Group’s Consolidated Balance Sheets do not reflect any assets or liabilities related to these
plans. The Group’s Combined Statements of Operations includes expense allocations for these benefits. The
Group considers the expense allocation methodology and results to be reasonable for all periods presented.
Plan information is as follows:
Legal name of the plan: Majesco Software & Solutions India Private Limited Employees’ Group
Gratuity Assurance Scheme (C. A.)
Year ended
March 31, 2017
Year ended
March 31, 2016
Year ended
March 31, 2015
Group’s Total Contributions to plan . . . . . . . . . $2,957 $2,957 $1,420
$2,957 $2,957 $1,420
Total plan assets and actuarial present value of accumulated plan benefits are as follows:
As of March 31,
2017 2016
Total plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,908 $3,000
Actuarial present value of accumulated plan benefits . . . . . . . . . . . . . . . 2,449 2,780
Total contributions received by the plan from all employers (for the period
ended) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.06
126
F - 137
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
14 ACCUMULATED OTHER COMPREHENSIVE INCOME
Changes in accumulated other comprehensive income by component was as follows:
Year ended March 31, 2017
Year ended March 31, 2016
Year ended March 31, 2015
Other comprehensive income
Foreign currency translation adjustments
Before
tax Tax
effect
Net of Tax
Before
tax Tax
effect
Net of Tax
Before
tax Tax
effect
Net of Tax
Opening balance . . . . . . . . . . . . . . . . . . . . . . . $ 222 — 222 $ 1,884 — 1,884 $2,209 — 2,209
Change in foreign currency translation adjustments . . (567) — (567) (1,662) — (1,662) (325) — (325)
Closing balance . . . . . . . . . . . . . . . . . . . . . . . . $(345) — (345) $ 222 — 222 $1,884 — 1,884
Unrealized gains/(losses) on cash flow hedges
Opening balance . . . . . . . . . . . . . . . . . . . . . . . $ 176 (60) 116 $ 545 (185) 360 $ 455 (155) 300
Unrealized gains/(losses) on cash flow hedges . . . . . 167 (57) 110 (167) 57 (110) 633 (215) 418
Reclassified to Statement of Operations . . . . . . . . . (254) 86 (168) (202) 69 (133) (543) 185 (358)
Net change . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (87) 29 (58) $ (369) 126 (243) $ 90 (30) 60
Closing balance . . . . . . . . . . . . . . . . . . . . . . . . $ 89 (31) 58 $ 176 (59) 117 $ 545 (185) 360
15 INCOME TAXES
Year ended
March 31, 2017
Year ended
March 31, 2016
Year ended
March 31, 2015
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1508) $ 19,189 $(3,351)
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 683 (23,938) 2,559
(Loss) /Income before provision for income taxes . . . . . . . . . . $ (825) $ (4,749) $ (792)
The Group’s (provision)/benefit for income taxes consists of the following:
Year ended March 31,
2017
Year ended March 31,
2016
Year ended March 31,
2015
Current:
U.S. Federal and state . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28 $ 753 $ 142
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270 238 1,004
Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 298 $ 991 $ 1,146
Prior Period – Current Tax:
U.S. Federal and state . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86 $ 49 $ (410)
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27 $ — $ —
Total Prior Period – Current Tax . . . . . . . . . . . . . . . . . . . . $ 113 $ 49 $ (410)
Deferred:
U.S. Federal and state . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(366) $(2,052) $(1,326)
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 (175) 449
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(314) $(2,227) $ (877)
Provision for income taxes recognized in Statement of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 97 $(1,187) $ (141) F - 138
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
15 INCOME TAXES continued
The total income tax expense differs from the amounts computed by applying the statutory federal
income tax rate of 39.3% as follows:
Year ended March 31,
2017
Year ended March 31,
2016
Year ended March 31,
2015
Net (loss)/income before taxes . . . . . . . . . . . . . . . . . . . . . . (825) (4,749) (792)
Computed tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . (324) (1,866) (311)
Non-deductible expenses – Stock based compensation & Meals &Entertainment . . . . . 697 367 97
– Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 97 103
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (228) — 302
Tax charge/(credit) of earlier year assessed in current year . . . 113 330 (172)
Net tax credit on R&D and Sec 199 deduction . . . . . . . . . . . (306) (169) (238)
Difference arising from different tax jurisdiction . . . . . . . . . . (140) (127) 90
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 181 (12)
Total taxes recognized in Statement of Operations . . . . . . . . . 97 (1,187) (141)
Significant components of activities that gave rise to deferred tax assets and liabilities included on the
Balance Sheet was as follows:
As of March 31,
2017 2016
Deferred tax assets/(liability):
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,538
1,278
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 52
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,120 550
Allowance for impairment of accounts receivables . . . . . . . . . . . . . . . . . 385 76
Carry forwarded income tax losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,883 6,190
Tax credit for R&D expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 951 645
Derivative financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (—) (60)
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,413) (1,835)
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,502 6,896
Less: Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,628) (1,463)
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,874 5,433
Current portion of deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . 2,018 1,847
Non-current portion of deferred tax assets . . . . . . . . . . . . . . . . . . . . . . 3,856 3,586
A valuation allowance is established attributable to deferred tax assets recognized on carry forward tax
losses and tax credit for R&D expenses by the Group where, based on available evidence, it is more likely
than not that they will not be realized. Significant management judgment is required in determining
provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against
deferred tax assets. The valuation allowance is based on the Group’s estimates of taxable income by
jurisdiction in which the Group operates and the period over which deferred tax assets will be recoverable.
The change in valuation allowance is $165, $353 and $379 for the years ended March 31, 2017, March 31,
2016, and March 31, 2015, respectively.
F - 139
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
15 INCOME TAXES continued
The Group entity in Canada has recognized a valuation allowance on Deferred income tax assets
recognized on carry-forward losses and tax credit for R&D expenses amounting to $1,335 and $NIL as of
March 31, 2017, $1,194 and $NIL as of March 31, 2016 and $2,368 and $169 as of March 31, 2015,
respectively because it is not probable that future taxable profit will be available against which these
temporary difference can be utilized. These carry forward losses and tax credit for R&D expenses do not
have any expiry date.
The Group entity in Thailand has recognized a valuation allowance on Deferred income tax assets
recognized on carry-forward losses amounting to $293 as of March 31, 2017, $269 of March 31, 2016 and
$1,032 as of March 31, 2015, respectively because it is not probable that future taxable profit will be
available against which these temporary difference can be utilized. These carry forward losses are subject to
expiration beginning in 2020.
Changes in unrecognized income tax benefits were as follows:
As of March 31,
2017 2016 2015
Opening balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $441 $310 $172
Increase in unrecognized tax benefits – due to tax
Positions taken in current period for prior periods . . . . . . . — 131 138
Closing balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $441 $441 $310
As of March 31, 2017, the entire balance of unrecognized income tax benefits would affect the Group’s
effective income tax rate, if recognized. Significant changes in the amount of unrecognized tax benefits are
not reasonably possible within the next 12 months from the reporting date. The Group includes interest and
penalties relating to unrecognized tax benefits within the provision for income taxes. The total amount of
accrued interest and penalties as of March 31, 2017, 2016, and 2015 is $NIL, $NIL, and $NIL, respectively.
The amount of interest and penalties expenses for the fiscal years ended March 31, 2017, 2016 and 2015 is
$NIL, $NIL and $NIL, respectively.
Majesco and Majesco Software and Solutions Inc. file a consolidated income tax return, and the
provision for income tax for the fiscal years ended March 31, 2017, 2016 and 2015 has been made
accordingly.
There were no undistributed earnings in Majesco and its US subsidiaries as of March 31, 2017 and
2016. The remaining earnings of Majesco from its non-US subsidiaries are considered to be permanently
reinvested. As of March 31, 2017 and 2016, the cumulative amounts of such undistributed earnings were
$1,848 and $2,716, respectively.
The determination of the amount of the unrecognized deferred tax liability relating to undistributed
earnings is not practicable because numerous possible methods could be used to facilitate the repatriation of
earnings to the US, and each would require evaluation of withholding taxes, evaluation of the local taxability
of dividends as well as an analysis of Majesco’s historical tax position and the ability to use
foreign tax credits. Furthermore, due to Majesco’s complex legal structure, the number of jurisdictions
involved, and the layers of regulatory requirements, all of which would have to be evaluated to determine
the amount of allowable dividends between legal entities and ultimately to the U.S., such an effort would
require significant amount of Company resources. Because any estimate would not be meaningful due to
the numerous assumptions upon which it would be based, and because of the significant resources, this
exercise would require, Majesco has determined that it is not practical to estimate the amount of
unrecognized deferred tax liabilities.
F - 140
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
15 INCOME TAXES continued
In the US and India, the income tax returns are subject to examination by the appropriate tax
authorities for the year ended June 30, 2010 and onwards and March 31, 2011 and onwards, respectively.
16 EMPLOYEE STOCK OPTION PLAN
Employee Stock Option Scheme of Majesco Limited — Plan 1
Certain employees of the Group participate in the Group’s parent company Majesco Limited’s
employee stock option plan. The plan termed as “ESOP plan 1”, became effective June 1, 2015, the effective
date of the demerger of Mastek Ltd. Group employees who were having options in the earlier ESOP plans
of Mastek Ltd. have now been given options of Majesco Limited. Under the plan, Majesco Limited during
the year has also granted newly issued options to the employees of MSSIPL. During the year ended
March 31, 2017 37,500 options were granted. The options were granted at the market price on the grant
date.
As of March 31, 2017, the total future compensation cost related to non-vested options not yet
recognized in the Statement of Operations was $1,911 and the weighted average period over which these
awards are expected to be recognized was 2.18 years. The weighted average remaining contractual life of
options expected to vest as of March 31, 2017 is 9.19 years.
Activity in the stock options granted under the Majesco Limited ‘s stock option plans granted to
Majesco’s employees during the year was as follows:
Year Ended March 31, 2017
Weighted
Year Ended March 31, 2016
Weighted
Year Ended March 31, 2015
Weighted
Particulars
Number
of
Options
Average
Exercise
Price*
Number
of
Option
Average
Exercise
Price*
Number
of
Options
Average
Exercise
Price*
Outstanding at the beginning of the year . . . 2,015,401 $3.23 1,599,015 $1.45 1,337,775 $2.85
Granted during the year . . . . . . . . . . . . . . 37,500 7.96 825,000 5.82 848,389 2.37
Forfeited during the year . . . . . . . . . . . . . . (257,705) 5.57 (147,982) 2.99 (546,805) 2.94
Expired during the year . . . . . . . . . . . . . . . (18,145) 2.79 (19,514) 3.37 (300) 5.07
Exercised during the year . . . . . . . . . . . . . (153,011) 1.86 (130,522) 1.75 (143,294) 2.08
Transfer adjustment . . . . . . . . . . . . . . . . . (—) — (110,596) 1.14 103,250 2.27
Outstanding at the end of the year . . . . . . . . $1,624,040 $3.06 $2,015,401 $3.23 $1,599,015 $1.45
Exercisable at the end of the year . . . . . . . .
807,695
$2.18
560,417
$1.51
503,156
$2.33
* The per share value has been converted at year end rate 1 US$ =Rs. 64.85, Rs. 66.255 and Rs. 62.50 as
of March 31, 2017, 2016 and 2015, respectively.
The weighted average grant date fair values of options granted during the fiscal years ended March 31,
2017, 2016 and 2015 is $4.65, $5.70 and $2.31, respectively, per option. The weighted average grant date fair
value of vested options as of March 31, 2017 and 2016 is $1.55 and $1.17, respectively, per option. The
Aggregate Intrinsic Value of options outstanding is $162 and options exercisable is $70 as of March 31,
2017.
F - 141
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
16 EMPLOYEE STOCK OPTION PLAN continued
The Group calculated the fair value of each option grant on the date of grant using the Black-Scholes
pricing method with the following assumptions:
As of March 31,
Variables (range) 2017 2016 2015
Expected term of share options . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6 Years
7.29%
6 Years
7.61%
6 Years
8.70%
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51.16% 49.17% 47.77%
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . 0% 0% 2.56%
The volatility is determined based on annualized standard deviation of the continuously compounded
rate of return on the stock over the time to maturity of the options. The risk free interest rates are
determined using the expected life of options based on the zero-coupon yield curve for Government
Securities in India. The expected dividend is based on the average dividend yields for the preceding seven
years. Weighted average price is based on latest available closing market price on the stock exchange with
the highest trading volume on the date of grant.
Summary of outstanding options as of March 31, 2017 is as follows
Exercise Price Range*
Number of
shares arising
out of options
Wtd. Avg.
Exercise Price*
Wtd. Avg.
remaining
Contractual life
$0.1 – $3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 970,915 1.37 7.48
$3.1 – $6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 554,125 5.05 9.43
$6.1 – $7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,000 8.49 9.88
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,624,040 3.06 8.29
Summary of exercisable options as of March 31, 2017 is as follows:
Number of
shares arising
Wtd. Avg.
Wtd. Avg.
remaining
Exercise Price range* out of options Exercise Price* contractual life
$0.1 – $3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 649,445 1.36 6.87
$3.1 – $6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,000 5.05 2.58
$6.1 – $7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,250 8.50 9.85
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 807,695 2.18 7.38
* The per share value has been converted at year end rate 1 US$ = Rs 67 as of March 31, 2017.
In accordance with SAB Topic 14, Majesco uses the simplified method for estimating the expected
term when measuring the fair value of employee stock options using the Black-Scholes option pricing
model. Majesco believes the use of the simplified method is appropriate due to the employee stock options
qualifying as “plain-vanilla” options under the following criteria established by SAB Topic 14:
• stock options are granted at-the-money;
• exercisability is conditional only on the completion of a service condition through the vesting
date;
• employees who terminate their service prior to vesting forfeit the options; F - 142
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
16 EMPLOYEE STOCK OPTION PLAN continued
• employees who terminate their service after vesting are granted limited time to exercise their stock
options (typically 30 – 90 days); and
• stock options are nontransferable and nonhedgable.
Given our limited history with employee grants, we use the “simplified” method in estimating the
expected term for our employee grants. The “simplified” method, as permitted by applicable regulations, is
calculated as the average of the time-to-vesting and the contractual life of the options.
Majesco 2015 Equity Incentive Plan
In the fiscal year ended March 31, 2017, we recognized $1,324 compared to $748 in the fiscal year
ended March 31, 2016, of stock-based compensation expense in our consolidated Financial Statements.
In June 2015, Majesco adopted the Majesco 2015 Equity Incentive Plan (the “2015 Plan”). Options and
stock awards for the purchase of up to 3,877,263 shares may be granted by the Board of Directors to our
employees, consultants and directors at an exercise or grant price determined by the Board of Directors on
the date of grant. Options may be granted as incentive or nonqualified stock options with a term of not
more than ten years. The 2015 Plan allows the Board of Directors to grant restricted or unrestricted stock
awards or awards denominated in stock equivalent units or any combination of the foregoing and may be
paid in common stock or other securities, in cash, or in a combination of common stock or other securities
and cash. On March 31, 2017, an aggregate of 1,004,374 shares were available for grant under the 2015
Plan.
Majesco uses the Black-Scholes-Merton option-pricing model (“Black-Scholes”) to measure fair value
of the share-based awards. The Black-Scholes model requires us to make significant judgments regarding
the assumptions used within the model, the most significant of which are the expected stock price volatility,
the expected life of the option award, the risk-free interest rate of return and dividends during the expected
term.
• Expected volatilities are based on peer entities as the historical volatility of Majesco’s common
stock is limited.
• In accordance with SAB Topic 14, Majesco uses the simplified method for estimating the expected
term when measuring the fair value of employee stock options using the Black-Scholes option
pricing model. Majesco believes the use of the simplified method is appropriate due to the
employee stock options qualifying as “plain-vanilla” options under the criteria established by SAB
Topic 14.
• The risk-free interest rate for periods within the contractual life of the option is based on the U.S.
Treasury yields for an equivalent term at the time of grant.
• Majesco does not anticipate paying dividends during the expected term. 2017 2016
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41% – 50% 41% – 50%
Weighted-average volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41% 41%
Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0
Expected term (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 – 5 Years 3 – 5 Years
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.46 0.46
F - 143
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
16 EMPLOYEE STOCK OPTION PLAN continued
As of March 31, 2017, there was $$4,154 of total unrecognized compensation costs related to
non-vested share-based compensation arrangements previously granted by Majesco. That cost is expected
to be recognized over a weighted-average period of 3.1 years.
A summary of the outstanding common stock options under the 2015 Plan is as follows:
Shares
Exercise Price
Per Share
Weighted-Average
Remaining
Contractual Life
Weighted-Average
Exercise Price
Balance, April 1, 2015 . . . . . . . . . . — $— — $ —
Granted . . . . . . . . . . . . . . . . . . . . 2,279,882 4.81 – 7.72 9.07Years 5.24
Canceled . . . . . . . . . . . . . . . . . . . (100,497) 4.81 – 6.93 4.95
Balance, April 1, 2016 . . . . . . . . . . 2,179,385 $4.81 – 7.72 9.07Years $5.25
Granted . . . . . . . . . . . . . . . . . . . . 860,331 4.79 – 6.22 9.41Years 5.56
Exercised . . . . . . . . . . . . . . . . . . . (2,083) 4.92 4.92
Canceled . . . . . . . . . . . . . . . . . . . (168,991) 4.81 – 7.53 5.37
Balance, March 31, 2017 . . . . . . . . 2,868,642 $4.79 – 7.72 8.91Years $5.34
The options granted during fiscal 2017 are distributed as follows, relative to the difference between the
exercise price and the stock price at grant date:
Number
Weighted-Average
Granted
Weighted-Average
Exercise Price Fair Value
Exercise Price at Stock Price . . . . . . . . . . . . . . . . . 860,331 $5.56 $2.25
The options granted during fiscal 2016 are distributed as follows, relative to the difference between the
exercise price and the stock price at grant date:
Number Granted
Weighted-Average Exercise Price
Weighted-Average Fair Value
Exercise Price at Stock Price . . . . . . . . . . . . . . . . 2,279,882 $5.24 $2.06
Exercisable options at March 31, 2017 were as follows:
Number of
Exercisable Options
Weighted-Average
Exercise Price
March 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 627,675 $5.70
March 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163,390 $7.63
The following table summarizes information about stock options at March 31, 2017:
Exercisable Outstanding Stock Options
Weighted-Average
Stock Options
Range of Remaining Weighted-Average Weighted-Average
Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price
$ 4.79 − $6.20 . . . . . . . 2,590,826 9.2 Years $5.16 471,859 $5.06
$ 7.53 − $7.72 . . . . . . . 277,816 6.7 Years $7.01 155,816 $7.61
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded
F - 144
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
16 EMPLOYEE STOCK OPTION PLAN continued
options which have no vesting restrictions and are fully transferable. In addition, option valuation models
require the input of highly subjective assumptions including the expected stock price volatility. Because our
F - 145
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
16 EMPLOYEE STOCK OPTION PLAN continued
employee stock options have characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the fair value estimate, in
management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair
value of our employee stock options.
We follow FASB Accounting Standards Codification (“ASC”) 718, Accounting for Stock Options and
Other Stock-Based Compensation. Among other items, ASC 718 requires companies to record the
compensation expense for share-based awards issued to employees and directors in exchange for services
provided. The amount of the compensation expense is based on the estimated fair value of the awards on
their grant dates and is recognized over the required service periods. Our share-based awards include stock
options and restricted stock awards. For restricted stock awards, the calculation of compensation expense
under ASC 718 is based on the intrinsic value of the grant.
Majesco Employee Stock Purchase Plan
Majesco established the Majesco Employee Stock Purchase Plan (the “ESPP”). The ESPP is intended
to be qualified under Section 423 of the Internal Revenue Code. If a plan is qualified under Section 423,
employees who participate in the ESPP enjoy certain tax advantages. The ESPP allows employees to
purchase shares of Majesco common stock at a discount, without being subject to tax until they sell the
shares, and without having to pay any brokerage commissions with respect to the purchases.
The purpose of the ESPP is to encourage the purchase of Majesco common stock by our employees, to
provide employees with a personal stake in our business and to help us retain our employees by providing a
long range inducement for such employees to remain in our employ.
The ESPP provides employees with the right to purchase shares of common stock through payroll
deductions. The total number of shares available for purchase under the ESPP is 2,000,000. The ESPP Plan
became effective January 1, 2016. As of March 31, 2017, we had issued and sold 54,763 shares under the
ESPP.
Warrants
As of March 31, 2017, there were warrants to purchase 334,064 shares of common stock outstanding.
A summary of the terms of the outstanding warrants as of March 31, 2017 is as follows:
Outstanding
and Exercisable
Warrants
Exercise Price
Per Warrant
Weighted-Average
Remaining
Contractual Life
Weighted-Average
Exercise Price
Balance, April 1, 2015 . . . . . . . . . — —
Granted . . . . . . . . . . . . . . . . . . 334,064 6.84 − 7.00 1.7 6.85
Balance, March 31, 2016 . . . . . . . 334,064 $6.85
Granted . . . . . . . . . . . . . . . . . . — —
Balance, March 31, 2017 . . . . . . . 334,064 $6.85
Exercisable Warrants at March 31, 2017 were as follows:
Number of
Exercisable Warrants
Weighted-Average
Exercise Price
March 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334,064 $6.85
March 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309,064 $6.84
F - 146
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
16 EMPLOYEE STOCK OPTION PLAN continued
On September 11, 2012, Cover-All entered into a Loan and Security Agreement (“Loan Agreement”)
by and among Imperium Commercial Finance Master Fund, LP, a Delaware limited partnership
(“Imperium”), as lender, Cover-All Systems, Inc., a wholly-owned subsidiary of Cover-All (the
“Subsidiary”), as borrower, and Cover-All as guarantor. The Loan Agreement provided for a three-year
term loan to the Subsidiary of $2,000,000 and a three-year revolving credit line to the Subsidiary of up to
$250,000, evidenced by a Revolving Credit Note in favor of Imperium (together with the Term Note, the
“Imperium Notes”). Prior to the merger with Majesco, Cover-All paid in full the balance of the Imperium
Notes.
In connection with the Loan Agreement, Cover-All issued to Imperium a five-year warrant (the “Stock
Purchase Warrant”) to purchase 1,400,000 shares of Cover-All’s common stock at an exercise price of $1.48
per share. Cover-All also issued five-year warrants (the “Monarch Warrants”) to purchase 42,000 shares, in
the aggregate, of Cover-All’s common stock at an exercise price of $1.48 per share, to Monarch Capital
Group, LLC (“Monarch”), which acted as Cover-All’s financial adviser in connection with the loan
transaction, and an officer of Monarch. The Stock Purchase Warrants became exercisable on the date of
the merger of Cover-All with Majesco. These issued and outstanding warrants to purchase shares of
Cover-All common stock were not exercised or cancelled prior to the merger and were assumed by Majesco
in accordance with their terms on the same terms and conditions as were applicable to such warrants
immediately prior to the merger, with the number of shares subject to, and the exercise price applicable to,
such warrants being appropriately adjusted based on the exchange ratio of 0.21641.
On September 1, 2015, Majesco issued to Maxim Partners LLC a five year warrant to purchase 25,000
shares of common stock of Majesco at an exercise price of $7.00 per share. The warrant was issued in
connection with the engagement of the holder to perform certain advisory services to the Group. The
number of shares issuable upon exercise of the warrant may be reduced under certain circumstances of
non-performance under the services agreement. The warrant may be exercised at any time after
September 1, 2016 and will expire, if unexercised, on September 1, 2020. The warrant contains certain
anti-dilution adjustment protection in case of certain future issuances of securities, stock dividends, split
and other transactions affecting Majesco’s securities. The holder of the warrant is entitled to piggyback
registration rights in case of certain registered securities offerings by Majesco.
Total employee stock option plans expenses
The total amount of compensation expense recognized in Majesco’s Statement of Operations in respect
of employee stock option plans is as follows:
Year Ended March 31,
2017
Year Ended March 31,
2016
Year Ended March 31,
2016
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 360 $148 $ 41
Research and development expenses . . . . . . . . . . . . . . . . . . 118 83 8
Selling, general and administrative expenses . . . . . . . . . . . . . 1,100 517 199
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,578 $748 $248
F - 147
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
17 OTHER INCOME/(EXPENSES)
Other income/(expenses) consists of following:
(Loss) on derivative instruments not designated as hedges and
ineffective portion of derivative instruments designated as
Year ended March 31,
2017
Year ended March 31,
2016
Year ended
March 2015
hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $ —
Foreign exchange gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (108) 122 187
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 167 994
Other income/(expenses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (15) $289 $1,181
18 EARNINGS PER SHARE
The basic and diluted earnings/(loss) per share were as follows:
Year ended March 31,
2017
Year ended March 31,
2016
Year ended March 31,
2015
Net income/(Loss) . . . . . . . . . . . . . . . . . . . . . . . . . $(922) $ (3,562) $ (651) Basic
weighted average outstanding equity shares . . . 36,477,774 35,055,000 30,575,000
Adjustment for dilutive potential common stock
Options under Majesco 2015 Equity Plan
Dilutive weighted average outstanding equity
shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,477,774 35,055,000 30,575,000
Earnings per share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.02) $ (0.10) $ (0.02)
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.02) $ (0.10) $ (0.02)
Basic earnings per share amounts are calculated by dividing net income for the year ended March 31,
2017, 2016 and 2015 attributable to common shareholders by the weighted average number of ordinary
shares outstanding during the same periods.
Diluted earnings per share amounts are calculated by dividing the net income attributable to common
shareholders by the sum of the weighted average number of ordinary shares outstanding during the periods
plus the weighted average number of common shares that would be issued on the conversion of all the
dilutive potential common shares into common shares.
The calculation of diluted earnings per share excluded potential equity shares and options granted to
employees, as their inclusion would have been antidilutive.
F - 148
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
19 RELATED PARTIES TRANSACTIONS
Reimbursement of Expenses
The following tables summarize the liabilities to or by related parties:
Net reimbursable expenses payable to Majesco Limited or Mastek (1)
As of
March 31, 2017
As of
March 31, 2016
Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $622 $927
(1) The net reimbursable expenses payable at March 31, 2017 and March 31, 2016 include employee stock
option charges of Majesco Limited and various expenses which are recurring in nature and attributable
to shared resources with Majesco Limited or Mastek Limited that are in the process of being separated
after the Reorganization, including air travel, travel insurance, telephone costs, water charges, insurance
costs, administrative personnel costs, software and hardware costs and third party license costs, less
receivables from Majesco Limited or Mastek Limited for similar expenses.
Leases
MSSIPL entered into an operating lease for its operation facilities in Mahape, India, as lessee, with
Majesco Limited, Majesco’ s parent company, as lessor. The approximate aggregate annual rent payable to
Majesco Limited under this lease agreement is $1,253. The lease is effective June 1, 2015 and expires on
May 31, 2020.
MSSIPL also entered into a lease for facilities for its operations in Pune, India, with Mastek Ltd. as
lessor. The lease is effective June 1, 2015 and expires on May 31, 2020. MSSIPL has also entered into a
supplementary lease for its operations in Pune, India, with Mastek Ltd. as lessor. The lease is effective
April 1, 2016 and expires on May 31, 2020. The approximate aggregate annual rent payable to Mastek Ltd.
under these lease agreements is $394.
MSSIPL also entered into a lease for facilities for its operations in Ahmedabad, India, with Mastek
Ltd. as lessor. The approximate aggregate annual rent payable to Mastek Ltd. under this lease agreement is
$2. The lease was renewed in December 1, 2015 for a new term ending on October 31, 2016, and further
extended to December 31, 2016. The lease has not been renewed.
Security deposits paid to Majesco Limited by MSSIPL for use of
As of March 31,
2017
As of March 31,
2016
Mahape premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $648 $634
Security deposits paid to Mastek Ltd. by MSSIPL for use of Pune
premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $224 $163
Security deposits paid to Mastek Ltd. by MSSIPL for use of
Ahmedabad premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 1
Rental expenses paid by MSSIPL to Majesco Limited for use of premises for the years ended
March 31, 2017 and March 31, 2016 was $1,259 and $ 1,066, respectively. Rental expenses paid by MSSIPL
to Mastek Ltd. for use of premises for the years ended March 31, 2017 and March 31, 2016 was $397 and
$272, respectively.
Joint Venture Agreement
On September 24, 2015, MSSIPL and Mastek (UK) Limited, a wholly owned subsidiary of Mastek
Ltd. (“Mastek UK”), entered into a Joint Venture Agreement (the “Joint Venture Agreement”) pursuant to F - 149
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
19 RELATED PARTIES TRANSACTIONS continued
which the two companies agreed to work together to deliver services to third parties under the terms of the
Joint Venture Agreement, which services comprise the delivery of development, integration and support
services to third parties by use of Mastek Ltd.’s development, integration and support methodologies and
tools. The Joint Venture Agreement is effective September 24, 2015 and will remain in force, unless
terminated by either party upon three months’ notice in writing to the other of its intention to terminate the
Joint Venture Agreement. The consideration for each party’s performance of its obligations under the Joint
Venture Agreement is the performance of the other’s obligations under the same agreement, being services
to the other. The services comprise in the case of Mastek Ltd., Mastek Ltd.’s development, integration and
support methodologies and tools and business development services. In the case of MSSIPL, the services
comprise the provision of leading edge technical expertise and advice. The parties will also exchange
technical, business and other information.
Purchase of Singapore Subsidiary
On October 31, 2015, Majesco Sdn. Bhd., a company incorporated under the laws of Malaysia and
wholly-owned subsidiary of Majesco (“Majesco Malaysia”), entered into a Share Purchase Agreement with
Mastek Ltd. pursuant to which Majesco Malaysia purchased from Mastek Ltd. all of the issued and
outstanding shares of Mastek Asia Pacific Pte. Limited, a company incorporated under the laws of
Singapore, for a total cash purchase consideration of 381,800 Singapore Dollars (USD $276,000). The
acquisition closed on November 1, 2015. Mastek Asia Pacific Pte. Limited has since been renamed
“Majesco Asia Pacific Pte. Limited.”
Services Agreements
On December 2, 2015, Majesco UK Limited, a company registered in England and Wales wholly
owned by Majesco (“Majesco UK”), entered into a Services Agreement with Mastek UK, pursuant to
which Mastek UK provides certain corporate and operational support services to Majesco UK, including
managed office accommodation and facilities; managed office IT infrastructure and networks; and
corporate support services, insurance coverage and subscription to professional associations and
publications. The charges for these core services consist of a monthly charge of 13 UK Pounds (USD $20)
and a pass through of actual costs of providing the services. Any support services by Mastek UK staff not
included in the core services is charged on a basis to be determined separately between both parties but
before provision of such services. Either party may at any time, by notice in writing to the other party,
terminate this agreement for breach or if the other party becomes subject to insolvency issues. Either party
for any reason or no reason may also terminate this agreement by providing the other party written notice
of the termination ninety (90) days in advance. The Services Agreement contains customary
representations, warranties and indemnities of the parties. The effective date of this Services Agreement is
January 1, 2015. The expense by Majesco UK to Mastek UK under the Services Agreement for the years
ended March 31, 2017 and March 31, 2016 was $138 and $203, respectively.
On March 1, 2016, Majesco, and Digility Inc., a Delaware corporation (“Digility”) wholly-owned by
Mastek UK, entered into a Services Agreement, pursuant to which Majesco will provide certain
management and operational support services to Digility, including managed office accommodation and
facilities, managed office IT infrastructure and networks, and corporate support services. The charges for
these services consist of an initial set-up fee of $1, a monthly fee of $4 and a pass through of actual costs of
providing the services incurred in excess of the monthly fee. Either party may at any time, by notice in
writing to the other party, terminate the Services Agreement for breach or if the other party becomes
subject to insolvency issues. Either party for any reason or no reason may terminate the Services Agreement
by providing the other party written notice of the termination thirty (30) days in advance. The Services
F - 150
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
19 RELATED PARTIES TRANSACTIONS continued
Agreement contains customary representations, warranties and indemnities of the parties. The effective date
of the Services Agreement is March 1, 2016. Service charges received from Digility for the years ended
March 31, 2017 and March 31, 2016 was $45 and $0, respectively.
On August 2, 2016, Majesco Limited and MSSIPL entered into a master service agreement, effective as
of June 30, 2016 pursuant to which MSSIPL will provide software development services to Majesco
Limited. Under this agreement, MSSIPL will charge Majesco Limited cost plus a margin for the services
rendered. Software development charges charged by MSSIPL under the agreement for the years ended
March 31, 2017 and March 31, 2016 was $823 and $0, respectively.
Sublease
On March 1, 2016, Majesco and Digility entered into a Sublease Agreement (the “Sublease
Agreement”), pursuant to which Majesco sublets the premises located on the first floor of 685 Route
202/206, Bridgewater, New Jersey to Digility. Digility will pay monthly $1 for rent to Majesco during the
term of the Sublease Agreement. Digility will also reimburse Majesco for any costs charged by the landlord,
Route 206 Associates, a New Jersey partnership, for additional services requested by Digility. The term of the
Sublease Agreement commenced on March 1, 2016 and will expire on July 31, 2017, unless terminated
at an earlier date. Either party for any reason or no reason may terminate the Sublease Agreement by
providing the other party written notice of the termination thirty (30) days in advance. The Sublease
Agreement contains customary representations, warranties and indemnities of the parties. Rental charges
received from Digility for the years ended March 31, 2017 and March 31, 2016 was $14 and $1, respectively.
Guarantee
During the fiscal years ended March 31, 2017 and March 31, 2016, Majesco paid $213 and $0,
respectively, to Majesco Limited as arrangement fees and guarantee commission for the guarantee given by
Majesco Limited to HSBC and ICICI Bank for the facilities taken by Majesco and its subsidiaries.
Intellectual Property License
On August 2, 2016, Majesco Limited and MSSIPL entered into a Memorandum of Understanding
(the “MOU”) pursuant to which MSSIPL granted Majesco Limited a perpetual, royalty-free right to use
the intellectual property rights of MSSIPL in “Elixir”, including any improvements and upgrades, in
connection with Majesco Limited’s India insurance business.
20 SEGMENT INFORMATION
The Group operates in one segment as software solutions provider for the insurance industry. The
Group’s chief operating decision maker (the “CODM”) of the Group is the Chief Executive Officer. The
CODM manages the Group’s operations on a consolidated basis for purposes of allocating resources. When
evaluating the Group’s financial performance, the CODM reviews all financial information on a
consolidated basis. Majority of the Group’s principal operations and decision-making functions are located
in the United States.
F - 151
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
20 SEGMENT INFORMATION continued
The following table sets forth revenues by country based on the billing address of the customer:
Year ended March 31,
2017
Year ended March 31,
2016
Year ended March 31,
2015
USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $107,077 $ 98,209 $62,084
UK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,167 8,935 6,828
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,748 2,175 3,209
Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,625 3,672 5,347
Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 448
Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 73 0
India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,092 238 700
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 666
$121,768 $113,302 $79,282
The following table sets forth the Group’s property and equipment, net by geographic region:
As of March 31,
2017 2016
USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,812 $1,668
India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,835 1,788
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 5
Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0
$3,659 $3,462
We provide a significant volume of services to many customers. Therefore, a loss of a significant
customer could materially reduce our revenues. The Group had no customer for the fiscal year ended
March 31, 2017, one customer for the fiscal year ended March 31, 2016 and no customer for the fiscal year
ended March 31, 2015 that accounted for 10% or more of total revenue. The Group had no customer as of
March 31, 2017 and one customer as of March 31, 2016 that accounted for 10% or more of total accounts
receivables and unbilled accounts receivable. Presented in the table below is information about our major
customer:
Year ended March 31,
2017
% of
combined
Year ended March 31,
2016
% of
combined
Year ended March 31,
2015
% of
combined
Customer A
Amount revenue Amount revenue Amount revenue
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,106 7.5% $11,540 10.2% $6,884 8.7%
Accounts receivables and unbilled accounts
receivable . . . . . . . . . . . . . . . . . . . . . . . . . $ 697 3.4% $ 4,295 14.4% $ 41 0.3%
Customer B
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,511 5.3% $ 6,166 5.4% $5,903 7.4%
Accounts receivables and unbilled accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . $ 243 1.2% $ 923 3.1% $ 378 2.8%
F - 152
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
21 COMMITMENTS
Capital Commitments
The Group had outstanding contractual commitments of $358 and $842 as of March 31, 2017 and 2016, respectively for capital expenditures relating to acquisition of property, equipment and new network
infrastructure.
Operating Leases
The Group leases certain office premises under operating leases. Many of these leases include a renewal
option on a periodic basis at the Group’s option, with the renewal periods extending in the range of 2 – 5
years. Rental expense for operating leases amounted to $3,348, $2,788 and $2,379 for the fiscal years ended
March 31, 2017, 2016 and 2015, respectively. The schedule for future minimum rental payments over the
lease term in respect of operating leases is set out below.
Year ended March 31, Amount
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,991
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,003
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,087
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278
Beyond 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,769
22 ACQUISITIONS
On December 14, 2014, Majesco entered into a definitive merger agreement with Cover-All. The
merger was completed on June 26, 2015. Cover-All licenses and maintains software products for the
property/casualty insurance industry throughout the United States and Puerto Rico. Majesco merged with
Cover-All to expand its insurance business in the United States.
The following table summarizes the consideration paid in the merger of Cover-All into Majesco and
the amounts of identified assets acquired and liabilities assumed at the merger date:
Fair value of consideration transferred
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29,708
Total consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29,720
The merger of Cover-All and Majesco was a stock-for-stock merger with each share of Cover-All
common stock issued and outstanding immediately prior to the merger converted into the right to receive the
number of shares of Majesco common stock multiplied by the exchange ratio. The exchange ratio in the
merger was 0.21641. Accordingly, at the closing of the merger, Cover-All in the aggregate represented 16.5%
of the total capitalization of the combined company.
In the merger, 5,844,830 shares of Majesco common stock were issued to the shareholders of
Cover-All and 197,081 equity incentives were issued to the holders of options and restricted stock units of
Cover-All. Consequently, common stock of Majesco is increased by $12 and additional paid in capital is
increased by $29,708.
F - 153
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
22 ACQUISITIONS continued
Recognized amount of identifiable assets acquired and liabilities assumed
Amount
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,990
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,592
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 629
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
Customer contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,410
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,460
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,110
Defer tax asset on NOL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,120)
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (623)
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,515)
Capital lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (294)
Total fair value of assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,700
Fair value of consideration paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,720
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,020
The goodwill of $18,020 arising from the merger consists largely of the synergies and economies of
scale expected from combining the operations of Majesco and Cover-All. Further, though workforce has
been valued, it is not recognized separately, but subsumed in goodwill. Goodwill deductible for tax purpose
amounts to $NIL.
On October 31, 2015, Majesco Malaysia entered into a Share Purchase Agreement with Mastek Ltd.
for the purchase of the issued and authorized shares of Mastek Asia Pacific Pte. Limited, which was
renamed Majesco Asia Pacific Pte. Limited.
Recognized amount of identifiable assets acquired and liabilities assumed
Amount
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $212
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14)
Total fair value of assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
Fair value of consideration paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59
F - 154
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
22 ACQUISITIONS continued
The following table summarizes the consideration paid to Mastek Ltd. and the amounts of identified
assets acquired and liabilities assumed at the effective date:
The changes in the varying amount of goodwill are as follows:
Changes in carrying amount of the goodwill
As of
March 31, 2017
As of
March 31, 2016
Opening value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32,275 14,196
Addition of goodwill related to acquisition . . . . . . . . . . . . . . . . . . . . . . — 18,079
Changes on account of current fluctuation . . . . . . . . . . . . . . . . . . . . . . 1
Impairment of Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (60)
Closing value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32,216 32,275
Due to uncertainty in the future business of Majesco Asia Pacific Pte. Limited, which indicated the
potential impairment of goodwill, the Group decided to impair the amount of goodwill recognized earlier
in the acquisition of this entity as at March 31, 2017.
Details of identifiable intangible assets acquired are as follows:
Weighted average
amortization
period (in years)
Amount
assigned
Residual
value
Customer contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 3 $2,410 —
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . 8 4,460 —
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3,110 —
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 $9,980 —
Revenues and earnings specific to the Cover-All business for the period June 26, 2015 to June 30, 2015
were $233 and $47, respectively. Revenues and earnings specific to the Cover-All business for the period
July 1, 2015 to March 31, 2016 were $17,636 and $1,260, respectively.
Pro-Forma Financial Information (Unaudited):
The following unaudited proforma financial information is presented to illustrate the estimated effect of
the Cover-All merger and Mastek Asia Pacific Pte. Limited acquisition, the related financing of funds and
tax effects from these transactions. The unaudited proforma information for the periods set forth below gives
effect to 2015 and 2014 transactions as if they had occurred as of April 1, 2014. Majesco has a fiscal year
end of March 31st and Cover-All has a fiscal year end of December 31st. The unaudited proforma financial
information for the twelve months ended March 31, 2017 and March 31, 2016 reflects the Statement of
Operations of Majesco for the twelve months ended March 31, 2017 and March 31, 2016 and Cover-All for
the twelve months ended March 31, 2017 and March 31, 2016, respectively.
The unaudited proforma financial information is presented for illustrative purposes only, and is not
necessarily indicative of the financial condition or results of operations of future periods or the financial
condition or results of operations that actually would have been realized had the entities been combined
during the periods presented.
F - 155
Majesco
Notes to Consolidated and Combined Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
22 ACQUISITIONS continued
The following unaudited pro-forma summary presents consolidated information of Majesco as if the
business combination had occurred on April 1, 2014:
Unaudited
Pro forma
year ended March 31, 2016
Unaudited
Pro forma
year ended March 31, 2015
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,475 86,262
Earnings/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,360) (748)
There are no material nonrecurring pro forma adjustments directly attributable to the merger included
in the reported pro forma revenue and earnings. These proforma amounts have been calculated after
applying Majesco’s accounting policies and adjusting the results of Cover-All to reflect the additional
depreciation and amortization that would have been charged assuming the fair value adjustments to
property, plant and equipment and intangible assets had been applied from April 1, 2014 with consequential
tax effects.
23 NON CONTROLLING INTEREST
As of March 31, 2016, all the subsidiaries are 100% subsidiaries through direct and step down holdings
and hence non-controlling interest is Nil.
Until December 2014, the Group held a 90% equity interest in Vector Insurance Services LLC
(“Vector”). On January 21, 2015, Vector bought back 10% shares held by the minority shareholders for a
consideration of $5. Subsequent to this buy-back, Vector signed an agreement of merger with Majesco
dated February 15, 2015. The merger was effected on March 5, 2015. This merger has no impact on the
Group’s financial position or results of its operations.
24 QUARTERLY RESULTS
(Unaudited) Quarter ended
June 30, 2016 September 30, 2016 December 31, 2016 March 31, 2017
Revenue . . . . . . . . . . . . . . . . . . . . . . . . 32,554 31,046 30,012 28,156
Income/(loss) from operations . . . . . . . . . (435) 271 192 (267)
Net Income . . . . . . . . . . . . . . . . . . . . . . (550) 217 209 (798)
Net income/(loss) attributable to Owners of
the Company . . . . . . . . . . . . . . . . . . .
(550)
217
209
(798)
Basic EPS . . . . . . . . . . . . . . . . . . . . . . (0.02) 0.01 0.01 (0.02)
Diluted EPS . . . . . . . . . . . . . . . . . . . . . (0.02) 0.01 0.01 (0.02)
(Unaudited) Quarter ended
June 30, 2015 September 30, 2015 December 31, 2015 March 31, 2016
Revenue . . . . . . . . . . . . . . . . . . . . . . . . 23,163 28,208 29,625 32,306
Income from operations . . . . . . . . . . . . . 91 (1,540) (2,288) (729)
Net Income . . . . . . . . . . . . . . . . . . . . . . 82 (976) (1,130) (1,538)
Net income/(loss) attributable to Owners of
the Company . . . . . . . . . . . . . . . . . . .
82
(976)
(1,130)
(1,538)
Basic EPS . . . . . . . . . . . . . . . . . . . . . . (0.00) (0.03) (0.03) (0.04)
Diluted EPS . . . . . . . . . . . . . . . . . . . . . (0.00) (0.03) (0.03) (0.04)
F - 156
25 RECENT DEVELOPMENTS
On May 9, 2017, MSSIPL and Standard Chartered Bank entered into an Export Invoice Financing Facility,
Working Capital Overdraft Facility, Short Term Loans Facility, Bonds and Guarantees Facility and Pre Shipment
Financing Under Export Orders Facility (the “Combined Facility”) pursuant to which Standard Chartered Bank agrees
to a Combined Facility of up to INR 200,000,000 ($3,092,760 at exchange rates in effect on the date of the agreement).
The Export Invoice Financing Facility is for the financing of MSSIPL’s sale of goods, as evidenced by MSSIPL’s
invoice to the customer. Each amount drawn is required to be repaid within 90 days. The interest on this facility is
based on the marginal cost of funds based lending rate (“MCLR”) plus a margin to be agreed with Standard Chartered
Bank at the time of each drawdown. The MCLR is to be determined on
the date of each disbursement and be effective until repayment. Interest will accrue from the utilization date to
the date of repayment or payment of that utilization.
The Working Capital Overdraft Facility and the Short Term Loans Facility are for working capital purposes and
subject to sub-limits. The interest on these facilities is based on the MCLR plus a margin to
be agreed with Standard Chartered Bank at the time of each borrowing. The MCLR is to be determined on the
date of each disbursement and be effective until repayment or maturity. Interest will accrue from the draw down date
up to the repayment or maturity date.
The Bonds and Guarantees Facility is for the issuance of guarantees and subject to commissions as agreed with
Standard Chartered Bank from time to time.
The Pre Shipment Financing Under Export Orders Facility is for the purchase of raw material, processing,
packing, transportation, warehousing and other expenses and overheads incurred by MSSIPL to ready goods for sale.
The interest on this facility is based on the MCLR plus a margin to be agreed with Standard Chartered Bank at the
time of each borrowing. The MCLR is to be determined on the date of utilization and be effective until repayment.
Interest will accrue from the utilization date up to the repayment date.
The interest under the Combined Facility may be changed by Standard Chartered Bank upon the occurrence of
certain market disruption events. The Combined Facility is secured by a first pari passu security interest over the
current assets of MSSIPL.
F - 157
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MAJESCO
By: /s/ Ketan Mehta
Ketan Mehta
President and Chief Executive Off icer
Date: June 16, 2017
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by
the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Ketan Mehta
Ketan Mehta
President and Chief Executive Officer
(Principal Executive Officer)
and Director
June 16, 2017
/s/ Farid Kazani
Farid Kazani
Chief Financial Officer and Treasurer
(Principal Financial Officer)
June 16, 2017
/s/ Arun K. Maheshwari
Arun K. Maheshwari
Director June 16, 2017
/s/ Earl Gallegos
Earl Gallegos
Director June 16, 2017
/s/ Atul Kanagat
Atul Kanagat
Director June 16, 2017
/s/ Sudhakar Ram
Sudhakar Ram
Director June 16, 2017
/s/ Steven R. Isaac
Steven R. Isaac
Director June 16, 2017
/s/ Robert P. Restrepo Jr.
Robert P. Restrepo Jr.
Director June 16, 2017
/s/ Westley Thompson
Westley Thompson
Director June 16, 2017
F - 158
EXHIBIT INDEX
2.1 Agreement and Plan of Merger, dated as of December 14, 2014, by and between Majesco and
Cover-All (incorporated by reference to Exhibit 2.1 to Majesco’s Annual Report on Form 10-K
for the fiscal year ended March 31, 2015, filed with the SEC on June 19, 2015)
2.2 Amendment No. 1 to Agreement and Plan of Merger dated as of February 18, 2015, by and
among Majesco, Cover-All and RENN (incorporated by reference to Exhibit 2.2 to Annual
Report on Form 10-K for the fiscal year ended March 31, 2015, filed with the SEC on June 19,
2015)
3.1 Amended and Restated Articles of Incorporation of Majesco, dated June 22, 2015, as amended
(incorporated by reference to Exhibit 3.2 to Majesco’s Current Report on Form 8-K, filed with
the SEC on June 23, 2015)
3.2 Amended and Restated Bylaws of Majesco, dated June 22, 2015, as amended (incorporated by
reference to Exhibit 3.3 to Majesco’s Current Report on Form 8-K, filed with the SEC on
June 23, 2015)
4.1 Form of common stock certificate of Majesco (incorporated by reference to Exhibit 4.1 to
Majesco’s Registration Statement on Form S-4 (File No. 333-202180), filed with the SEC on
April 1, 2015)
10.1+ Form of Majesco Indemnification Agreement with directors and executive officers
(incorporated by reference to Exhibit 10.1 to Majesco’s Registration Statement on Form S-4
(File No. 333-202180), filed with the SEC on April 1, 2015)
10.2+ Majesco 2015 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to Majesco’s
Registration Statement on Form S-4 (File No. 333-202180), filed with the SEC on April 1,
2015)
10.3+ Form of Incentive Stock Option Award Agreement (incorporated by reference to Exhibit 10.4
to Majesco’s Registration Statement on Form S-4 (File No. 333-202180), filed with the SEC on
April 1, 2015)
10.4+ Form of Non-Qualified Stock Option Award Agreement (incorporated by reference to Exhibit
10.5 to Majesco’s Registration Statement on Form S-4 (File No. 333-202180), filed with the
SEC on April 1, 2015)
10.5+ Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.6 to
Majesco’s Registration Statement on Form S-4 (File No. 333-202180), filed with the SEC on
April 1, 2015)
10.6+ Form of Employee Stock Option Scheme of Majesco Limited — Plan I (incorporated by
reference to Exhibit 10.7 to Majesco’s Registration Statement on Form S-4 (File No.
333-202180), filed with the SEC on April 1, 2015)
10.7+ Form of Option Award Letter (incorporated by reference to Exhibit 10.8 to Majesco’s
Registration Statement on Form S-4 (File No. 333-202180), filed with the SEC on April 1,
2015)
10.8+ Form of Majesco Performance Bonus Plan (incorporated by reference to Exhibit 10.9 to
Majesco’s Registration Statement on Form S-4 (File No. 333-202180), filed with the SEC on
April 1, 2015)
10.9+ Form of Majesco Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.10
to Majesco’s Registration Statement on Form S-4 (File No. 333-202180), filed with the SEC on
April 1, 2015)
10.10+ Employment Letter Agreement between Majesco and Ketan Mehta, dated as of September 4,
2013 (incorporated by reference to Exhibit 10.11 to Majesco’s Registration Statement on Form
S-4 (File No. 333-202180), filed with the SEC on April 1, 2015)
10.11+ Employment Letter Agreement between Majesco and William Freitag, dated as of January 1,
2015 (incorporated by reference to Exhibit 10.12 to Majesco’s Registration Statement on Form
S-4 (File No. 333-202180), filed with the SEC on April 1, 2015)
F - 159
10.12+ Employment Letter Agreement between Majesco and Edward Ossie, dated December 1, 2014
(incorporated by reference to Exhibit 10.13 to Majesco’s Registration Statement on Form S-4
(File No. 333-202180), filed with the SEC on April 1, 2015)
10.13+ Employment Letter Agreement between Majesco and Prateek Kumar, dated as of April 11,
2003 (incorporated by reference to Exhibit 10.14 to Majesco’s Registration Statement on Form
S-4 (File No. 333-202180), filed with the SEC on April 1, 2015)
10.14+ Employment Letter Agreement between Majesco and Chad Hersh, dated as of November 14,
2014 (incorporated by reference to Exhibit 10.15 to Majesco’s Registration Statement on Form
S-4 (File No. 333-202180), filed with the SEC on April 1, 2015)
10.15+ Employment Letter Agreement between Majesco and Lori Stanley, dated as of June 29,
2011(incorporated by reference to Exhibit 10.16 to Majesco’s Registration Statement on Form
S-4 (File No. 333-202180), filed with the SEC on April 1, 2015)
10.16 Credit Facility Agreement between ICICI Bank Limited (“ICICI”), New York Branch and
Majesco, dated as of March 25, 2011 (incorporated by reference to Exhibit 10.19 to Majesco’s
Registration Statement on Form S-4 (File No. 333-202180), filed with the SEC on April 1,
2015)
10.17 Revolving Credit Note in Favor of ICICI dated as of March 25, 2011 (incorporated by
reference to Exhibit 10.20 to Majesco’s Registration Statement on Form S-4 (File No.
333-202180), filed with the SEC on April 1, 2015)
10.18 Security Agreement between ICICI and Majesco, dated as of March 25, 2011 (incorporated by
reference to Exhibit 10.21 to Majesco’s Registration Statement on Form S-4 (File No.
333-202180), filed with the SEC on April 1, 2015)
10.19 Guaranty Agreement between ICICI and Mastek Limited, dated as of June 10, 2012
(incorporated by reference to Exhibit 10.22 to Majesco’s Registration Statement on Form S-4
(File No. 333-202180), filed with the SEC on April 1, 2015)
10.20 Subordination Agreement between ICICI and Majesco, dated as of March 25, 2011
(incorporated by reference to Exhibit 10.23 to Majesco’s Registration Statement on Form S-4
(File No. 333-202180), filed with the SEC on April 1, 2015)
10.21 Asset Purchase and Sale Agreement by and among Majesco, Agile Technologies, LLC and
solely with respect to Sections 7.8 and 9, William K. Freitag, John M. Johansen and Robert
Buhrle, dated December 12, 2014 (incorporated by reference to Exhibit 10.27 to Majesco’s
Registration Statement on Form S-4 (File No. 333-202180), filed with the SEC on April 1,
2015)(2)
10.22 Amendment No. 1 to Amendment Asset Purchase and Sale Agreement, dated as of January 1,
2015, by and among Majesco, Agile Technologies, LLC, William K. Freitag, John M. Johansen
and Robert Buhrle (incorporated by reference to Exhibit 10.28 to Majesco’s Registration
Statement on Form S-4 (File No. 333-202180), filed with the SEC on April 1, 2015)
10.23 Share Purchase Agreement, dated September 15, 2014, between Mastek Limited and
MajescoMastek, for shares of MajescoMastek Canada Limited (incorporated by reference to
Exhibit 10.29 to Majesco’s Registration Statement on Form S-4 (File No. 333-202180), filed
with the SEC on April 1, 2015)
10.24 Business Transfer Agreement, dated January 29, 2015, between Mastek (UK) Limited and
Majesco UK Limited (incorporated by reference to Exhibit 10.30 to Majesco’s Registration
Statement on Form S-4 (File No. 333-202180), filed with the SEC on April 1, 2015)
10.25 Share Purchase Agreement, dated September 18, 2014, between Mastek Limited and
MajescoMastek, for shares of Mastek MSC Sdn Bhd. (incorporated by reference to Exhibit
10.31 to Majesco’s Registration Statement on Form S-4 (File No. 333-202180), filed with the
SEC on April 1, 2015)
F - 160
10.26 Scheme of Arrangement among Mastek Limited, Minefields Computers Limited, Majesco
Software and Solutions India Private Limited and their respective shareholders and creditors
(incorporated by reference to Exhibit 10.32 to Majesco’s Registration Statement on Form S-4
(File No. 333-202180), filed with the SEC on April 1, 2015)(2)
10.27+ Form of Non-Qualified Stock Option Award Agreement for the United Kingdom
(incorporated by reference to Exhibit 10.32 to Majesco’s Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 2015, filed with the SEC on August 10, 2015)
10.28 Pre Shipment in Foreign Currency Credit Facility Agreement between Majesco Software and
Solutions India Private Limited and Yes Bank Limited, dated June 30, 2015. (incorporated by
reference to Exhibit 10.33 to Majesco’s Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2015, filed with the SEC on August 10, 2015)
10.29 Joint Venture Agreement dated September 24, 2015, between Mastek (UK) Limited and
Majesco Software and Solutions India Private Limited (incorporated by reference to Exhibit
10.34 to Majesco’s Current Report on Form 8-K, filed with the SEC on September 28, 2015)
10.30 Share Purchase Agreement dated October 31, 2015, between Mastek Limited and Majesco
SDN BHD (incorporated by reference to Exhibit 10.35 to Majesco’s Current Report on Form
8-K, filed with the SEC on November 3, 2015)
10.31 Services Agreement dated December 2, 2015, between Mastek (UK) Limited and Majesco UK
Limited (incorporated by reference to Exhibit 10.36 to Majesco’s Current Report on Form
8-K, filed with the SEC on December 3, 2015)
10.32 Credit Arrangement Letter dated July 27, 2015, between Majesco Software and Solutions
India Private Limited and ICICI Bank Limited (incorporated by reference to Exhibit 10.37 to
Majesco’s Current Report on Form 8-K, filed with the SEC on November 19, 2015)
10.33 Facility Letter dated August 28, 2015, between Majesco Software and Solutions India Private
Limited and Standard Chartered Bank (incorporated by reference to Exhibit 10.38 to
Majesco’s Current Report on Form 8-K, filed with the SEC on November 19, 2015)
10.34 Stock Purchase Warrant, dated June 26, 2015, issued to Michaelson Capital Special Finance
Fund, LP (incorporated by reference to Exhibit 10.1 to Majesco’s Current Report on Form
8-K, filed with the SEC on June 30, 2015)
10.35 Extension Letter of the Credit Facility Agreement between ICICI Bank Limited and Majesco,
dated as of November 20, 2015 (incorporated by reference to Exhibit 10.40 to Majesco’s
Current Report on Form 8-K, filed with the SEC on November 24, 2015)
10.36 Extension of the Guaranty Agreement between ICICI Bank Limited and Mastek Limited,
dated as of November 24, 2015 (incorporated by reference to Exhibit 10.41 to Majesco’s
Current Report on Form 8-K, filed with the SEC on November 24, 2015)
10.37 Second Amendment to Asset Purchase and Sale Agreement, dated as of January 26, 2016
amending the Asset Purchase and Sale Agreement by and among Agile Technologies, LLC, a
New Jersey limited liability company, the members of the Seller and Majesco, dated
December 12, 2014, and as amended on January 1, 2015 (incorporated by reference to Exhibit
10.42 to Majesco’s Quarterly Report on Form 10-Q for the quarterly period ended
December 31, 2015, filed with the SEC on January 29, 2016)(4)
10.38 First Amendment dated January 26, 2016 to the Employment Letter Agreement between
Majesco and William Freitag, dated as of January 1, 2015 (incorporated by reference to
Exhibit 10.43 to Majesco’s Quarterly Report on Form 10-Q for the quarterly period ended
December 31, 2015, filed with the SEC on January 29, 2016)
10.39 Stock Purchase Warrant, dated June 26, 2015, issued to Monarch Capital Group, LLC
(incorporated by reference to Exhibit 10.2 to Majesco’s Current Report on Form 8-K, filed
with the SEC on June 30, 2015)
10.40 Stock Purchase Warrant, dated June 26, 2015, issued to Robert Nathan (incorporated by
reference to Exhibit 10.3 to Majesco’s Current Report on Form 8-K, filed with the SEC on
June 30, 2015)
F - 161
10.41 Stock Purchase Warrant, dated September 1, 2015, issued to Maxim Partners LLC
(incorporated by reference to Exhibit 10.1 to Majesco’s Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 2015, filed with the SEC on November 3, 2015)
10.42 Extension Letter of the Credit Facility Agreement between ICICI Bank Limited and Majesco,
dated as of February 11, 2016 (incorporated by reference to Exhibit 10.1 to Majesco’s Current
Report on Form 8-K, filed with the SEC on February 16, 2016)
10.43 Services Agreement, dated March 1, 2016, by and between Majesco and Digility Inc.
(incorporated by reference to Exhibit 10.1 to Majesco’s Current Report on Form 8-K, filed
with the SEC on March 2, 2016)
10.44 Sublease Agreement, dated March 1, 2016, by and between Majesco and Digility Inc.
(incorporated by reference to Exhibit 10.2 to Majesco’s Current Report on Form 8-K, filed
with the SEC on March 2, 2016)
10.45 Loan Agreement, dated March 23, 2016, by and between Majesco and HSBC Bank USA,
National Association (incorporated by reference to Exhibit 10.1 to Majesco’s Current Report
on Form 8-K, filed with the SEC on March 28, 2016)
10.46 Promissory Note in favor of HSBC Bank USA, National Association, dated March 23, 2016
(incorporated by reference to Exhibit 10.2 to Majesco’s Current Report on Form 8-K, filed
with the SEC on March 28, 2016)
10.47 Credit Arrangement letter dated as of May 20, 2016 between Majesco and ICICI Bank
Limited, New York Branch (incorporated by reference to Exhibit 10.50 to Annual Report on
Form 10-K for the fiscal year ended March 31, 2016, filed with the SEC on May 23, 2016)
10.48 Extension Letter of the Credit Facility Agreement between ICICI Bank Limited and Majesco,
dated as of June 2, 2016 (incorporated by reference to Exhibit 10.1 to Majesco’s Current
Report on Form 8-K, filed with the SEC on June 27, 2016)
10.49 Supplemental Deed to the Deed of Corporate Guarantee between ICICI Bank Limited and
Mastek Limited, dated as of June 27, 2016 (incorporated by reference to Exhibit 10.2 to
Majesco’s Current Report on Form 8-K, filed with the SEC on June 27, 2016)
10.50 Amended and Restated Revolving Credit Note between ICICI Bank Limited and Majesco,
dated as of June 2, 2016 (incorporated by reference to Exhibit 10.3 to Majesco’s Current
Report on Form 8-K, filed with the SEC on June 27, 2016)
10.51 Master Services Agreement, dated August 2, 2016, between Majesco Limited and Majesco
Software and Solutions India Private Limited (incorporated by reference to Exhibit 10.1 to
Majesco’s Current Report on Form 8-K, filed with the SEC on August 5, 2016)
10.52 Memorandum of Understanding, dated August 2, 2016, between Majesco Limited and
Majesco Software and Solutions India Private Limited (incorporated by reference to Exhibit
10.1 to Majesco’s Current Report on Form 8-K, filed with the SEC on August 5, 2016)
10.53 Addendum to Facility Letter between Yes Bank and Majesco Software and Solutions India
Private Limited, dated as of September 27, 2016 (incorporated by reference to Exhibit 10.1 to
Majesco’s Current Report on Form 8-K, filed with the SEC on October 3, 2016)
10.54 Receivable Purchase Agreement, dated January 13, 2017, by and between Majesco and HSBC
Bank USA, National Association (incorporated by reference to Exhibit 10.1 to Majesco’s
Current Report on Form 8-K, filed with the SEC on January 19, 2017)
21 Subsidiaries of Majesco(1)
23.1 Consent of MSPC Certified Public Accountants and Advisors, P.C.(1)
31.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(1)
31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(1)
F - 162
32.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act
and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002(3)
32.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act
and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002(3)
101.1 The following materials from Majesco’s Annual Report on Form 10-K for the fiscal year ended
March 31, 2017 formatted in extensible Business Reporting Language (XBRL):
(i) Consolidated and Combined Balance Sheets as of March 31, 2017 and March 31, 2016;
(ii) Consolidated and Combined Statements of Operations for the fiscal years ended March 31,
2017, March 31, 2016 and March 31, 2015; (iii) Consolidated and Combined Statements of
Comprehensive Income for the fiscal years ended March 31, 2017, March 31, 2016 and
March 31, 2015; (iv) Consolidated and Combined Statements of Changes in Stockholders’
Equity for the fiscal year ended March 31, 2017, March 31, 2016 and March 31, 2015;
(v) Consolidated and Combined Statements of Cash Flows for the fiscal years ended
March 31, 2017, March 31, 2016 and March 31, 2015; and (vi) Notes to Consolidated and
Combined Financial Statements
+ Denotes a management contract or compensatory plan.
(1) Filed herewith.
(2) Schedules or similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K.
Majesco agrees to furnish supplementally a copy of any such omitted schedules or attachments to the
SEC upon request; provide, however, that Majesco may request confidential treatment pursuant to
Rule 24b-2 under the Exchange Act for any schedule or attachment so furnished.
(3) Furnished herewith.
(4) Confidential treatment has been requested to a portion of this exhibit, and such confidential portion
has been deleted and filed separately with the SEC pursuant to Rule 24b-2 of the Securities Exchange
Act of 1934.
F - 163
Exhibit 21
List of Subsidiaries of Majesco
Name State/Country of Organization or Incorporation
Cover-All Systems, Inc. Delaware
Majesco Canada Ltd. Canada
Majesco Sdn. Bhd. Malaysia
Majesco Asia Pacific Pte. Ltd. Singapore
Majesco Software and Solutions Inc. New Jersey
Majesco Software and Solutions India Private
Limited
Majesco (Thailand) Co., Ltd.
Majesco UK Limited
India
Thailand
United Kingdom
F - 164
MAJESCO
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEAR ENDED MARCH 31, 2016
F - 165
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Majesco
We have audited the accompanying consolidated and combined balance sheets of Majesco (“the Company”) (a
combination of subsidiaries and insurance related operations of Mastek Ltd.) as of March 31, 2016 and 2015, and
the related consolidated and combined statements of operations, comprehensive income, changes in stockholders’
equity, and cash flows for the fiscal years ended March 31, 2016, 2015 and 2014. These consolidated and
combined financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these consolidated and combined financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the consolidated and combined financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our
audits included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated and
combined financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated and combined financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated and combined financial statements referred to above present fairly, in all material
respects, the financial position of Majesco as of March 31, 2016 and 2015, and the results of their operations and
their cash flows for the fiscal years ended March 31, 2016, 2015 and 2014, in conformity with U.S. generally
accepted accounting principles.
As discussed in Note 2, the accompanying combined financial statements for fiscal 2015 and 2014 have been
derived from the consolidated financial statements and accounting records of Mastek Ltd. and include allocations
of certain costs from Mastek Ltd. As a result, these allocations may not be reflective of the actual costs that would
have been incurred had Majesco operated as a separate entity apart from Mastek Ltd.
/s/ MSPC
Certified Public Accountants and Advisors,
A Professional Corporation
Cranford, New Jersey
May 23, 2016
F - 166
Majesco
Consolidated and Combined Balance Sheets
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
March 31,
2016 2015
ASSETS CURRENT ASSETS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,520 $ 6,262
Short term investments
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 634 270
Restricted cash
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257 305
Accounts receivables, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,503 7,758
Unbilled accounts receivable
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,379 5,615
Deferred income tax assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,847 2,168
Prepaid expenses and other current assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,195 2,911
Total current assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,335 25,289
Property and equipment, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,462 1,173
Intangible assets, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,483 3,434
Deferred income tax assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,586 2,182
Other assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480 271
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,275 14,196
Total Assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 94,621 $ 46,545
LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital lease obligation .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 159 $ 17
Loan from Bank
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,951 1,470
Accounts payable
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,659 442
Accrued expenses and other liabilities Related Parties
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3,520
Others
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,701 8,739
Deferred revenue
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,200 4,826
Total current liabilities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,670 19,014
Capital lease obligation, net of current portion
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 31
Term loan – bank
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,800 3,000
F - 167
Others
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,474 3,944
Total Liabilities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 49,064 $ 25,989
Commitments and contingencies
STOCKHOLDERS’ EQUITY Preferred stock, par value $0.002 per share – 50,000,000 shares authorized as of March 31, 2016,
and NIL shares authorized as of March 31, 2015; NIL shares issued and outstanding as of
March 31, 2016 and March 31, 2015
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ —
Common stock, par value $0.002 per share – 450,000,000 shares authorized as of March 31,
2016 and 300,000,000 shares authorized as of March 31, 2015; 36,451,357 shares issued and
outstanding as of March 31, 2016 and 30,575,000 shares issued and outstanding as of March 31,
2015(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 61
Additional paid-in capital(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,505 39,049
Accumulated deficit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,36
0 )
(20,79
8 )
Accumulated other comprehensive income
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339 2,244
Total stockholders’ equity
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,557 20,556
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 94,621 $ 46,545
(1) The common stock shares and additional paid in capital for all periods presented reflect the one-for-six
reverse stock split which took effect on June 26, 2015.
See accompanying notes to the Consolidated and Combined Financial Statements.
F - 168
Majesco
Consolidated and Combined Statements of Operations
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
Year ended
March 31,
2016
Year ended
March 31,
2015
Year ended
March 31,
2014
Revenue
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 113,302 $ 79,282 $ 82,837
Cost of revenue
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,832 48,776 45,748
Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,470 $ 30,506 $ 37,089
Operating expenses Research and development expenses
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,267 $ 10,344 $ 10,102
Selling, general and administrative expenses
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,204 21,000 22,746
Restructuring costs
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465 1,120 —
Total operating expenses
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,936 $ 32,464 $ 32,848
(Loss)/Income from operations
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (4,466 ) $ (1,958 ) $ 4,241
Interest income
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 185 89
Interest expense
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (596 ) (200 ) (63 )
Other income (expenses), net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289 1,181 546
(Loss)/Income before provision for income taxes
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (4,749 ) $ (792 ) $ 4,813
(Benefit)/Provision for income taxes
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,187 ) (141 ) 1,893
Net (Loss)/Income
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,562 ) $ (651 ) $ 2,920
Less: Net income/(loss) attributable to Non-controlling interests
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 15 $ 16
Owners of the Company
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,562 ) (666 ) 2,904
$ (3,562 ) $ (651 ) 2,920
Earnings (Loss) per share: Basic
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.10 ) $ (0.02 ) $ 0.10
Diluted
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.10 ) (0.02 ) 0.10
Weighted average number of common shares outstanding(1) Basic and diluted
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,055,000
30,575,00
0
30,575,00
0
(1) The common stock shares for all periods presented reflect the one-for-six reverse stock split which took
effect on June 26, 2015.
F - 169
See accompanying notes to the Consolidated and Combined Financial Statements.
F - 170
Majesco
Consolidated and Combined Statements of Comprehensive Income
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
Year ended
March 31,
2016
Year ended
March 31,
2015
Year ended
March 31,
2014
Net (Loss)/Income
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,562 ) $ (651 ) $ 2,920
Other comprehensive income (loss), net of tax: Foreign currency translation adjustments
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,662 ) (325 ) (14 )
Unrealized (loss)/gains on cash flow hedges
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (243 ) 60 877
Other comprehensive income
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,905 ) $ (265 ) $ 863
Comprehensive (Loss)/Income
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (5,467 ) $ (916 ) $ 3,783
Less: Comprehensive income attributable to the non-controlling
interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ — $ 15 $ 16
Comprehensive (Loss)/Income attributable to Owners of the
Company
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (5,467 ) $ (931 ) $ 3,767
See accompanying notes to the Consolidated and Combined Financial Statements.
F - 171
Majesco
Consolidated and Combined Statements of Changes in Stockholders’ Equity
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
Common Stock
Additional
paid-in Accumulated
Accumulated
other
comprehensiv
e
Non-
controllin
g
Total
Stockholders
’
Shares Amount capital deficit income interests equity
Balance as of April 1, 2013
. . . . . . . . . . . . . . . . . . . . . 183,450,000 $ 367 $
38,09
1 $ (23,72
7 ) $ 1,646 $ 57 $ 16,43
4 Reverse Stock Split(1)
. . . . . . . . . . . . . . . . . . .
(152,875,00
0 ) (30
6 ) 306 — — — — Stock based compensation
. . . . . . . . . . . . . . . . . . . — — 321 — — — 321
Net income
. . . . . . . . . . . . . . . . . . . — — — 2,904 — 16 2,920
Foreign currency translation
adjustments
. . . . . . . . . . . . . . . . . . .
— — — — (14 ) — (14 ) Unrealized gains on cash flow
hedges
. . . . . . . . . . . . . . . . . . .
— — — — 877 — 877 Balance as of March 31, 2014
. . . . . . . . . . . . . . . . . . . . . 30,575,000 $ 61 $
38,71
8 $ (20,82
3 ) $ 2,509 $ 73 $ 20,53
8 Stock based compensation
. . . . . . . . . . . . . . . . . . . — — 248 — — — 248
Net income
. . . . . . . . . . . . . . . . . . . — — — (666 ) — 15 (651 )
Reorganization
. . . . . . . . . . . . . . . . . . . — — — 691 — — 691
Foreign currency translation
adjustments
. . . . . . . . . . . . . . . . . . .
— — — — (325 ) — (325) Unrealized gains on cash flow
hedges
. . . . . . . . . . . . . . . . . . .
— — — — 60 — 60 Non-controlling interest bought
back
. . . . . . . . . . . . . . . . . . .
— — 83 — — (88 ) (5 ) Balance as of March 31, 2015
. . . . . . . . . . . . . . . . . . . . . 30,575,000 $ 61 $
39,04
9 $ (20,79
8 ) $ 2,244 — $ 20,55
6 Stock based compensation
. . . . . . . . . . . . . . . . . . . — — 748 — — — 748
Cover-All Merger
. . . . . . . . . . . . . . . . . . . 5,876,357 $ 12 $
29,70
8 — — — $ 29,72
0 Net income
. . . . . . . . . . . . . . . . . . . — — — (3,562 ) — — (3,562 )
Foreign currency translation
adjustments
. . . . . . . . . . . . . . . . . . .
— — — — (1,66
2 ) — (1,662 ) Unrealized gains on cash flow
hedges
. . . . . . . . . . . . . . . . . . .
— — — (243 ) — (243 ) Balance as of March 31, 2016
. . . . . . . . . . . . . . . . . . . . . 36,451,357 $ 73 $
69,50
5 $ (24,36
0 ) $ 339 $
— $ 45,55
7
F - 172
(1) The common stock shares and additional paid in capital for all periods presented reflect the one-for-six
reverse stock split which took effect on June 26, 2015.
See accompanying notes to the Consolidated and Combined Financial Statements.
F - 173
Majesco
Consolidated and Combined Statements of Cash Flows
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
Year ended
March 31,
2016
Year ended
March 31,
2015
Year ended
March 31,
2014
Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,562 )
$ (651 )
$ 2,920
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,843
2,425
2,522
Share based payment expenses
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 748
248
321
Provision/(Recovery) for doubtful receivables
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (149 )
340
(9 )
Deferred tax (benefit)/expense
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,227 )
(877 )
748
Accounts receivables
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,135 )
2,173
2,026
Unbilled accounts receivable
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,615 )
2,402
(785 )
Prepaid expenses and other current assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,355 )
(72 )
851
Accounts payable
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,097
(53 )
(82 )
Accrued expenses and other liabilities – Others
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,215
(2,019 )
(3,212 )
Deferred revenue
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,859
(1,439 )
(793 )
Other Liabilities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (470 )
1,211
(1,423 )
Net cash generated (used in) from operating activities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (5,751 )
$ 3,688
$ 3,084
Cash flows from investing activities: Purchase of Property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,875 )
$ (775 )
$ (1,007 )
Purchase of Intangible assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (268 )
(744 )
(847 )
Sale of Tangible Assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Acquisition of Agile Technologies, LLC assets, net of $158 cash
acquired
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
(2,842 )
Consideration paid on acquisition of Majesco Singapore
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (276 )
(Purchase) of investments
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (364 )
2,755
(2,869 )
Payment to related party
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
(5,907 )
Payment to Majesco as reorganization consideration
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,520 )
—
(Increase)/decrease in restricted cash
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(3 )
(208 )
Net cash used in investing activities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (7,195 )
$ (7,516 )
$ (4,931 )
F - 174
Cash flows from financing activities: Payment of Capital lease obligation
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (62 )
$ (29 )
$ (22 )
Receipt of Term loan
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,340
3,000
Repayment of Loan
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34,060 )
—
Payment for buy back of Non-controlling Interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
(5 )
Net cash provided by (used in) financing activities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,218
$ 2,966
$ (22 )
Effect of foreign exchange rate changes on cash and cash
equivalents
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (217 )
108
(432 )
Net (Decrease)/Increase in cash and cash equivalents
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,945 )
$ (754 )
$ (2,301 )
Cash and cash equivalents, beginning of the period
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,262
7,016
9,317
Add: Cash acquired on business combination
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,203
—
—
Cash and cash equivalents at end of the period
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,520
$ 6,262
$ 7,016
Supplementary disclosure of non-cash items Cash paid for interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 510
$ 200
$ 64
Cash paid for income taxes (net of refunds received)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,257
1,278
2,238
Supplementary disclosure of non-cash items Non-cash items – Assets acquired under Capital leases
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40
$ 12
$ 11
See accompanying notes to the Consolidated and Combined Financial Statements.
F - 175
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
1 DESCRIPTION OF BUSINESS
Majesco is a global provider of core insurance software, consulting and services for business transformation for the
insurance industry. We offer core software solutions for property and casualty (“P&C”) and life and annuity
(“L&A”) and Pensions Group Employee Benefits providers, allowing them to manage policy administration,
claims management and billing functions. In addition, we offer a variety of other technology-based solutions that
enable organizations to automate business processes and comply with policies and regulations across their
organizations. Our solutions enable customers to respond to evolving market needs and regulatory changes, while
improving the efficiency of their core operations, thereby increasing revenues and reducing costs.
Majesco’s customers are insurers, managing general agents and other risk providers from the P&C, L&A and
group insurance segments worldwide. Majesco delivers proven software solutions, consulting and services in the
core insurance areas such as policy, billing, claims, distribution management, business intelligence/analytics,
digital, application management, cloud and more.
Majesco was previously 100% owned (directly or indirectly) by Mastek Ltd. (“Mastek Ltd.”), a publicly traded
limited company domiciled in India whose equity shares are listed on the Bombay Stock Exchange and the
National Stock Exchange (India). Mastek Ltd. underwent a demerger through a scheme of arrangement under
India’s Companies Act, 1956 pursuant to which its insurance related business was separated from Mastek Ltd.’s
non-insurance related business and the insurance related operations of Mastek Ltd. that were not directly owned by
Majesco were contributed to Majesco (the “Reorganization”). The Reorganization was completed on June 1, 2015.
Majesco, along with its subsidiaries, operates in the United States, Canada, the United Kingdom, Malaysia,
Singapore, New Zealand, Thailand and India (hereinafter referred to as the “Group”).
Merger with Cover-All Technologies Inc.
On June 26, 2015, Cover-All Technologies Inc. (“Cover-All”), an insurance software company listed on NYSE
MKT, merged into Majesco in a 100% stock-for-stock merger, with Majesco surviving the merger.
In connection with the merger, Majesco’s common stock was listed on the NYSE MKT and began trading on the
NYSE MKT on June 29, 2015. Pursuant to the merger, Cover-All’s stockholders and holders of its options and
restricted stock units received equity or equity interests in Majesco representing approximately 16.5% of the total
capitalization of the combined company in the merger.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation
The financial statements presented herein represent (i) periods prior to March 31, 2015 when Majesco was a
wholly owned subsidiary of Mastek Ltd. (referred to as “Combined Financial Statements”) and (ii) the period as of
and subsequent to March 31, 2015 when Majesco became a separate publicly-traded company (referred to as
“Consolidated Financial Statements”).
The combined financial statements for fiscal 2015 and fiscal 2014 have been prepared on a ‘carve-out’ basis
(assuming the Reorganization had been effected as of July 1, 2012) and are derived from the historical consolidated
financial statements and accounting records of Mastek. All material inter-company balances and transactions have
been eliminated on combination. The combined financial statements reflect the Group’s financial position, results
of operations and cash flows in conformity with accounting principles generally accepted in the United States
(“GAAP”). The combined Balance Sheet, combined Statement of Operations and combined Statement of cash
flows of the Group may not be indicative of the Group had it been a separate operation during the periods
presented, nor are the results stated herein indicative of what the Group’s financial position, results of operations
and cash flows may be in the future.
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Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
These combined financial statements include assets and liabilities that are specifically identifiable or have been
allocated to the Group. Costs directly related to the Group have been included in the accompanying financial
statements. The Group historically received service and support functions from Mastek Ltd. The costs associated
with these support functions have been allocated relative to Mastek Ltd. in its entirety, which is considered to be
the most meaningful under the circumstances. The costs were allocated to the Group using various allocation
inputs, such as head count, services rendered, and assets assigned to the Group. These allocated costs are primarily
related to corporate administrative expenses, employee related costs, including gratuity and other benefits, and
corporate and shared employees. These allocated costs only apply to the combined financial statements for the
periods ended March 31, 2015 and prior.
The Group considers the expense allocation methodology and results to be reasonable for all periods presented.
These allocations may not be indicative of the actual expenses the Group may have incurred as a separate
independent public company during the periods presented nor are these costs indicative of what the Group will
incur in the future.
Mastek Ltd. maintained benefit and stock-based compensation programs at the parent company level. After the
demerger of Mastek Ltd., which became effective with effect from June 1, 2015, the Group employees who
participated in those programs were allotted options of Majesco’s parent company, Majesco Limited, in the same
proportion in addition to the existing options of Mastek Ltd. which these employees already had. The consolidated
Balance Sheets do not include any outstanding equity related to the stock-based compensation programs of Mastek
Ltd. but include outstanding equity related to the stock-based compensation programs of Majesco Limited.
The Group’s acquisition costs for the insurance related businesses of Mastek Ltd. under the Reorganization has
been reflected under ‘Accrued expenses and other liabilities — Related Parties’ and ‘Other liabilities — Related
Parties’ in the consolidated Balance Sheet as of March 31, 2015. Such costs were paid on July 1, 2015.
b. Use of estimates
The preparation of the consolidated and combined financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and contingent liabilities as of the date of the financial statements, and the reported
amount of revenues and expenses during the reported period.
Significant estimates used in preparing these consolidated and combined financial statements include revenue
recognition based on the percentage of completion method of accounting for fixed bid contracts applied to the
expected contract cost to be incurred to complete various engagements, allowances for doubtful debts, provisions
for losses on uncompleted contracts, valuation allowances for deferred taxes, identification and measurement of
unrecognized tax benefit, provision for uncertain tax positions, future obligations under employee benefit plans,
expected future cash flows used to evaluate the recoverability of long-lived assets, estimated fair values of long-
lived assets used to record impairment charges related to intangible assets and goodwill, allocation of purchase
price in business combinations, useful lives and residual value of property and equipment and intangible assets,
valuation of derivative financial instruments, goodwill, contingent liabilities and assumptions used in valuing
stock-based compensation expense.
Although the Group regularly assesses these estimates, actual results could differ materially from these estimates.
Changes in estimates are recorded in the period in which they become known. The Group bases its estimates on
historical experience and various other assumptions that it believes to be reasonable under the existing
circumstances. Actual results may differ from management’s estimates if these results differ
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Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
from historical experience or other assumptions do not turn out to be substantially accurate, even if such
assumptions were reasonable when made.
c. Foreign Currency Translation
The functional currency of Majesco is the US dollar. However, Indian Rupee, Great Britain Pounds, US Dollars,
Malaysian Ringgit, Thai Baht, Canadian dollar, Singapore dollar and New Zealand dollar are the functional
currencies for the Group entities located in India, the UK, the US, Malaysia, Thailand, Canada, Singapore and New
Zealand, respectively.
Adjustments resulting from the translation of functional currency financial statements to reporting currency are
accumulated and reported as a part of Accumulated other comprehensive income, a separate component of
Stockholders’ equity.
Transactions in foreign currency are recorded at the exchange rate prevailing on the date of the transaction.
Monetary assets and liabilities denominated in foreign currency are expressed in functional currency at the
exchange rates in effect at the balance sheet date. Non-Monetary assets and liabilities denominated in foreign
currency are expressed in functional currency at the historical exchange rates. Gains/(losses) resulting from foreign
currency transactions amounting to $122, $187, $257 for the years ended March 31, 2016, March 31, 2015 and
March 31, 2014 are included in the Combined Statement of Operations under the “Other income (expenses), net”
caption.
d. Cash and cash equivalents, investments and restricted cash
Cash and cash equivalents are comprised of cash and highly liquid investments with an original maturity of three
months or less. Cash equivalents are stated at amortized cost, which approximates their fair value due to the short
maturity of the investments.
The Group’s short-term investment portfolio is comprised primarily of time deposits. Time deposits with banks are
valued at amortized cost, which approximates their fair value.
Interest income is recognized over time on a proportionate basis.
Cash and claims to cash that are restricted as to withdrawal or use in the ordinary course of business are disclosed
separately as restricted cash, unless they are to be utilized for other than current operations in which case they will
be separately classified as noncurrent assets.
e. Property and equipment
Property and equipment are stated at actual cost less accumulated depreciation. Depreciation is computed using the
straight-line method over the estimated useful lives. The cost and the accumulated depreciation for premises and
equipment sold, retired or otherwise disposed of are removed from the stated values and the resulting gains and
losses are included in the combined Statement of Operations. Maintenance and repairs are charged to combined
Statement of Operations when incurred. Advance paid towards acquisition of long-lived assets and cost of assets
not put to use before the balance sheet date are disclosed under the caption “capital work in progress”.
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Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
The estimated useful lives of assets are as follows:
Leasehold Improvements 5 years or over the primary period of lease whichever is less Computers 2 years Plant and Equipment 2 – 5 years Furniture and Fixtures 5 years Vehicles 5 years Office Equipment 2 – 5 years
f. Goodwill and other intangible assets
Goodwill represents the cost of the acquired businesses in excess of the estimated fair value of assets acquired,
identifiable intangible assets and liabilities assumed. Goodwill is not amortized but is tested for impairment at the
reporting unit level at least annually or as circumstances warrant. If impairment is indicated and the carrying value
of the goodwill of a reporting unit exceeds the implied fair value of that goodwill, then goodwill is written-down.
There are no indefinite-lived intangible assets.
Intangible assets other than goodwill are amortized over their estimated useful lives on a straight line basis. The
estimated useful life of an identifiable intangible asset is based on a number of factors, including the effects of
obsolescence, demand, competition, the level of maintenance expenditures required to obtain the expected future
cash flows from the asset and other economic factors (such as the stability of the industry, known technological
advances, etc.).
The estimated useful lives of intangible assets are as follows:
Non-compete agreements 3 years Leasehold benefit Ascertainable life or primary period of lease whichever is less Internal-use Software 1 – 5 years Intellectual Property Rights 1 – 5 years Customer Contracts 1 – 3 years Customer Relationships 6 – 8 years Technology 6 years
g. Software Development Costs
The costs incurred for the development of software that will be sold, leased or otherwise marketed are capitalized
when technological feasibility has been established. In certain situations in which technological feasibility is
established by completing a working model, substantially all development costs could be expensed when costs
qualifying for capitalization are not material. Current engineering costs related to routine updates, customer support
issues, and other modifications that do not extend the life or improve the marketability of the existing software are
expensed as incurred.
h. Impairment of long-lived assets and intangible assets
The Group reviews long-lived assets and certain identifiable intangible assets subject to amortization for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. During this review, the Group re-evaluates the significant assumptions used in determining the
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original cost and estimated lives of long-lived assets. Although the assumptions may vary from asset to asset, they
generally include operating results, changes in the use of the asset, cash flows and
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Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
other indicators of value. Management then determines whether the remaining useful life continues to be
appropriate or whether there has been an impairment of long-lived assets based primarily upon whether expected
future undiscounted cash flows are sufficient to support the assets’ recovery. If impairment exists, the Group would
adjust the carrying value of the asset to fair value, generally determined by a discounted cash flow analysis.
i. Concentration of Credit Risk
Financial instruments that potentially subject the Group to concentrations of credit risk consist of cash and cash
equivalents, time deposits, derivative financial instruments and accounts receivables. The Group maintains its cash
and cash equivalents, time deposits, derivative financial instruments with banks having good reputation, good past
track record, and who meet the minimum threshold requirements under the counterparty risk assessment process,
and reviews their credit-worthiness on a periodic basis. Accounts receivables of the Group are typically unsecured.
As there is no independent credit rating of the customer available with the Group, Management reviews the
creditworthiness of customers based on their financial position, past experience and other factors. The Group
entities perform ongoing credit evaluations of their customers’ financial condition and monitor the creditworthiness
of their customers to which they grant credit terms in the normal course of business. Refer to note 20 on ‘Segment
information’ for details relating to customers with revenue that accounted for 10% or more of total revenue and
their outstanding total accounts receivables and unbilled accounts receivable as of March 31, 2016 and 2015.
j. Accounts receivables and allowance for accounts receivables
Accounts receivables are recorded at invoiced amounts, net of the Group’s estimated allowances for doubtful
accounts. The Group performs ongoing credit evaluations of its customers. Allowance for doubtful receivables is
established in amounts considered to be appropriate based primarily upon write-off history, historical collections
experience, aging analysis and management’s specific evaluation of potential losses in the outstanding receivable
balances. There is judgment involved with estimating the Group’s allowance for doubtful accounts and if the
financial condition of its customers were to deteriorate, resulting in their inability to make the required payments,
the Group may be required to record additional allowances or charges against revenues. The Group writes-off
accounts receivables against the allowance when it determines a balance is uncollectible and no longer actively
pursues collection of the receivable. Amounts recovered, if any, from such debtors written off are accounted on
receipt basis and disclosed as Other income. The Group’s accounts receivables are not collateralized by any
security.
k. Revenue recognition
Revenues are recognized when all of the following general revenue recognition criteria are met:
• Persuasive evidence of an arrangement exists: Evidence of an arrangement consists of a written
contract signed by both the customer and management prior to the end of the reporting period.
• Delivery or performance has occurred: The Group’s software product has met the milestones
contained in the software development contract, professional services are rendered, and any customer acceptance
provisions have been satisfied.
• Fees are fixed or determinable: Fees from customer arrangements are generally at a contractually fixed
price or based upon agreed upon time and material rates.
• Collectability is probable: Collectability is assessed on a customer-by-customer basis, based primarily
on creditworthiness as determined by credit checks and analysis, as well as customer
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Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
payment history. If it is determined prior to revenue recognition that collection of an arrangement fee is not
probable, revenues are deferred until collection becomes probable or cash is collected, assuming all other revenue
recognition criteria are satisfied.
License revenues sometimes may not be accounted for separately from software services revenues if professional
services are essential to the software functionality and include significant modification or customization to or
development of the underlying software code. Since these software arrangements do not qualify as a separate unit
of accounting, the software license revenues are recognized using the percentage of completion method. When
contracts contain multiple software and software-related elements (for example, software license, and maintenance
and professional services) wherein Vendor-Specific Objective (“VSOE”) exists for all undelivered elements, we
account for the delivered elements in accordance with the “Residual Method”. VSOE of fair value for post-contract
customer support services is established by a stated renewal rates charged in stand-alone sales. VSOE of fair value
of hosting services is based upon stand-alone sales of those services.
Time and Material Contracts — Professional services revenue consists primarily of revenue received for
assisting with the development, implementation of the Group’s software, on-site support, and other professional
consulting services. In determining whether professional services revenue should be accounted, we review the
nature of the Group’s software products; whether they are ready for use by the customer upon receipt; the nature of
the Group’s implementation services, which typically do involve significant customization to or development of
the underlying software code; and whether milestones or acceptance criteria exist that affect the realization of the
services rendered. Substantially all of the Group’s professional services arrangements are billed on a time and
materials basis and, accordingly, are recognized as the services are performed. If there is significant uncertainty
about the project completion or receipt of payment for professional services, revenue is deferred until the
uncertainty is sufficiently resolved. Payments received in advance of rendering professional services are deferred
and recognized when the related services are performed. Work performed and expenses incurred in advance of
invoicing are recorded as unbilled receivables. These amounts are billed in the subsequent month.
Fixed Price Contracts — For arrangements that do not qualify for separate accounting for the license and
professional services revenues, including arrangements that involve significant modification or customization of
the software, that include milestones or customer specific acceptance criteria that may affect collection of the
software license fees or where payment for the software license is tied to the performance of professional services,
software license revenue is generally recognized together with the professional services revenue using the
percentage-of-completion method. Under the percentage-of completion method, revenue recognized is equal to the
ratio of costs expended to date to the anticipated total contract costs, based on current estimates of costs to
complete the project. If there are milestones or acceptance provisions associated with the contract, the revenue
recognized will not exceed the most recent milestone achieved or acceptance obtained. If the total estimated costs
to complete a project exceed the total contract amount, indicating a loss, the entire anticipated loss would be
recognized in the current period.
The Group also enters into multiple element revenue arrangements in which a customer may purchase a
combination of a software license, hosting services, maintenance, and professional services. For multiple element
arrangements that contain non-software related elements, for example the Group’s hosting services, the Group
allocates revenue to each element based upon VSOE of the undelivered elements and the Group accounts for the
delivered elements in accordance with the “Residual Method”. VSOE of fair value for the hosting, maintenance,
and other post-contract customer support services (“PCS”) is established by a stated renewal rate charged in stand-
alone renewals of each type of PCS.
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Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
Revenue is shown net of applicable service tax, sales tax, value added tax and other applicable taxes. The Group
has accounted for reimbursements received for out of pocket expenses incurred as revenues in the combined
Statement of Operations.
l. Employee benefits
i) Provident Fund and other contribution plans: In accordance with Indian law, all employees in India
are entitled to receive benefits under the ‘Provident Fund’, which is a defined contribution plan. Both, the
employee and the employer make monthly contributions to the plan at a predetermined rate (presently at 12%) of
the employees’ basic salary. These contributions are made to the fund which is administered and managed by the
Government of India. The Group also provides for defined contribution plans in accordance with the local laws of
its Group entities. The Group’s monthly contributions to all of the above mentioned plans are charged to Statement
of Operations in the year they are incurred and there are no further obligations under the plan beyond those
monthly contributions. The Group contributed $1,292, $921 and $911 towards such Provident Fund and other
contribution plans during the years ended March 31, 2016, March 31, 2015, and March 31, 2014, respectively.
ii) Superannuation Plan: The senior employees of the Indian Group entity are entitled to superannuation, a
defined contribution plan (the “Superannuation Plan”). The Group makes a yearly contribution to the
superannuation plan administered and managed by Life Insurance Corporation of India (LIC) based on a specified
percentage (presently at 12.5% to 15% depending on the grade of the employee) of each covered employee’s basic
salary. The Group contributed $33, $31 and $29 towards the Superannuation Plan maintained by LIC during the
years ended March 31, 2016, March 31, 2015, and March 31, 2014, respectively.
iii) Pension Commitments: The Group pays contributions to a defined contribution pension scheme for
Majesco and its subsidiaries. The assets of the scheme are held separately from those of the Group in an
independently administered fund. The pension cost charge represents contributions payable by the Group to the
fund and amounted to $25, $33 and $41 for the years ended March 31, 2016, March 31, 2015, and March 31, 2014,
respectively.
iv) Gratuity Plan: The Group provides for gratuity obligation, a defined benefit retirement plan (the
“Gratuity Plan”) covering all employees in India, when the terms of employment so provide. The Gratuity Plan
provides a lump sum payment to vested employees at retirement or termination of employment based on the
respective employee’s salary and the years of employment with the Group. The Group determines its liability
towards the Gratuity Plan on the basis of actuarial valuation. Actuarial gains and losses arising from experience
adjustments, and changes in actuarial assumptions are recognized immediately in the combined Statement of
Operations as income or expense. These obligations are valued by independent qualified actuaries.
v) Leave encashment: Leave encashment benefit comprises of encashment of leave balances is recognized
using the accrual method.
m. Financing costs
The Group amortizes financing costs and premiums, and accretes discounts, over the remaining life of the related
debt using the effective interest amortization method. The expense is included in “Interest expense” in the
combined Statements of Operations. We record discounts or premiums as a direct deduction from, or addition to,
the amount of the related borrowing.
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Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
n. Stock-based compensation
Stock-based compensation represents the cost related to stock-based awards granted to employees. The Group
measures stock-based compensation costs at the grant date, based on the estimated fair value of the award and
recognizes the cost on a straight-line basis (net of estimated forfeitures) over the employee’s requisite service
period for the entire award. Forfeitures are estimated on the date of grant and revised if actual or expected
forfeiture activity differs materially from the original estimates. The Group estimates the fair value of stock options
using a Black-Scholes valuation model. The cost is recorded in Cost of revenues, Selling, general and
administrative expenses and Research and development expenses in the combined Statement of Operations based
on the employees’ respective function.
o. Advertising and Sales commission costs
Advertising and promotion related expenses are charged to the combined Statement of Operations in the period
incurred. Advertising expense for the years ended March 31, 2016, March 31, 2015 and March 31, 2014 was
approximately $1,350, $1,196 and $323, respectively.
Sales commissions are recognized as an expense when earned by the sales representative, generally occurring at the
time the customer order is signed.
p. Derivative Instruments
All derivative instruments are recorded in the combined Balance Sheet as either an asset or liability at their fair
value. The Group normally enters into foreign exchange forward contracts and par forward contracts where the
counter party is generally a bank, to mitigate its foreign currency risk on foreign currency denominated inter-
company balances. For derivative financial instruments to qualify for hedge accounting, the following criteria must
be met: (1) the hedging instrument must be designated as a hedge; (2) the hedged exposure must be specifically
identifiable and expose the Group to risk; and (3) it is expected that a change in fair value of the derivative
financial instrument and an opposite change in the fair value of the hedged exposure will have a high degree of
correlation. The changes in the Group’s derivatives’ fair values are recognized in the combined Statement of
Operations unless specific hedge accounting and documentation criteria are met (i.e., the instruments are accounted
for as hedges).
For items to which hedge accounting is applied, the Group records the effective portion of derivative financial
instruments that are designated as cash flow hedges in Accumulated other comprehensive income, a separate
component of Stockholders’ equity, and an amount is reclassified out of accumulated other comprehensive income
into earnings to offset the earnings impact that is attributable to the risk being hedged. Any ineffectiveness or
excluded portion of a designated cash flow hedge is recognized in the statement of operations. The related cash
flow impacts of derivative activities are reflected as cash flows from operating activities.
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 recognized 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 recognized in hedging reserve is
transferred to the combined Statement of Operations for the year.
For derivative financial instruments that do not qualify for hedge accounting, realized gains or losses and changes
in the estimated fair value of these derivative financial instruments are recorded in Other Income/(Expenses).
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Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
The fair value of derivatives expiring within 12 months is classified as current assets or liabilities, and of those
with longer maturity is classified as non-current assets or liabilities.
q. Income taxes
Income taxes are accounted for under the asset and liability method. Deferred income taxes reflect the tax effect of
temporary differences between asset and liability amounts that are recognized for financial reporting purposes and
the amounts that are recognized for income tax purposes. These deferred taxes are measured by applying currently
enacted tax laws. The effect on deferred tax assets and liabilities of a change in enacted tax rates is recognized in
the Statement of Operations in the year of change.
Valuation allowances are recognized to reduce deferred tax assets to the amount that will more likely than not be
realized. In assessing the need for a valuation allowance, management considers all available evidence for each
jurisdiction including past operating results, estimates of future taxable income and the feasibility of ongoing tax
planning strategies. When the Group changes its determination as to the amount of deferred tax assets that can be
realized, the valuation allowance is adjusted with a corresponding impact to income tax expense in the period in
which such determination is made.
The Group recognizes tax liabilities when, despite the Group’s belief that its tax return positions are supportable,
the Group believes that certain positions may not be fully sustained upon review by the tax authorities. Benefits
from tax positions are measured at the largest amount of benefit that is greater than 50 percent likely of being
realized upon settlement. To the extent that new information becomes available which causes the Group to change
its judgment regarding the adequacy of existing tax liabilities, such changes to tax liabilities will impact income tax
expense in the period in which such determination is made. Interest and penalties, if any, related to accrued
liabilities for potential tax assessments are included in income tax expense.
r. Business combination
The purchase price of an acquisition is allocated to the underlying assets acquired and liabilities assumed based
upon their estimated fair values at the date of acquisition. To the extent the purchase price exceeds the fair value of
the net identifiable tangible and intangible assets acquired and liabilities assumed, such excess is allocated to
goodwill. Majesco determines the estimated fair values after review and consideration of relevant information,
including discounted cash flows, and estimates made by management. Acquisition-related costs are recognized
separately from the acquisition and are expensed as incurred. The cost of an acquisition also includes the fair value
of any contingent consideration. Any subsequent changes to the fair value of contingent consideration classified as
liabilities are recognized in the Statement of operations.
s. Earnings per share
Basic and diluted earnings/(losses) per share are computed as net income/(loss) divided by the weighted-average
number of common shares outstanding for the period.
3 RECENT ACCOUNTING PRONOUNCEMENTS
Recently Issued Accounting Standards
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09,
“Revenue from Contracts with Customers” (“ASC 606”), which, when effective, will supersede the guidance in
former ASC 605, Revenue Recognition. The new guidance requires entities to
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Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
3 RECENT ACCOUNTING PRONOUNCEMENTS continued
recognize revenue based on the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance is
effective for annual periods beginning after December 15, 2016 and interim periods within that year for public
companies and effective for annual reporting periods beginning after December 15, 2017, and interim periods
within annual periods beginning after December 15, 2018 for private companies. Early adoption is not permitted.
The Group will adopt this standard for the year ended March 31, 2019 and interim periods of the year ended
March 31, 2020. On July 9, 2015, the FASB voted to defer the effective date by one year to December 15, 2017 for
the interim and annual reporting periods. The Group is currently evaluating the impact of this standard on its
consolidated financial statements.
In February 2015, the FASB issued Accounting Standards Update 2015-02, “Consolidation (Topic 810):
Amendments to the Consolidation Analysis” (“ASU 2015-02”), which makes changes to both the variable interest
model and the voting model. These changes will require re-evaluation of certain entities for consolidation and will
require the Group to revise its documentation regarding the consolidation or deconsolidation of such entities. ASU
2015-02 is effective for reporting periods after December 15, 2015 and interim periods within those fiscal years.
The Group is currently evaluating the effect that this ASU will have on its consolidated financial statements and
related disclosures.
In April 2015, the FASB issued Accounting Standards Update 2015-06, “Earnings Per Share (Topic 260): Effects
on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions (a consensus of the FASB
Emerging Issues Task Force)” (“ASU 2015-06”), which applies to master limited partnerships that receive net
assets through a dropdown transaction. ASU 2015-06 specifies that for purposes of calculating historical earnings
per unit under the two-class method, the earnings (losses) of a transferred business before the date of a dropdown
transaction should be allocated entirely to the general partner. Qualitative disclosures about how the rights to the
earnings (losses) differ before and after the dropdown transaction occurs for purposes of computing earnings per
unit under the two-class method also are required. ASU 2015-06 is effective for fiscal years beginning after
December 15, 2015, and interim periods within those fiscal years and will be applied retrospectively. Earlier
application is permitted. The Group is currently evaluating the effect that this ASU will have on its consolidated
financial statements and related disclosures.
In September 2015, the FASB issued Accounting Standards Update 2015-16, “Business Combinations (Topic
805): Simplifying the Accounting for Measurement-Period Adjustments” (“ASU 2015-16”). The FASB issued
ASU 2015-16 to simplify US GAAP to require that the acquirer record, in the same period’s financial statements,
the effect of changes to provisional, measurement period amounts calculated as if the accounting had been
completed at the acquisition date and disclose the portion of the amount recorded in current-period earnings by line
item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had
been recognized as of the acquisition date. This guidance is effective for fiscal years beginning after December 15,
2015, including interim periods within those fiscal years. The Group does not believe that this updated standard
will have a material impact on its consolidated financial statements.
In November 2015, the FASB issued Accounting Standards Update 2015-17, “Income Taxes (Topic 740): Balance
Sheet Classification of Deferred Taxes” (“ASU 2015-17”). ASU 2015-17 removes the requirement that deferred
tax assets and liabilities be classified as either current or noncurrent in a classified statement of financial position
and instead considers deferred tax assets and liabilities to be classified as noncurrent. This guidance is effective for
financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those
annual periods. The Group does not believe that this updated standard will have a material impact on its
consolidated financial statements.
In February 2016, the FASB issued Accounting Standards Update 2016-02, “Leases (Topic 842)” (“ASU 2016-
02”). ASU 2016-02 requires the identification of arrangements that should be accounted for as
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Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
3 RECENT ACCOUNTING PRONOUNCEMENTS continued
leases by lessees. In general, for lease arrangements exceeding a twelve month term, these arrangements must now
be recognized as assets and liabilities on the balance sheet of the lessee. Under ASU No. 2016-02, a right-of-use
asset and lease obligation will be recorded for all leases, whether operating or financing, while the income
statement will reflect lease expense for operating leases and amortization/interest expense for financing leases. The
balance sheet amount recorded for existing leases at the date of adoption of ASU No. 2016-02 must be calculated
using the applicable incremental borrowing rate at the date of adoption. In addition, ASU No. 2016-02 requires the
use of the modified retrospective method, which will require adjustment to all comparative periods presented in the
consolidated financial statements. The new guidance is effective for fiscal years beginning after December 15,
2018, including interim periods within those fiscal years. The Group is currently evaluating the impact that the
adoption of this guidance will have on its consolidated financial statements and the implementation approach to be
used.
Emerging growth company
The Group is an “emerging growth company” under the federal securities laws and is subject to reduced public
company reporting requirements. In addition, Section 107 of the JOBS Act also provides that an “emerging growth
company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act
for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay
the adoption of certain accounting standards until those standards would otherwise apply to private companies. The
Group has taken the advantage of the extended transition period for complying with new or revised accounting
standards. As a result, the Group’s financial statements may not be comparable to those of companies that comply
with public company accounting standards effective dates.
4 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Group’s financial instruments consist primarily of cash and cash equivalents, short term investments in time
deposits, restricted cash, derivative financial instruments, accounts receivables, unbilled accounts receivable,
accounts payable, contingent consideration liability and accrued liabilities. The carrying amount of cash and cash
equivalents, short term investments in time deposits, restricted cash, accounts receivables, unbilled accounts
receivable, accounts payable and accrued liabilities as of the reporting date approximates their fair market value
due to the relatively short period of time of original maturity tenure of these instruments.
Basis of Fair Value Measurement
Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a
liability in the principal or most advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. Valuation techniques used to measure fair value must maximize the
use of observable inputs and minimize the use of unobservable inputs. The current accounting guidance for fair
value measurements defines a three-level valuation hierarchy for disclosures as follows:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level I that are observable, unadjusted quoted
prices in markets that are not active, or other inputs that are observable or can be corroborated by observable
market data.
F - 190
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
4 FAIR VALUE OF FINANCIAL INSTRUMENTS continued
Level 3: Unobservable inputs that are supported by little or no market activity, which require the Group
to develop its own assumptions. The following table sets forth the financial assets, measured at fair value, by level
within the fair value hierarchy as of March 31, 2016 and 2015:
As of March 31,
2016 2015
Assets
Level 2 Derivative financial instruments (included in the following line items in the
Combined balance sheet) Other assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 28
Other liabilities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (15 )
Prepaid expenses and other current assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 545
Accrued expenses and other liabilities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4 ) (13 )
$ 176 $ 545
Level 3 Contingent consideration
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (229 ) $ (989 )
Accrued expenses and other liabilities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (364 ) (723 )
$ (593 ) $ (1,712 )
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (417 ) $ (1,167 )
The following table presents the change in level 3 instruments:
As of March 31,
2016 2015 2014
Opening balance
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,712 ) $ (628 ) $ (924 )
Additions
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (1,610 ) Total (Losses)/gains recognized in Statement of Operations
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (344 ) 526 (52 )
Settlements
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,463 — 348
Closing balance
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (593 ) $ (1,712 ) $ (628 )
Contingent consideration pertaining to the acquisition of the consulting business of Agile Technologies, LLC, a
New Jersey limited liability company (“Agile”), as of December 31, 2015 has been classified under level 3 as the
F - 191
fair valuation of such contingent consideration has been done using one or more of the significant inputs which are
not based on observable market data. The fair value of the contingent consideration was estimated using a
discounted cash flow technique with significant inputs that are not observable in the market. The significant inputs
not supported by market activity included the Group’s probability assessments of expected future cash flows
related to its acquisition of the consulting business of Agile during the earnout period, appropriately discounted
considering the uncertainties associated with the obligation, and calculated in accordance with the terms of the
asset purchase agreement (the “Agile Agreement”) dated December 12, 2014, as amended on January 26, 2016.
The fair value of the contingent consideration was estimated using a discounted cash flow technique with
significant inputs that are not observable in the market. The significant inputs not supported by market activity
included the
F - 192
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
4 FAIR VALUE OF FINANCIAL INSTRUMENTS continued
Group’s probability assessments of expected future cash flows related to its acquisition of the Agile business
during the earn-out period, appropriately discounted considering the uncertainties associated with the obligation,
and calculated in accordance with the terms of the Agile Agreement, respectively.
The total (losses)/gains attributable to contingent consideration payable for the acquisition of the Agile business
were $(344) and $(101) for the years ended March 31, 2016 and March 31, 2015.
The fair value of Derivative financial instruments is determined based on observable market inputs and valuation
models. The Derivative financial instruments are valued based on valuations received from the relevant counter-
party (i.e., bank). The fair value of the foreign exchange forward contract and foreign exchange par forward
contract has been determined as the difference between the forward rate on the reporting date and the forward rate
on the original transaction, multiplied by the transaction’s notional amount (with currency matching). The Group
paid $1,503 to Agile as earn out consideration in the year ended March 31, 2016.
5 PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
As of March 31,
2016 2015
Leasehold improvements
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 389 $ 13
Computers
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,202 3,907
Plant and Equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,942 2,878
Furniture and Fixtures
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,423 3,179
Vehicles
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215 83
Office Equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 815 618
Capital Work in Progress
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 —
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,066 $ 10,678
Less: Accumulated depreciation
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,604 ) (9,505 )
Property and Equipment, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,462 $ 1,173
As of March 31, 2016 and 2015, the Group has hypothecated assets with net carrying value amounting to $67 and
$45, respectively. Depreciation expense was $1,080, $859 and $967 for the years ended March 31, 2016,
March 31, 2015, and March 31, 2014, respectively.
F - 193
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
6 INTANGIBLE ASSETS
Intangible assets consist of the following:
Weighted Average
amortisation period (in
years)
As of March 31, 2016 As of March 31, 2015
Gross carrying amount
Accumulated amortization
Net carrying
value
Gross carrying amount
Accumulated amortization
Net carrying
value Customer contracts
. . . . . . . . . . . . . . . . . . 1 $ 2,950 (1,155 ) 1,795 $ 540 (133 ) 407
Customer relationships
. . . . . . . . . . . . . . . . . . 6 6,720 (891 ) 5,829 2,260 (93 ) 2,167
Leasehold benefit
. . . . . . . . . . . . . . . . . . 7 — — — 1,085 (1,085 ) —
Intellectual Property
Rights
. . . . . . . . . . . . . . . . . . 3 2,251 (2,251 ) — 2,386 (2,068 ) 318
Technology
. . . . . . . . . . . . . . . . . . 6 3,110 (394 ) 2,716 — — —
Software
. . . . . . . . . . . . . . . . . . 3 3,272 (3,129 ) 143 3,167 (2,625 ) 542
Total
. . . . . . . . . . . . . . . . . . 4 18,303 (7,820 ) 10,483 9,438 (6,004 ) 3,434
All the intangible assets have finite lives and as such are subject to amortization. Amortization expense was
$2,762, $1,566 and $1,555 for the years ended March 31, 2016, March 31, 2015, and March 31, 2014, respectively.
The estimated aggregate amortization expense for the next five fiscal years and thereafter is as follows:
Year ended March 31, Future
Amortization 2017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,484 2018
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,266 2019
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,641 2020
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,457 2021
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,358 Thereafter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,277 Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,483
7 ACCOUNTS RECEIVABLES AND ALLOWANCE FOR DOUBTFUL DEBTS
As of March 31,
F - 194
2016 2015
Customers (trade)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,930 $ 8,322
Less: Allowance for doubtful receivables
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (427 ) (564 )
Accounts receivables
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,503 $ 7,758
The Group’s credit period for its customers generally ranges from 30 – 45 days. The Group has collectively and
individually evaluated all of its accounts receivables for collectability.
F - 195
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
7 ACCOUNTS RECEIVABLES AND ALLOWANCE FOR DOUBTFUL DEBTS continued
As of March 31,
2016 2015 2014
Opening balance
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 564 $ 298 $ 314
Current period provision
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 519 450 61
Reversals during current period
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (668 ) (110 ) (70 )
Foreign currency translation adjustments
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 (74 ) (7 )
Closing balance
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 427 $ 564 $ 298
The Group entities perform ongoing credit evaluations of their customers’ financial condition and monitor the
credit worthiness of their customers to which they grant credit terms in the normal course of business. In their
evaluation, they use certain factors like historical experience and use management judgment in assessing credit
quality.
8 PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
As of March 31
2016 2015
Prepaid expenses
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,020 $ 636
Advance for expenses
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 715 459
Loans and advance to employees
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 73
Derivative financial instruments
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 545
Advance tax
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,122 1,067
Rent Deposits
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,191 —
Service tax
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 566 —
Other advances and receivables
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318 131
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,195 $ 2,911
Advance for expenses includes foreign currency advances, travel advances and advances to suppliers. Other
advances and receivables mainly include amount recoverable from statutory authorities and miscellaneous
advances.
9 CAPITAL LEASE OBLIGATIONS
F - 196
The Group leases vehicles under capital leases which are stated at the present value of the minimum lease
payments. The gross stated amounts for such capital leases are $86 and $74 and related accumulated depreciation
recorded under capital leases are $19 and $29, respectively as of March 31, 2016 and 2015. At the termination of
the leases, the Group has an option to receive title to the assets at no cost or for a nominal payment.
Depreciation expenses in respect of assets held under capital leases were $21, $19 and $22 for the years ended
March 31, 2016, March 31, 2015, and March 31, 2014, respectively.
The following is a schedule of the future minimum lease payments under capital leases, together with the present
value of the net minimum lease payments as of March 31, 2016.
F - 197
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
9 CAPITAL LEASE OBLIGATIONS continued
Year ended March 31, Amount
2017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
2018
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
2019
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2020
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Total minimum lease payments
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 302
Less: Interest portion
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Present value of net minimum capital leases payments
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 279
10 BORROWINGS
Line of Credit
On March 25, 2011, the Group entered into a secured revolving working capital line of credit facility with ICICI
Bank Limited (“ICICI”) under which the maximum borrowing limit is $5,000. The interest rate on the credit
facility at March 31, 2016 was three-month LIBOR plus 350 basis points and increased to three-month LIBOR plus
375 basis points with the second extension of this facility described below. The interest rate was 4.13% at
March 31, 2016 and 3.77 % at March 31, 2015. In case of unhedged foreign currency exposure, if any, ICICI
reserves the right to increase the pricing of this facility. The credit facility is guaranteed by Mastek Ltd., subject to
the terms and conditions set forth in the guarantee. The credit facility initially matured on November 11, 2015. On
November 20, 2015, the Group extended this line of credit to February 11, 2016. The facility was further extended
to May 9, 2016 and again extended to May 15, 2017. Majesco paid a processing fee of $12,500 in connection with
the second extension and a processing fee of $50,833.33 in connection with the third extension. In connection with
these extensions of the Majesco line of credit, Mastek also extended its guarantee of such line of credit.
This facility is secured by a continuing first priority lien on and security interest in, among other things, all of
Majesco’s personal property and assets (both tangible and intangible), including accounts receivable, cash,
certificated and uncertificated securities and proceeds of any insurance or indemnity payable to the Group with
respect to the collateral. This facility contains financial covenants, as well as restrictions on, among other things,
the ability of the Group to incur debt or liens; make loans and investments; enter into mergers, acquisitions and
other business combinations; engage in asset sales; or amend its governing documents. This facility also restricts
the Group from paying dividends upon and during the continuation of an event of default.
As of March 31, 2016, the Group had $2,300 of borrowings outstanding, and was in compliance with all financial
covenants, under this facility.
PCFC Facility
On June 30, 2015, the Group entered into a secured Pre Shipment in Foreign Currency and Past Shipment in
Foreign Currency (“PCFC”) facility with Yes Bank under which the Group may request 3 months pre-export
advances and advances against export collection bills. The maximum borrowing limit is $5,656. The interest rate
on this PCFC facility is LIBOR plus 150 basis points. The interest rate on this PCFC facility is determined at the
time of each advance. This PCFC facility has a first pari passu charge over the current assets of the Group’s
F - 198
subsidiary Majesco Software and Solutions India Pvt. Ltd. (“MSSIPL”). As of March 31, 2016, the Group had
$4,651 of borrowings outstanding under this PCFC facility and was in compliance with the terms of this facility.
F - 199
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
10 BORROWINGS continued
The outstanding loans as on March 31, 2016 are as follows:
Date of loan Repayable on
Outstanding as
of March 31, 2016
Rate of interest (Libor + 1.5%)
January 27, 2016
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . April 26, 2016 $ 731 2.12% February 9, 2016
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . May 9, 2016 500 2.12% February 16, 2016
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . May 16, 2016 500 2.12% February 24, 2016
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . May 16, 2016 850 2.13% March 29, 2016
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 27, 2016 2,070 2.13% Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,651
On July 27, 2015, MSSIPL entered into a Credit Arrangement Letter with ICICI for packing credit in foreign
currency and post-shipment credit in foreign currency. Under this facility MSSIPL may borrow up to 150 million
Indian Rupees (approximately $2,252 at the exchange rate on May 6, 2016) in short term borrowings for working
capital, including software and related services. Interest rate on this facility is based on LIBOR plus a margin to be
determined at the time of each draw by ICICI. In addition, this facility includes a bank guarantee facility of up to 5
million Indian rupees (approximately $75 at the exchange rate on May 6, 2016) bearing a commission of 0.40%
annually plus applicable service tax. This facility has a first pari passu charge over the current assets of MSSIPL.
This facility is available until July 8, 2016 and contains covenants and customary events of default. As of
March 31, 2016, the Group had no amounts outstanding under this facility.
On August 28, 2015, MSSIPL entered into a Facility Letter with Standard Chartered Bank for pre-shipment
financing and overdraft facilities. Under this facility MSSIPL may borrow up to 50 million Indian Rupees
(approximately $750 at the exchange rate on May 6, 2016) in short term borrowings. Interest rate on this facility is
based on a base rate or LIBOR plus a margin to be determined at the time of each draw by the lender. This facility
has a first pari passu charge over the current assets of MSSIPL. This facility contains restrictive covenants on
MSSIPL, its direct parent and their subsidiaries, including a negative pledge covenant and restrictions on assets
sales outside the ordinary course of business or other substantial changes to the business. In addition, any change in
ownership or control or merger transaction of MSSIPL, its direct parent or their subsidiaries will require consent
from Standard Chartered Bank. Standard Chartered Bank may cancel a loan at any time. This facility also contains
customary events of default provision and indemnification provisions whereby MSSIPL will indemnify Standard
Chartered Bank against all losses or damages related to the facility. In addition, Standard Chartered Bank has a
right of first refusal on future hedging transactions, refinancing of the facility or other similar transactions so long
as any amounts remain owed to it under the facility. MSSIPL is also obligated to reimburse all costs and expenses
of Standard Chartered Bank under this facility. As of March 31, 2016, the Group had no amounts outstanding
under this facility.
On March 23, 2016, Majesco entered into a Loan Agreement (the “Loan Agreement”) with HSBC Bank USA,
National Association (“HSBC”) pursuant to which HSBC agreed to extend loans to Majesco in the amount of up to
$10,000 and Majesco issued a promissory note to HSBC in the maximum principal amount of $10,000 or any
lesser amount borrowed under the Loan Agreement (the “Note”, and together with the “Loan Agreement”, the
“Facility”). On March 23, 2016, Majesco borrowed $6,800 under the Facility, and the remainder of the loan
amount may be borrowed at any time up to and including May 23, 2016. The outstanding principal balance of the
F - 200
loan will bear interest based on LIBOR plus a margin in effect on the first day of the relevant interest period. Until
January 1, 2018, only interest will be payable under the loan. Commencing on January 1, 2018, and on each
January 1 and July 1 thereafter until July 1, 2020, installments of principal in the amount of $1,666.67 shall be due
and payable semi-annually. All
F - 201
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
10 BORROWINGS continued
principal and interest outstanding under the Note shall be due and payable on March 1, 2021. The Facility is
unsecured and supported by a letter of credit issued by Majesco Limited of $10,000. As of March 31, 2016, we had
$6,800 outstanding under this facility.
The Facility contains affirmative covenants that require Majesco to furnish financial statements to HSBC and cause
Majesco Limited to maintain (1) a Net Debt-to-EBITDA Ratio (as defined in the Loan Agreement) of not more
than (a) 5.00 to 1.00 as of the last day of its 2017 fiscal year and (b) 2.50 to 1.00 as of the last day of each fiscal
year thereafter, and (2) a Debt Service Coverage Ratio (as defined in the Loan Agreement) of not less than 1.50 to
1.00 as of the last day of each fiscal year. The Facility contains restrictive covenants on Majesco, including
restrictions on declaring or paying dividends upon and during the continuation of an event of default, incurring
additional indebtedness, selling material portions of its assets or undertaking other substantial changes to the
business, purchasing or holdings securities for investment, and extending credit to any person outside the ordinary
course of business. The Facility also contains customary events of default provision and indemnification provisions
whereby Majesco will indemnify HSBC against all losses or damages related to the Facility, provided, however,
that Majesco shall not have any indemnification obligations to HSBC for any claims caused by HSBC’s gross
negligence or willful misconduct. Majesco shall use the loan proceeds solely for the purpose of refinancing existing
indebtedness, capital expenditures and working capital and other general corporate purposes.
Majesco used the proceeds from the Facility to refinance its existing $3,000 term loan agreement with Punjab
National Bank (International) Limited, capital expenditures and for working capital and other general corporate
purposes.
11 ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following:
As of March 31,
2016 2015
Accrued expenses
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,719 $ 2,465
Payable to related parties as reorganization consideration
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3,520
Statutory payments
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 780 236
Provision for taxation
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,214 890
Leave encashment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,954 1,054
Derivative financial instruments
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 15
Employee benefits
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,972 3,861
Others
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 218
Accrued expenses and other liabilities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,701 $ 12,259
F - 202
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
12 DERIVATIVE FINANCIAL INSTRUMENTS
The following table provides information of fair values of derivative financial instruments:
Asset Liability
Noncurrent* Current* Noncurrent* Current*
As of March 31, 2016 Designated as hedging instruments under Cash Flow
Hedges Foreign exchange forward contracts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0 $ 180 $ 0 $ 4
Total $ 0 $ 180 $ 0 $ 4
As of March 31, 2015 Designated as hedging instruments under Cash Flow
Hedges Foreign exchange forward contracts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28 $ 545 $ 13 $ 15 Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28 $ 545 $ 13 $ 15
* The noncurrent and current portions of derivative assets are included in ‘Other assets’ and ‘Prepaid
expenses and other current assets’, respectively and of derivative liabilities are included in ‘Other liabilities’ and
‘Accrued expenses and other liabilities’, respectively in the Combined Balance Sheet.
Cash Flow Hedges and Other derivatives
The Group uses foreign currency forward contracts and par forward contracts to hedge its risks associated with
foreign currency fluctuations relating to certain commitments and forecasted transactions. The Group designates
these hedging instruments as cash flow hedges. The use of hedging instruments is governed by the policies which
are approved by Board of Directors of the Group.
Derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge
relationships are classified in Financial instruments at fair value through profit or loss.
The aggregate contracted USD principal amounts of the Group’s foreign exchange forward contracts (sell)
outstanding as of March 31, 2016 amounted to $10,660 and as of March 31, 2015 amounted to $22,980. The
outstanding forward contracts as of March 31, 2016 mature between 1 to 12 months. As of March 31, 2016, the
Group estimates that $117, net of tax, of the net gains/(losses) related to derivatives designated as cash flow hedges
recorded in accumulated other comprehensive income (loss) is expected to be reclassified into earnings within the
next 12 months.
The related cash flow impacts of all of the Group’s derivative activities are reflected as cash flows from operating
activities.
F - 203
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
12 DERIVATIVE FINANCIAL INSTRUMENTS continued
The following table provides information of the amounts of pre-tax gains/(losses) recognized in and reclassified
from AOCI of derivative instruments designated as cash flow hedges:
Amount of
Gain/(Loss)
recognized in
AOCI (effective
portion)
Amount of
Gain/(Loss)
reclassified
from
AOCI to
Statement of
Operations
(Revenue)
For the year ended March 31, 2016 Foreign exchange forward contracts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (167 ) $ (202 )
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (167 ) $ (202 )
For the year ended March 31, 2015 Foreign exchange forward contracts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 633 $ 543
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 633 $ 543
For the year ended March 31, 2014 Foreign exchange forward contracts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (17 ) $ (378 )
Foreign exchange par forward contracts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (825 ) $ (1,793 )
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (842 ) $ (2,171 )
The following table provides information of the amounts of pre-tax gains/(losses) associated with the change in fair
value of derivative instruments not designated as hedges and ineffective portion of derivative instruments
designated as hedges recognized in ‘Other income (expenses), net’ in the Combined Statements of Operations:
Derivative instruments
not designated as
hedges
Derivative instruments designated as hedges
(ineffective
portion)
For the year ended March 31, 2016
Foreign exchange forward contracts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ —
Foreign exchange par forward contracts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ —
For the year ended March 31, 2015
Foreign exchange forward contracts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ —
F - 204
Foreign exchange par forward contracts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ —
For the year ended March 31, 2014
Foreign exchange forward contracts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7 $ —
Foreign exchange par forward contracts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (21 )
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7 $ (21 )
F - 205
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
13 RETIREMENT BENEFIT OBLIGATION — GRATUITY
Employees of the Group who are in India, participate in a gratuity employee benefit plan sponsored by MSSIPL,
which is a defined benefit plan. In India, gratuity is governed by the Payment of Gratuity Act, 1972. This plan is
accounted for as multi-employer benefit plan in these combined financial statements and, accordingly, the Group’s
Combined Balance Sheets do not reflect any assets or liabilities related to these plans. The Group’s Combined
Statements of Operations includes expense allocations for these benefits. The Group considers the expense
allocation methodology and results to be reasonable for all periods presented.
Plan information is as follows:
Legal name of the plan: Majesco Software & Solutions India Private Limited Employees’ Group Gratuity
Assurance Scheme (C. A.)
Year ended
March 31, 2016 Year ended
March 31, 2015 Year ended
March 31, 2014 Group’s Total Contributions to plan
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,957 $ 1,420 $ 701
$ 2,957 $ 1,420 $ 701
Total plan assets and actuarial present value of accumulated plan benefits are as follows:
As of March 31,
2016 2015
Total plan assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,000 $ 6,054
Actuarial present value of accumulated plan benefits
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,780 5,591
Total contributions received by the plan from all employers (for the period
ended)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 2,648
14 ACCUMULATED OTHER COMPREHENSIVE INCOME
Changes in accumulated other comprehensive income by component was as follows:
Year ended
March 31, 2016
Year ended
March 31, 2015
Year ended
March 31, 2014
Before
tax
Tax
effect
Net of
Tax
Before
tax
Tax
effect
Net of
Tax
Before
tax
Tax
effect
Net of
Tax
Other comprehensive income
Foreign currency translation adjustments Opening balance
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,884 — 1,884 $ 2,209 — 2,209 $ 2,223 — 2,223
Change in foreign currency translation
adjustments
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,662 ) — (1,662 ) (325 ) — (325 ) (14 ) — (14 )
Closing balance
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 222 — 222 $ 1,884 — 1,884 $ 2,209 — 2,209
Unrealized gains/(losses) on cash flow
hedges
F - 206
Opening balance
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 545 (185 ) 360 $ 455 (155 ) 300 $ (874 ) 297 (577 )
Unrealized gains/(losses) on cash flow
hedges
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (167 ) 57 (110 ) 633 (215 ) 418 (842 ) 286 (556 )
Reclassified to Statement of Operations
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (202 ) 69 (133 ) (543 ) 185 (358 ) 2,171 (738 ) 1,433
Net change
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (369 ) 126 (243 ) $ 90 (30 ) 60 $ 1,329 (452 ) 877
Closing balance
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 176 (59 ) 117 $ 545 (185 ) 360 $ 455 (155 ) 300
F - 207
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
15 INCOME TAXES
Year
ended
March 31,
2016
Year
ended
March 31,
2015
Year
ended
March 31,
2014
United States
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,189 $ (3,351 ) $ 2,954
Foreign
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,938 ) 2,559 1.859
(Loss) / Income before provision for income taxes
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (4,749 ) $ (792 ) $ 4,813
The Group’s (provision)/benefit for income taxes consists of the following:
Year
ended
March 31,
2016
Year
ended
March 31,
2015
Year
ended
March 31,
2014
Current: U.S. Federal and state
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 753 $ 142 $ 995
Foreign
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238 1,004 189
Total current
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 991 $ 1,146 $ 1,184
Prior Period – Current Tax: U.S. Federal and state
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 49 $ (410 ) $ (39 )
Total Prior Period – Current Tax
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 49 $ (410 ) $ (39 )
Deferred: U.S. Federal and state
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,052 ) $ (1,326 ) $ 350
Foreign
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (175 ) 449 398
Total deferred
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,227 ) $ (877 ) $ 748
Provision for income taxes recognized in Statement of Operations
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,187 ) $ (141 ) $ 1,893
The total income tax expense differs from the amounts computed by applying the statutory federal income tax rate
of 39.3% as follows:
Year
ended
March 31,
2016
Year
ended
March 31,
2015
Year
ended
March 31,
2014
Net (loss) / income before taxes
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,749 ) (792 ) 4,813
Computed tax expense
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,866 ) (311 ) 1,891
F - 208
Non-deductible expenses – Stock based compensation & Meals & Entertainment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367 97 126
– Others
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 103 164
Valuation allowance
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 302 (5 )
Tax charge/(credit) of earlier year assessed in current year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330 (172 ) 159
Net tax credit on R&D and Sec 199 deduction
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (169 ) (238 ) (197 )
Difference arising from different tax jurisdiction
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (127 ) 90 (141 )
Others
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 (12 ) (104 )
Total taxes recognized in Statement of Operations
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,187 ) (141 ) 1,893
F - 209
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
15 INCOME TAXES continued
Significant components of activities that gave rise to deferred tax assets and liabilities included on the Balance
Sheet was as follows:
As of March 31,
2016 2015
Deferred tax assets / (liability): Employee benefits
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,278 908
Property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 743
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 550 1,188
Allowance for impairment of accounts receivables
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 55
Carry forwarded income tax losses
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,190 2,582
Tax credit for R&D expenses
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 645 169
Derivative financial instruments
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (60 ) (185 )
Others
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,835 ) —
Gross deferred tax assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,896 5,460
Less: Valuation allowance
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,463 ) (1,110 )
Net deferred tax assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,433 4,350
Current portion of deferred tax assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,847 2,168
Non-current portion of deferred tax assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,586 2,182
A valuation allowance is established attributable to deferred tax assets recognized on carry forward tax losses and
tax credit for R&D expenses by the Group where, based on available evidence, it is more likely than not that they
will not be realized. Significant management judgment is required in determining provision for income taxes,
deferred tax assets and liabilities and any valuation allowance recorded against deferred tax assets. The valuation
allowance is based on the Group’s estimates of taxable income by jurisdiction in which the Group operates and the
period over which deferred tax assets will be recoverable. The change in valuation allowance is $353, $379 and
$(69) for the years ended March 31, 2016, March 31, 2015, and March 31, 2014, respectively.
The Group entity in Canada has recognized valuation allowance on Deferred income tax assets recognized on
carry-forward losses and tax credit for R&D expenses amounting to $1,194 and $NIL as of March 31, 2016, $2,368
and $169 as of March 31, 2015 and $1,728 and $195 as of March 31, 2014, respectively because it is not probable
that future taxable profit will be available against which these temporary difference can be utilized. These carry
forward losses and tax credit for R&D expenses do not have any expiry date.
The Group entity in Thailand has recognized valuation allowance on Deferred income tax assets recognized on
carry-forward losses amounting to $269 as of March 31, 2016, $1,032 as of March 31, 2015 and $NIL as of
F - 210
March 31, 2014, respectively because it is not probable that future taxable profit will be available against which
these temporary difference can be utilized. These carry forward losses are subject to expiration beginning in 2020.
F - 211
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
15 INCOME TAXES continued
Changes in unrecognized income tax benefits were as follows:
As of March 31,
2016 2015 2014 Opening balance
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 310 $ 172 $ 80
Increase in unrecognized tax benefits – due to tax Positions taken in current period for prior periods
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 138 92 Closing balance
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 441 $ 310 $ 172
As of March 31, 2016, the entire balance of unrecognized income tax benefits would affect the Group’s effective
income tax rate, if recognized. Significant changes in the amount of unrecognized tax benefits are not reasonably
possible within the next 12 months from the reporting date. The Group includes interest and penalties relating to
unrecognized tax benefits within the provision for income taxes. The total amount of accrued interest and penalties
as of March 31, 2016, 2015, and 2014 is $NIL, $NIL, and $NIL respectively. The amount of interest and penalties
expenses for the year ended March 31, 2016, 2015 and 2014 is $NIL, $NIL and $NIL, respectively.
Majesco and Majesco Software and Solutions Inc. file a consolidated income tax return, and the provision for
income tax for the year ended March 31, 2016, 2015 and 2014 has been made accordingly.
There were no undistributed earnings in Majesco and its US subsidiaries as of March 31, 2016 and 2015. The
remaining earnings of Majesco from its non-US subsidiaries are considered to be permanently reinvested. As of
March 31, 2016 and 2015, the cumulative amounts of such undistributed earnings were $2,716 and $2,557,
respectively.
The determination of the amount of the unrecognized deferred tax liability relating to undistributed earnings is not
practicable because numerous possible methods could be used to facilitate the repatriation of earnings to the U.S.,
and each would require evaluation of withholding taxes, evaluation of the local taxability of dividends as well as an
analysis of Majesco’s historical tax position and the ability to use foreign tax credits. Furthermore, due to
Majesco’s complex legal structure, the number of jurisdictions involved, and the layers of regulatory requirements,
all of which would have to be evaluated to determine the amount of allowable dividends between legal entities and
ultimately to the U.S., such an effort would require significant amount of Company resources. Because any
estimate would not be meaningful due to the numerous assumptions upon which it would be based, and because of
the significant resources, this exercise would require, Majesco has determined that it is not practical to estimate the
amount of unrecognized deferred tax liabilities.
In US and India, the income tax returns are subject to examination by the appropriate tax authorities for the year
ended June 30, 2010 and onwards and March 31, 2011 and onwards, respectively.
16 EMPLOYEE STOCK OPTION PLAN
Employee Stock Option Scheme of Majesco Limited — Plan 1
Certain employees of the Group participate in the Group’s parent company Majesco Limited’s employee stock
option plan. The plan termed as “ESOP plan 1”, became effective June 1, 2015, the effective date of the demerger
of Mastek Ltd.. Group employees who were having options in the earlier ESOP plans of Mastek Ltd. have now
been given options of Majesco Limited. Under the plan, Majesco Limited during the year has also granted newly
F - 212
issued options to the employees of MSSIPL. During the year 825,000 options were granted. The options were
granted at the market price on the grant date.
F - 213
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
16 EMPLOYEE STOCK OPTION PLAN continued
As of March 31, 2016, the total future compensation cost related to non-vested options not yet recognized in the
Statement of Operations was $1,461 and the weighted average period over which these awards are expected to be
recognized was 4.01 years. The weighted average remaining contractual life of options expected to vest as of
March 31, 2016 is 11.02 years.
Activity in the stock options granted under Majesco Limited’s stock option plan granted to the Group’s employees
was as follows:
Year ended
March 31, 2016
Year ended
March 31, 2015
Year ended
March 31, 2014
Particulars
Number
of
options
Weighted
Average
Exercise
Price*
Number
of
options
Weighted
Average
Exercise
Price*
Number
of
options
Weighted
Average
Exercise
Price*
Outstanding at the beginning of the year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,599,015 $ 1.45 1,337,775 $ 2.85 858,623 $ 3.23
Granted during the year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 825,000 5.82 848,389 2.37 563,750 2.31
Forfeited during the year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (147,982 ) 2.99 (546,805 ) 2.94 (82,598 ) 3.43
Expired during the year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,514 ) 3.37 (300 ) 5.07 (2,000 ) 5.87
Exercised during the year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (130,522 ) 1.75 (143,294 ) 2.08 — —
Transfer adjustments
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (110,596 ) 1.14 103,250 2.27 — —
Outstanding at the end of the year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,015,401 $ 3.23 1,599,015 $ 1.45 1,337,775 2.85
Exercisable at the end of the year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 560,417 $ 1.51 503,156 $ 2.33 422,387 4.00
* The per share value has been converted at year end rate 1 US$ = Rs. 66.255, Rs. 62.50 and Rs. 59.92 as of
March 31, 2016, 2015 and 2014, respectively.
The weighted average grant date fair values of options granted during the year ended March 31, 2016, 2015 and
2014 is $5.70, $2.31 and $1.08, respectively per option. The weighted average grant date fair value of vested
options as of March 31, 2016 and 2015 is $1.17 and $1.41, respectively per option. The Aggregate Intrinsic Value
of options outstanding is $272 and options exercisable is $46 as of March 31, 2016.
The Group calculated the fair value of each option grant on the date of grant using the Black-Scholes pricing
method with the following assumptions:
As of March 31,
Variables (range) 2016 2015 2014 Expected term of share options
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Years 6 Years 6 Years Risk-free interest rates
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.61% 8.70% 7.90%
F - 214
Expected volatility
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49.17% 47.77% 48.94% Expected dividend yield
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0% 2.56% 2.91%
The volatility is determined based on annualized standard deviation of the continuously compounded rate of return
on the stock over the time to maturity of the options. The risk free interest rates are determined using the expected
life of options based on the zero-coupon yield curve for Government Securities in India. The expected dividend is
based on the average dividend yields for the preceding seven
F - 215
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
16 EMPLOYEE STOCK OPTION PLAN continued
years. Weighted average price is based on latest available closing market price on the stock exchange with the
highest trading volume on the date of grant.
Summary of outstanding options as of March 31, 2016 is as follows:
Exercise Price Range*
Number of shares arising out of options
Wtd. Avg. Exercise
Price*
Wtd. Avg. remaining
contractual
life $0.1 – $3
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,177,939 1.43 8.31 $3.1 – $6
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 668,462 5.06 10.24 $6.1 – $7
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169,000 8.59 10.85
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,015,401 3.23 9.17
Summary of exercisable options as of March 31, 2016 is as follows:
Exercise Price Range*
Number of shares arising out of options
Wtd. Avg. Exercise
Price*
Wtd. Avg. remaining
contractual
life $0.1 – $3
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 547,955 1.48 7.08 $3.1 – $6
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,462 3.01 2.58 $6.1 – $7
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 560,417 1.51 6.98
* The per share value has been converted at year end rate 1 US$ = Rs 66.255 as of March 31, 2016.
In accordance with SAB Topic 14, the Group uses the simplified method for estimating the expected term when
measuring the fair value of employee stock options using the Black-Scholes option pricing model. Majesco
believes the use of the simplified method is appropriate due to the employee stock options qualifying as “plain-
vanilla” options under the following criteria established by SAB Topic 14:
• stock options are granted at-the-money;
• exercisability is conditional only on the completion of a service condition through the vesting date;
• employees who terminate their service prior to vesting forfeit the options;
• employees who terminate their service after vesting are granted limited time to exercise their stock options
(typically 30 – 90 days) and;
F - 216
• stock options are nontransferable and nonhedgable
Given the Group’s limited history with employee grants, we use the “simplified” method in estimating the expected
term for our employee grants. The “simplified” method, as permitted by applicable regulations, is calculated as the
average of the time-to-vesting and the contractual life of the options.
Majesco 2015 Equity Incentive Plan
In the year ended March 31, 2016, the Group recognized $748 compared to $78, respectively, in the year ended
March 31, 2015, of stock-based compensation expense in the Group’s consolidated Financial Statements.
F - 217
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
16 EMPLOYEE STOCK OPTION PLAN continued
In June 2015, Majesco adopted the Majesco 2015 Equity Incentive Plan (the “2015 Plan”). Options and stock
awards for the purchase of up to 3,877,263 shares may be granted by the Board of Directors to our employees,
consultants and directors at an exercise or grant price determined by the Board of Directors on the date of grant.
Options may be granted as incentive or nonqualified stock options with a term of not more than ten years. The
2015 Plan allows the Board of Directors to grant restricted or unrestricted stock awards or awards denominated in
stock equivalent units or any combination of the foregoing and may be paid in common stock or other securities, in
cash, or in a combination of common stock or other securities and cash. On March 31, 2016, an aggregate of
1,697,878 shares were available for grant under the 2015 Plan.
Majesco uses the Black-Scholes-Merton option-pricing model (“Black-Scholes”) to measure fair value of the
share-based awards. The Black-Scholes model requires us to make significant judgments regarding the
assumptions used within the model, the most significant of which are the expected stock price volatility, the
expected life of the option award, the risk-free interest rate of return and dividends during the expected term.
• Expected volatilities are based on peer entities as the historical volatility of Majesco’s common stock is
limited.
• In accordance with SAB Topic 14, Majesco uses the simplified method for estimating the expected term
when measuring the fair value of employee stock options using the Black-Scholes option pricing model. Majesco
believes the use of the simplified method is appropriate due to the employee stock options qualifying as “plain-
vanilla” options under the criteria established by SAB Topic 14.
• The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury
yields for an equivalent term at the time of grant.
• Majesco does not anticipate paying dividends during the expected term.
2016
Expected volatility
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41% –
50%
Weighted-average volatility
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41%
Expected dividends
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Expected term (in years)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 – 5
Years
Risk-free interest rate
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
As of March 31, 2016, there was $1,461 of total unrecognized compensation costs related to non-vested share-
based compensation arrangements previously granted by Majesco. That cost is expected to be recognized over a
weighted-average period of 3.1 years.
A summary of the outstanding common stock options under the 2015 Plan is as follows:
Shares
Exercise Price
Per Share
Weighted-Average Remaining
Contractual Life
Weighted-
Average Exercise Price
Balance, April 1, 2015
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 $ 0 0 Years $ 0
F - 218
Granted
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,279,88
2 4.81 –
7.72 9.07 Year
s 5.24 Canceled
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (100,497 ) 4.81 –
6.93 4.95 Balance, March 31, 2016
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,179,38
5 $ 4.81 –
7.72 9.07 Year
s $ 5.25
F - 219
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
16 EMPLOYEE STOCK OPTION PLAN continued
The options granted during fiscal 2016 are distributed as follows, relative to the difference between the exercise
price and the stock price at grant date:
Number Granted
Weighted-
Average Exercise Price
Weighted-
Average Fair Value
Exercise Price at Stock Price
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,279,88
2 $ 5.24 $ 2.06
Exercisable options at March 31, 2016 were as follows:
Number of
Exercisable Options Weighted-Average
Exercise Price March 31, 2016
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163,390 $ 7.63
The following table summarizes information about stock options at March 31, 2016:
Outstanding Stock Options Exercisable
Stock Options
Range of Exercise Prices Shares
Weighted-Average Remaining
Contractual Life Weighted-Average
Exercise Price Shares Weighted-Average
Exercise Price $4.81 – $6.20
. . . . . . . . . . . . . . . . . . 2,015,995 9.3 Years $ 5.06 0 $ 0 $7.53 – $7.72
. . . . . . . . . . . . . . . . . . 163,390 5.9 Years $ 7.63 163,390 $ 7.63
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options
which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input
of highly subjective assumptions including the expected stock price volatility. Because our employee stock options
have characteristics significantly different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of our employee stock options.
The Group follows FASB Accounting Standards Codification (“ASC”) 718, Accounting for Stock Options and
Other Stock-Based Compensation. Among other items, ASC 718 requires companies to record the compensation
expense for share-based awards issued to employees and directors in exchange for services provided. The amount
of the compensation expense is based on the estimated fair value of the awards on their grant dates and is
recognized over the required service periods. Our share-based awards include stock options and restricted stock
awards. For restricted stock awards, the calculation of compensation expense under ASC 718 is based on the
intrinsic value of the grant.
Warrants
As of March 31, 2016, there were warrants to purchase 334,064 shares of common stock outstanding. A summary
of the terms of the outstanding warrants as of March 31, 2016 is as follows:
Outstanding and Exercisable
Warrants
Exercise Price
Per Warrant
Weighted-
Average Remaining
Contractual Life
Weighted-
Average Exercise Price
F - 220
Balance, April 1, 2015
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — Granted
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334.06
4 6.84 –
7.00 1.7 6.85 Balance, March 31, 2016
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334,06
4 $ 6.85
F - 221
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
16 EMPLOYEE STOCK OPTION PLAN continued
Exercisable Warrants at March 31, 2016 were as follows:
Number of Exercisable
Warrants
Weighted-
Average Exercise Price
March 31, 2016
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309,06
4 $ 6.84
On September 11, 2012, Cover-All entered into a Loan and Security Agreement (“Loan Agreement”) by and
among Imperium Commercial Finance Master Fund, LP, a Delaware limited partnership (“Imperium”), as lender,
Cover-All Systems, Inc., a wholly-owned subsidiary of Cover-All (the “Subsidiary”), as borrower, and Cover-All
as guarantor. The Loan Agreement provided for a three-year term loan to the Subsidiary of $2,000,000 and a three-
year revolving credit line to the Subsidiary of up to $250,000, evidenced by a Revolving Credit Note in favor of
Imperium (together with the Term Note, the “Imperium Notes”). Prior to the merger with Majesco, Cover-All paid
in full the balance of the Imperium Notes.
In connection with the Loan Agreement, Cover-All issued to Imperium a five-year warrant (the “Stock Purchase
Warrant”) to purchase 1,400,000 shares of Cover-All’s common stock at an exercise price of $1.48 per share.
Cover-All also issued five-year warrants (the “Monarch Warrants”) to purchase 42,000 shares, in the aggregate, of
Cover-All’s common stock at an exercise price of $1.48 per share, to Monarch Capital Group, LLC (“Monarch”),
which acted as Cover-All’s financial adviser in connection with the loan transaction, and an officer of Monarch.
The Stock Purchase Warrants became exercisable on the date of the merger of Cover-All with Majesco. These
issued and outstanding warrants to purchase shares of Cover-All common stock were not exercised or cancelled
prior to the merger and were assumed by Majesco in accordance with their terms on the same terms and conditions
as were applicable to such warrants immediately prior to the merger, with the number of shares subject to, and the
exercise price applicable to, such warrants being appropriately adjusted based on the exchange ratio of 0.21641.
On September 1, 2015, Majesco issued to Maxim Partners LLC a five year warrant to purchase 25,000 shares of
common stock of Majesco at an exercise price of $7.00 per share. The warrant was issued in connection with the
engagement of the holder to perform certain advisory services to the Group. The number of shares issuable upon
exercise of the warrant may be reduced under certain circumstances of non-performance under the services
agreement. The warrant may be exercised at any time after September 1, 2016 and will expire, if unexercised, on
September 1, 2020. The warrant contains certain anti-dilution adjustment protection in case of certain future
issuances of securities, stock dividends, split and other transactions affecting Majesco’s securities. The holder of
the warrant is entitled to piggyback registration rights in case of certain registered securities offerings by Majesco.
The total amount of compensation expense recognized in Majesco’s Statement of Operations is as follows:
Year ended March 31,
2016
Year ended March 31,
2015
Year ended March 31,
2014
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 148 $ 41 $ 50
Research and development expenses . . . . . . . . . . . . . . . . . . . . . . 83 8 24
Selling, general and administrative expenses . . . . . . . . . . . . . . . . 517 199 247
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 748 $ 248 $ 321
F - 222
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
17 OTHER INCOME/(EXPENSES)
Other income/(expenses) consists of following:
Year ended March 31,
2016
Year ended March 31,
2015
Year ended March 31,
2014 (Loss) on derivative instruments not designated as hedges
and ineffective portion of derivative instruments designated
as
hedges
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $ (14 ) Foreign exchange gain
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 187 271 Others
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 994 289 Other income/(expenses)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 289 $ 1,181 $ 546
18 EARNINGS PER SHARE
The basic and diluted earnings/(loss) per share were as follows:
Year ended
March 31,
2016
Year ended
March 31,
2015
Year ended
March 31,
2014
Net income/(Loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,562 ) $ (651 ) $ 2,904
Basic weighted average outstanding equity shares
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35,055,00
0
30,575,00
0
30,575,00
0
Adjustment for dilutive potential common stock
Options under Majesco 2015 Equity Plan Dilutive weighted average outstanding equity shares
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35,055,00
0
30,575,00
0
30,575,00
0
Earnings per share Basic
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.10 ) $ (0.02 ) $ 0.10
Diluted
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.10 ) (0.02 ) 0.10
19 RELATED PARTIES TRANSACTIONS
The following tables summarize the liabilities to related parties:
As of March 31,
2016
As of March 31,
2015 Reorganization consideration payable to Majesco Limited for MSSIPL
business
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — $ 3,520 Reimbursable expenses payable to Majesco Limited
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 927
F - 223
927 $ 3,520
MSSIPL entered into an operating lease for its operation facilities in Mahape, India, as lessee, with Majesco
Limited, Majesco’ s parent company, as lessor. The approximate aggregate annual rent payable to Majesco Limited
under this lease agreement is expected to be $1,218. The lease is effective June 1, 2015 and expires on May 31,
2020.
MSSIPL also entered into a lease for facilities for its operations in Pune, India, with Mastek Ltd. as lessor. The
approximate aggregate annual rent payable to Mastek Ltd. under this lease agreement is expected to be $289. The
lease is effective June 1, 2015 and expires on May 31, 2020.
F - 224
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
19 RELATED PARTIES TRANSACTIONS continued
MSSIPL also entered into a lease for facilities for its operations in Ahmedabad, India, with Mastek Ltd. as lessor.
The approximate aggregate annual rent payable to Mastek Ltd. under this lease agreement is expected to be $2. The
lease was renewed in December 1, 2015 for a new term ending on October 31, 2016.
As of March 31,
2016
As of March 31,
2015 Security deposits paid to Majesco Limited by MSSIPL for use of Mahape
premises
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 634 — Security deposits paid to Mastek Ltd. by MSSIPL for use of Pune premises
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 163 — Security deposits paid to Mastek Ltd. by MSSIPL for use of Ahmedabad
premises
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1 —
Rental expenses paid by MSSIPL to Majesco Limited for use of premises for the years ended March 31, 2015 and
March 31, 2016 was $NIL and $ 1,066, respectively. Rental expenses paid by MSSIPL to Mastek Ltd. for use of
premises for the years ended March 31, 2015 and March 31, 2016 was $NIL and $272, respectively.
On September 24, 2015, MSSIPL and Mastek (UK) Limited, a wholly owned subsidiary of Mastek Ltd. (“Mastek
UK”), entered into a Joint Venture Agreement (the “Agreement”) pursuant to which the two companies agreed to
work together to deliver services to third parties under the terms of the Agreement, which services comprise the
delivery of development, integration and support services to third parties by use of Mastek Ltd.’s development,
integration and support methodologies and tools. The Agreement is effective September 24, 2015 and will remain
in force, unless terminated by either party upon three months’ notice in writing to the other of its intention to
terminate the Agreement. The consideration for each party’s performance of its obligations under the Agreement is
the performance of the other’s obligations under the same Agreement, being services to the other. The services
shall comprise in the case of Mastek Ltd., Mastek Ltd.’s development, integration and support methodologies and
tools and business development services. In the case of MSSIPL, the services comprise the provision of leading
edge technical expertise and advice. The parties will also exchange technical, business and other information.
On October 31, 2015, Majesco Sdn. Bhd., a company incorporated under the laws of Malaysia and wholly-owned
subsidiary of Majesco (“Majesco Malaysia”), entered into a Share Purchase Agreement with Mastek Ltd. pursuant
to which Majesco Malaysia purchased from Mastek Ltd. all of the issued and outstanding shares of Mastek Asia
Pacific Pte. Limited, a company incorporated under the laws of Singapore, for a total cash purchase consideration
of 381,800 Singapore Dollars (USD $276,000). The acquisition closed on November 1, 2015.
On December 2, 2015, Majesco UK Limited, a company registered in England and Wales wholly owned by
Majesco (“Majesco UK”), entered into a Services Agreement with Mastek UK, pursuant to which Mastek UK
provides certain corporate and operational support services to Majesco UK, including managed office
accommodation and facilities; managed office IT infrastructure and networks; and corporate support services,
insurance coverage and subscription to professional associations and publications. The charges for these core
services will consist of a monthly charge of 13,000 UK Pounds (USD $20,000) and a pass through of actual costs
of providing the services. Any support services by Mastek UK staff not included in the core services will be
charged on a basis to be determined separately between both parties but before provision of such services. Either
party may at any time, by notice in writing to the other party, terminate this agreement for breach or if the other
party becomes subject to insolvency issues. Either party for any reason or no reason may terminate this agreement
by providing the
F - 225
F - 226
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
19 RELATED PARTIES TRANSACTIONS continued
other party written notice of the termination ninety (90) days in advance. The Services Agreement contains
customary representations, warranties and indemnities of the parties. The effective date of this Services Agreement
is January 1, 2015. The amount paid for the years ended March 31, 2016 and March 31, 2015 were $203 and $147
respectively.
On March 1, 2016, Majesco, and Digility Inc., a Delaware corporation (“Digility”) wholly-owned by Mastek UK,
entered into a Services Agreement (the “Services Agreement”), pursuant to which Majesco will provide certain
management and operational support services to Digility, including managed office accommodation and facilities,
managed office IT infrastructure and networks, and corporate support services.
The charges for these services will consist of an initial set-up fee of $1,000, a monthly fee of $3,750 and a pass
through of actual costs of providing the services incurred in excess of the monthly fee. Either party may at any
time, by notice in writing to the other party, terminate the Services Agreement for breach or if the other party
becomes subject to insolvency issues. Either party for any reason or no reason may terminate the Services
Agreement by providing the other party written notice of the termination thirty (30) days in advance. The Services
Agreement contains customary representations, warranties and indemnities of the parties. The effective date of the
Services Agreement is March 1, 2016.
On March 1, 2016, Majesco and Digility entered into a Sublease Agreement (the “Sublease Agreement”), pursuant
to which Majesco will sublet the premises located on the first floor of 685 Route 202/206, Bridgewater, New
Jersey to Digility. Digility will pay monthly $1,200 for rent to Majesco during the term of the Sublease Agreement.
Digility will also reimburse Majesco for any costs charged by the landlord, Route 206 Associates, a New Jersey
partnership, for additional services requested by Digility. The term of the Sublease Agreement will commence on
March 1, 2016 and expire on July 31, 2017, unless terminated at an earlier date. Either party for any reason or no
reason may terminate the Sublease Agreement by providing the other party written notice of the termination thirty
(30) days in advance. The Sublease Agreement contains customary representations, warranties and indemnities of
the parties.
20 SEGMENT INFORMATION
The Group operates in one segment as software solutions provider for the insurance industry. The Group’s chief
operating decision maker (the “CODM”) of the Group is the Chief Executive Officer. The CODM manages the
Group’s operations on a consolidated basis for purposes of allocating resources. When evaluating the Group’s
financial performance, the CODM reviews all financial information on a consolidated basis. Majority of the
Group’s principal operations and decision-making functions are located in the United States.
F - 227
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
20 SEGMENT INFORMATION continued
The following table sets forth revenues by country based on the billing address of the customer:
Year
ended
March 31,
2016
Year
ended
March 31,
2015
Year
ended
March 31,
2014
USA
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 98,209 $ 62,084 $ 63,328
UK
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,935 6,828 8,684
Canada
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,175 3,209 5,715
Malaysia
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,672 5,347 3,511
Thailand
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 448 900
Singapore
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 0 0
India
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238 700 213
Others
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 666 486
$ 113,302 $ 79,282 $ 82,837
The following table sets forth the Group’s property and equipment, net by geographic region:
As of March 31,
2016 2015
USA
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,668 $ 474
India
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,788 698
United Kingdom
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 0
Malaysia
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0
Canada
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 1
$ 3,462 $ 1,173
We provide a significant volume of services to many customers. Therefore, a loss of a significant customer could
materially reduce our revenues. The Group had one customer for the year ended March 31, 2016, no customer for
the year ended March 31, 2015 and one customer for the year ended March 31, 2014 that accounted for 10% or
more of total revenue. The Group had one customer as of March 31, 2016 and no customer as of March 31, 2015
that accounted for 10% or more of total accounts receivables and unbilled accounts receivable. Presented in the
table below is information about our major customer:
Year ended March 31,
2016
Year ended March 31,
2015
Year ended March 31,
2014
F - 228
Amount
% of combined revenue Amount
% of combined revenue Amount
% of combined revenue
Customer A Revenue
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,540 10.2% $ 6,884 8.7% $ 16,386 19.8% Accounts receivables and unbilled
accounts receivable
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,295 14.4% $ 41 0.3% $ 1,873 10.9%
Customer B Revenue
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,166 5.4% $ 5,903 7.4% $ 4,769 5.8% Accounts receivables and unbilled
accounts receivable
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 923 3.1% $ 378 2.8% $ 428 2.5%
F - 229
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
21 COMMITMENTS
Capital Commitments
The Group had outstanding contractual commitments of $842 and $81 as of March 31, 2016 and 2015,
respectively for capital expenditures relating to acquisition of property, equipment and new network infrastructure.
Operating Leases
The Group leases certain office premises under operating leases. Many of these leases include a renewal option on
a periodic basis at the Group’s option, with the renewal periods extending in the range of 2 – 5 years. Rental
expense for operating leases amounted to $2,788, $2,379 and $2,040 for the year ended March 31, 2016, 2015 and
2014, respectively. The schedule for future minimum rental payments over the lease term in respect of operating
leases is set out below.
Year ended March 31, Amount
2017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,974
2018
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,793
2019
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,751
2020
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,790
2021
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695
Beyond 5 years
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 990
Total minimum lease payments
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
12,99
3
22 ACQUISITIONS
On December 14, 2014, Majesco entered into a definitive merger agreement with Cover-All. The merger was
completed on June 26, 2015. Cover-All licenses and maintains software products for the property/casualty
insurance industry throughout the United States and Puerto Rico. Majesco merged with Cover-All to expand its
insurance business in the United States.
The following table summarizes the consideration paid in the merger of Cover-All into Majesco and the amounts of
identified assets acquired and liabilities assumed at the merger date:
Fair value of consideration transferred
Common stock
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,708
Total consideration
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,720
The merger of Cover-All and Majesco was a stock-for-stock merger with each share of Cover-All common stock
issued and outstanding immediately prior to the merger converted into the right to receive the number of shares of
F - 230
Majesco common stock multiplied by the exchange ratio. The exchange ratio in the merger was 0.21641.
Accordingly, at the closing of the merger, Cover-All in the aggregate represented 16.5% of the total capitalization
of the combined company.
In the merger, 5,844,830 shares of Majesco common stock were issued to the shareholders of Cover-All and
197,081 equity incentives were issued to the holders of options and restricted stock units of Cover-All.
Consequently, common stock of Majesco is increased by $12 and additional paid in capital is increased by
$29,708.
F - 231
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
22 ACQUISITIONS continued
Recognized amount of identifiable assets acquired and liabilities assumed
Amount
Cash
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,990
Accounts receivable
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,592
Prepaid expenses and other current assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 629
Property, plant and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454
Other assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
Customer contracts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,410
Customer relationships
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,460
Technology
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,110
Defer tax asset on NOL
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459
Accounts payable
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,120 )
Accrued expenses
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (623 )
Deferred revenue
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,515 )
Capital lease liability
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (294 )
Total fair value of assets acquired
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,70
0
Fair value of consideration paid
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,72
0
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
18,02
0
The goodwill of $18,020 arising from the merger consists largely of the synergies and economies of scale expected
from combining the operations of Majesco and Cover-All. Further, though workforce has been valued, it is not
recognized separately, but subsumed in goodwill. Goodwill deductible for tax purpose amounts to $NIL.
On October 31, 2015, Majesco Malaysia entered into a Share Purchase Agreement with Mastek Ltd. for the
purchase of the issued and authorized shares of Mastek Asia Pacific Pte Limited, Singapore.
Recognized amount of identifiable assets acquired and liabilities assumed
Amount
Cash
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 212
Accounts receivable
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
F - 232
Other assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Accrued expenses
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14 )
Total fair value of assets acquired
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
Fair value of consideration paid
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
22 ACQUISITIONS continued
The following table summarizes the consideration paid to Mastek Ltd. and the amounts of identified assets
acquired and liabilities assumed at the effective date:
The changes in the varying amount of goodwill are as follows:
Changes in carrying amount of the goodwill
As of
March
31,
2016
As of
March 31
,
2015
Opening value
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,196 11,676
Addition of goodwill related to acquisition
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,079 2,520
Closing value
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,275 14,196
No impairment loss has been recognized on goodwill.
Details of identifiable intangible assets acquired are as follows:
Weighted average amortization
period (in years)
Amount assigned
Residual value
Customer contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 $ 2,410 —
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4,460 —
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3,110 —
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 $ 9,980 —
Revenues and earnings specific to the Cover-All business for the period June 26, 2015 to June 30, 2015 were $233
and $47, respectively. Revenues and earnings specific to the Cover-All business for the period July 1, 2015 to
March 31, 2016 were $17,636 and $1,260, respectively.
Pro-Forma Financial Information (Unaudited):
The following unaudited proforma financial information is presented to illustrate the estimated effect of the Cover-
All merger and Mastek Asia Pacific Pte. Limited acquisition, the related financing of funds and tax effects from
F - 233
these transactions. The unaudited proforma information for the periods set forth below gives effect to 2015 and
2014 transactions as if they had occurred as of April 1, 2014. Majesco has a fiscal year end of March 31st and
Cover-All has a fiscal year end of December 31st. The unaudited proforma financial information for the twelve
months ended March 31, 2016 and March 31, 2015 reflects the Statement of Operations of Majesco for the twelve
months ended March 31, 2016 and March 31, 2015 and Cover-All for the twelve months ended March 31, 2016
and March 31, 2015, respectively.
The unaudited proforma financial information is presented for illustrative purposes only, and is not necessarily
indicative of the financial condition or results of operations of future periods or the financial condition or results of
operations that actually would have been realized had the entities been combined during the periods presented.
F - 234
Majesco
Notes to Consolidated and Combined
Financial Statements
(All amounts are in thousands of US Dollars except per share data and as stated otherwise)
22 ACQUISITIONS continued
The following unaudited pro-forma summary presents consolidated information of Majesco as if the business
combination had occurred on April 1, 2014:
Unaudited
Pro forma
year ended
March 31,
2016
Unaudited
Pro forma
year ended
March 31,
2015 Revenue
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,475 86,262 Earnings/(loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,360 ) (748 )
There are no material nonrecurring pro forma adjustments directly attributable to the merger included in the
reported pro forma revenue and earnings. These proforma amounts have been calculated after applying Majesco’s
accounting policies and adjusting the results of Cover-All to reflect the additional depreciation and amortization
that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible
assets had been applied from April 1, 2014 with consequential tax effects.
23 NON CONTROLLING INTEREST
As of March 31, 2016, all the subsidiaries are 100% subsidiaries through direct and step down holdings and hence
non-controlling interest is Nil.
Till December 2014, in case of Vector Insurance Services LLC (‘Vector’), the Group held 90% equity interest in it.
On January 21, 2015, Vector had bought back 10% shares held by minority shareholders for a consideration of $5.
Subsequent to this buy-back, Vector signed an agreement of merger with Majesco dated February 15, 2015. The
said merger has been effected from March 5, 2015 as per approval letter received from State of Indiana dated
March 5, 2015. This merger has no impact on the group’s financial position or results of its operations.
24 QUARTERLY RESULTS
(Unaudited) Quarter ended
June 30, 2015 September 30,
2015 December 31,
2015 March 31, 2016 Revenue
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,16
3 28,208 29,625
32,30
6
Income from operations
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 (1,540 ) (2,288 ) (729 )
Net Income
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 (976 ) (1,130 ) (1,538 )
Net income/(loss) attributable to Owners of the
Company
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 (976 ) (1,130 ) (1,538 )
Basic EPS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.00 ) (0.03 ) (0.03 ) (0.04 )
Diluted EPS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.00 ) (0.03 ) (0.03 ) (0.04 )
(Unaudited) Quarter ended
F - 235
June 30, 2014 September 30,
2014 December 31,
2014 March 31, 2015 Revenue
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,88
2 19,074 21,610
21,71
6
Income from operations
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,295 ) (290 ) 1,510 (883 )
Net Income
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (862 ) (223 ) 1,369 (935 )
Net income/(loss) attributable to Owners of the
Company
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (874 ) (223 ) 1,366 (935 )
Basic EPS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.03 ) (0.01 ) 0.05 (0.03 )
Diluted EPS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.03 ) (0.01 ) 0.05 (0.03 )
F - 236
MAJESCO
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEAR ENDED MARCH 31, 2015
F - 237
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders, Majesco
We have audited the accompanying combined balance sheets of Majesco (“the Company”) (a
combination of subsidiaries and insurance related operations of Mastek Ltd.) as of March 31, 2015 and
2014, and the related combined statements of operations, comprehensive income, changes in stockholders’
equity, and cash flows for the fiscal years ended March 31, 2015 and 2014 and the nine months ended
March 31, 2013. These combined financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the combined financial statements are free of material misstatement.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present fairly, in all material
respects, the financial position of Majesco as of March 31, 2015 and 2014, and the results of their
operations and their cash flows for the fiscal years ended March 31, 2015 and 2014 and the nine months
ended March 31, 2013, in conformity with U.S. generally accepted accounting principles.
As discussed in Note 2, the accompanying combined financial statements have been derived from the
consolidated financial statements and accounting records of Mastek Ltd. and include allocations of certain
costs from Mastek Ltd. As a result, these allocations may not be reflective of the actual costs that would
have been incurred had Majesco operated as a separate entity apart from Mastek Ltd.
Certified Public Accountants and Advisors,
A Professional Corporation
Cranford, New Jersey
June 19, 2015
F - 238
Majesco
Combined Balance Sheets (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
ASSETS
CURRENT ASSETS
March 31,
2015 2014
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,262 $ 7,016
Short term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270 3,025
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305 301
Accounts receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,758 9,309
Unbilled accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,615 7,827
Deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,168 1,120
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . 2,911 2,813
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,289 31,411
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,173 1,229
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,434 1,456
Deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,182 2,441
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271 225
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,196 11,676
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 46,545 $ 48,438
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Capital lease obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17 $ 24
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities
Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
442
3,520
188
9,745
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,209 10,335
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,826 6,265
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,014 26,557
Capital lease obligation, net of current portion . . . . . . . . . . . . . . . . . . 31 43
Retirement benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term loan- bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
3,000 457
—
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,944 843
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,989 $ 27,900
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Common stock, par value $0.002 per share – 300,000,000 shares
authorized as of March 31, 2015 and 2014, 183,450,000 shares issued
and outstanding as of March 31, 2015 and 2014 . . . . . . . . . . . . . . . . $ 367 $ 367
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,743 38,412
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,798) (20,823)
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . 2,244 2,509
Total equity of common stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,556 20,465
Non-controlling Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 73
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,556 20,538
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY . . . . . . . . . . $ 46,545 $ 48,438
F - 239
Majesco
Combined Statements of Operations (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
Year ended March 31,
2015
Year ended March 31,
2014
Nine months
ended March
31, 2013
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 79,282 $ 82,837 $ 68,272
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,776 45,748 41,503
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,506 $ 37,089 $ 26,769
Operating expenses
Research and development expenses . . . . . . . . . . . . . . . $ 10,344 $ 10,102 $ 5,929
Selling, general and administrative expenses . . . . . . . . . 21,000 22,746 19,510
Restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,120 — —
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,464 $ 32,848 $ 25,439
(Loss)/Income from operations . . . . . . . . . . . . . . . . . . . . . $ (1,958) $ 4,241 $ 1,330
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 89 35
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (200) (63) (31)
Other income (expenses),net . . . . . . . . . . . . . . . . . . . . 1,181 546 73
(Loss)/Income before provision for income taxes . . . . . . . . . $ (792) $ 4,813 $ 1,407
(Benefit)/Provision for income taxes . . . . . . . . . . . . . . . (141) 1,893 981
Net (Loss)/Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (651) $ 2,920 $ 426
Less : Net income/(loss) attributable to Non-controlling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15 $ 16 $ (13)
Owners of the Company . . . . . . . . . . . . . . . . . . . . . . . (666) 2,904 439
$ (651) $ 2,920 426
Earnings per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.00) $ 0.02 $ 0.00
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.00) 0.02 0.00
Weighted average number of common shares outstanding
Basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183,450,000 183,450,000 183,450,000
F - 240
Majesco
Combined Statements of Comprehensive Income (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
Year ended March 31,
2015
Year ended March 31,
2014
Nine months
ended March
31, 2013
Net (Loss)/Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(651) $2,920 $ 426
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments . . . . . . . . . . . . . . . . (324) (14) 44
Unrealized gains on cash flow hedges . . . . . . . . . . . . . . . . . . 60 877 1,244
Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . $(264) $ 863 $1,288
Comprehensive (Loss)/Income . . . . . . . . . . . . . . . . . . . . . . . . $(915) $3,783 $1,714
Less: Comprehensive income attributable to the
non-controlling interest . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15 $ 16 $ (13)
Comprehensive (Loss)/Income attributable to Owners of the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(930) $3,767 $1,727
F - 241
Majesco
Combined Statements of Changes in Stockholders’ Equity (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
Common Stock Additional
paid-in
Accumulated
Accumulated
other
comprehensive
Non-controlling
Total
Stockholders’
Shares Amount capital deficit income interests equity
Balance as of July 1, 2012 . . . . . . . 183,450,000 $367 $37,768 $(24,166) $ 358 $ 70 $14,397
Stock based compensation . . . . . — — 323 — — — 323
Net income . . . . . . . . . . . . . . — — — 439 — (13) 426
Foreign currency translation adjustments . . . . . . . . . . . . — — — — 44 — 44
Unrealized gains on cash flow hedges . . . . . . . . . . . . . . . . — — — — 1,244 — 1,244
Balance as of March 31, 2013 . . . . . 183,450,000 $367 $38,091 $(23,727) $1,646 $ 57 $16,434
Stock based compensation . . . . . — — 321 — — — 321
Net income . . . . . . . . . . . . . . — — — 2,904 — 16 2,920
Foreign currency translation adjustments . . . . . . . . . . . . — — — — (14) — (14)
Unrealized gains on cash flow hedges . . . . . . . . . . . . . . . . — — — — 877 — 877
Balance as of March 31, 2014 . . . . . 183,450,000 $367 $38,412 $(20,823) $2,509 $ 73 $20,538
Stock based compensation . . . . . — — 248 — — — 248
Net income . . . . . . . . . . . . . . — — — (666) — 15 (651)
Reorganisation . . . . . . . . . . . . — — — 691 — — 691
Foreign currency translation adjustments . . . . . . . . . . . . — — — — (325) — (325)
Unrealized gains on cash flow hedges . . . . . . . . . . . . . . . . — — — — 60 — 60
Non-controlling interest bought back . . . . . . . . . . . . . . . . . — — 83 — — (88) (5)
Balance as of March 31, 2015 . . . . . 183,450,000 $367 $38,743 $(20,798) $2,244 $ — $20,556
F - 242
Majesco
Combined Statements of Cash Flows (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
Cash flows from operating activities
Year ended March 31,
2015
Year ended March 31,
2014
Nine months
ended March
31, 2013
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (651) $ 2,920 $ 426
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,425 2,522 3,881
Share based payment expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 248 321 323
Provision/(Recovery) for doubtful receivables . . . . . . . . . . . . . . . . . 530 (9) (41)
Deferred tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (877) 748 178
Changes in assets and liabilities:
Accounts receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,173 2,026 5,256
Unbilled accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,212 (785) 1,838
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . (24) 980 149
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (48) (129) (62)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (53) (82) (62)
Accrued expenses and other liabilities – Others . . . . . . . . . . . . . . . . (1,562) (442) (1,787)
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,439) (793) (725)
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,211 (1,423) (1,787
Retirement benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . (457) (810) 62
Net cash generated from operating activities . . . . . . . . . . . . . . . . . . . . $ 3,688 $ 3,084 $ 7,658
Cash flows from investing activities:
Purchase of Property and equipment . . . . . . . . . . . . . . . . . . . . . . . $ (775) $(1,007) $ (720)
Purchase of Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . (744) (847) (566)
Acquistion of Agile Technologies, LLC, net of $158 cash acquired . . (2,842) — Sale/(Purchase) of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,755 (2,869) (156)
Payment to related party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,907) — (Increase)/decrease in restricted cash . . . . . . . . . . . . . . . . . . . . . . . (3) (208) —
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . $(7,516) $(4,931) $(1,442)
Cash flows from financing activities:
Payment of Capital lease obligation . . . . . . . . . . . . . . . . . . . . . . . . $ (29) $ (22) $ (10)
Receipt of Term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 — —
Payment for buy back of Non-controlling Interest . . . . . . . . . . . . . . (5) — —
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,966 $ (22) $ (10)
Effect of foreign exchange rate changes on cash and cash equivalents . . 107 (432) 187
Net (Decrease)/Increase in cash and cash equivalents . . . . . . . . . . . . . . $ (755) $(2,301) $ 6.393
Cash and cash equivalents, beginning of the period . . . . . . . . . . . . . 7,016 9,317 2,924
Cash and cash equivalents at end of the period . . . . . . . . . . . . . . . . . . . $ 6,261 $ 7,016 $ 9,317
Supplementary disclosure of non-cash items
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 200 $ 64 $ 31
Cash paid for income taxes (net of refunds received) . . . . . . . . . . . . 1,278 2,238 596
Supplementary disclosure of non-cash items
Non-cash items – Assets acquired under Capital leases . . . . . . . . . . . $ 12 $ 11 $ 48
F - 243
Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
1 DESCRIPTION OF BUSINESS
Majesco (the ‘Company’) is a global technology solutions provider focusing on meeting customer
needs through the strategic application of tailored business solutions and IT services. Majesco possesses
proven experience in the life and annuity and property and casualty insurance verticals. Majesco delivers
solutions and IT services in core insurance areas including policy administration, product modelling, new
business processing, billing, claims and producer lifecycle management and distribution.
Currently, Majesco is 100% owned (directly or indirectly) by Mastek Ltd. (‘Mastek’), a public limited
company domiciled in India whose equity shares are listed on the Bombay Stock Exchange and the
National Stock Exchange (India). Mastek is currently undergoing a demerger through a scheme of
arrangement under India’s Companies Act, 1956 pursuant to which its insurance related business will be
separated from Mastek’s non-insurance related business and insurance related operations of Mastek that
were not directly owned by Majesco will be contributed to Majesco (the ‘Reorganization’). The
Reorganization has been completed on June 1, 2015.
Majesco, along with its subsidiaries, have operations in North America, Canada, the United Kingdom,
Malaysia and Thailand. Post reorganization, India operations will be included in Majesco. In connection
with the demerger all of Mastek Limited’s equity ownership interest in Majesco will be transferred to a
newly formed publicly traded company in India (named Majesco Limited) owned by shareholders of
Mastek Limited.
Merger with Cover-All Technologies Inc.
On December 14, 2014, Majesco has entered into a definitive merger agreement with Cover-All
Technologies Inc. (‘Cover-All’), an insurance software company listed on NYSE MKT, in a 100%
stock-for-stock transaction, pursuant to which Cover-All’s stockholders and the holders of its options and
restricted stock units will receive 16.5% of the outstanding shares of common stock of the combined
company with Majesco as the surviving entity.
The registration statement filled has been declared effective by the Securities and Exchange
Commission. Necessary approval from Honorable High Courts has been obtained and the said
reorganization has been completed. As a result, the meeting of shareholders of Cover-All to approve the
merger is expected to be held on June 22, 2015 and Majesco expects that the merger will be consummated
shortly thereafter. Majesco common stock would be listed on the NYSE MKT. Both companies will
continue to operate as independent entities until the closure of the merger.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation
The combined financial statements have been prepared on a ‘carve-out’ basis (assuming the
Reorganization had been effected as of July 1, 2012) and are derived from the historical consolidated
financial statements and accounting records of Mastek. All material inter-company balances and
transactions have been eliminated on combination. The combined financial statements reflect the Group’s
financial position, results of operations and cash flows in conformity with accounting principles generally
accepted in the United States (“GAAP”). The combined Balance Sheet, combined Statement of Operations
and combined Statement of cash flows of the Group may not be indicative of the Group had it been a
separate operation during the periods presented, nor are the results stated herein indicative of what the
Group’s financial position, results of operations and cash flows may be in the future.
These combined financial statements include assets and liabilities that are specifically identifiable or
have been allocated to the Group. Costs directly related to the Group have been included in the
accompanying financial statements. The Group receives service and support functions from Mastek. The
F - 244
Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
costs associated with these support functions have been allocated relative to Mastek in its entirety, which is
considered to be the most meaningful under the circumstances. The costs were allocated to the Group using
various allocation inputs, such as head count, services rendered, and assets assigned to the Group. These
allocated costs are primarily related to corporate administrative expenses, employee related costs, including
gratuity and other benefits, and corporate and shared employees. The corporate expenses of Mastek
Limited allocated to the Group amounted to $4,657, $5,423 and $4,605 for the year ended March 31, 2015,
March 31, 2014 and the nine months ended March 31, 2013, respectively.
The Group considers the expense allocation methodology and results to be reasonable for all periods
presented. These allocations may not be indicative of the actual expenses the Group may have incurred as a
separate independent public company during the periods presented nor are these costs indicative of what
the Group will incur in the future.
Mastek maintains benefit and stock-based compensation programs at the parent company level. To the
extent that Group employees participate in these programs, the Group was allocated a portion of the
associated expenses and estimated net benefit plan obligation. However, the Combined Balance Sheets do
not include any Mastek outstanding equity related to the stock-based compensation programs.
Historically, Mastek has been providing the Group with financing, cash management and other
treasury services. Most of the inter-company payable and receivable has been assumed to be settled, except
in case of non-availability of cash at the year end in a specific entity. The Group’s acquisition costs for the
insurance related businesses of Mastek under the Reorganization has been reflected under ‘Accrued
expenses and other liabilities — Related Parties’ and ‘Other liabilities — Related Parties’ in the Balance
Sheet as of March 31, 2015 and 2014, respectively, until such costs have been actually settled.
b. Use of estimates
The preparation of the combined financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and contingent liabilities as of the date of the financial statements, and the reported
amount of revenues and expenses during the reported period.
Significant estimates used in preparing these combined financial statements include revenue recognition
based on the percentage of completion method of accounting for fixed bid contracts applied to the expected
contract cost to be incurred to complete various engagements, allowances for doubtful debts, provisions for
losses on uncompleted contracts, valuation allowances for deferred taxes, identification and measurement of
unrecognized tax benefit, provision for uncertain tax positions, future obligations under employee benefit
plans, expected future cash flows used to evaluate the recoverability of long-lived assets, estimated fair
values of long-lived assets used to record impairment charges related to intangible assets and goodwill,
allocation of purchase price in business combinations, useful lives and residual value of property and
equipments and intangible assets, valuation of derivative financial instruments, goodwill, contingent
liabilities and assumptions used in valuing stock-based compensation expense.
Although the Group regularly assesses these estimates, actual results could differ materially from these
estimates. Changes in estimates are recorded in the period in which they become known. The Group bases
its estimates on historical experience and various other assumptions that it believes to be reasonable under
the existing circumstances. Actual results may differ from management’s estimates if these results differ
from historical experience or other assumptions do not turn out to be substantially accurate, even if such
assumptions were reasonable when made.
c. Foreign Currency Translation
The functional currency of the Company is the US dollar. However, Indian Rupee, Great Britain
Pounds, US Dollars, Malaysian Ringgit, Thai Baht and Canadian dollar are the functional currencies for
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2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
the Group entities located in India, the UK, the US, Malaysia, Thailand, and Canada, respectively.
Adjustments resulting from the translation of functional currency financial statements to reporting
currency are accumulated and reported as a part of Accumulated other comprehensive income, a separate
component of Stockholders’ equity.
Transactions in foreign currency are recorded at the exchange rate prevailing on the date of the
transaction. Monetary assets and liabilities denominated in foreign currency are expressed in functional
currency at the exchange rates in effect at the balance sheet date. Non-Monetary assets and liabilities
denominated in foreign currency are expressed in functional currency at the historical exchange rates.
Gains/(losses) resulting from foreign currency transactions amounting to $187, $257, $(33) for the years
ended March 31, 2015, March 31, 2014 and March 31, 2013 are included in the Combined Statement of
operations under the head Other income (expenses), net.
d. Cash and cash equivalents, investments and restricted cash
Cash and cash equivalents are comprised of cash and highly liquid investments with an original
maturity of three months or less. Cash equivalents are stated at amortized cost, which approximates their
fair value due to the short maturity of the investments.
The Group’s short-term investment portfolio is comprised primarily of time deposits. Time deposits
with banks are valued at amortized cost, which approximates their fair value.
Interest income is recognized over time on a proportionate basis.
Cash and claims to cash that are restricted as to withdrawal or use in the ordinary course of business
are disclosed separately as restricted cash, unless they are to be utilized for other than current operations in
which case they will be separately classified as noncurrent assets.
e. Property and equipment
Property and equipment are stated at actual cost less accumulated depreciation. Depreciation is
computed using the straight-line method over the estimated useful lives. The cost and the accumulated
depreciation for premises and equipment sold, retired or otherwise disposed off are removed from the
stated values and the resulting gains and losses are included in the combined Statement of Operations.
Maintenance and repairs are charged to combined Statement of Operations when incurred. Advance paid
towards acquisition of long-lived assets and cost of assets not put to use before the balance sheet date are
disclosed under the caption “capital work in progress”.
The estimated useful lives of assets are as follows:
Owned Buildings 25 – 30 years
Leasehold Improvements 5 years or over the primary period of lease whichever is less
Computers 2 years
Plant and Equipment 2 – 5 years
Furniture and Fixtures 5 years
Vehicles 5 years
Office Equipment 2 – 5 years
f. Goodwill and other intangible assets
Goodwill represents the cost of the acquired businesses in excess of the estimated fair value of assets
acquired, identifiable intangible assets and liabilities assumed. Goodwill is not amortized but is tested for
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2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
impairment at the reporting unit level at least annually or as circumstances warrant. If impairment is
indicated and the carrying value of the goodwill of a reporting unit exceeds the implied fair value of that
goodwill, then goodwill is written-down. There are no indefinite-lived intangible assets.
Intangible assets other than goodwill are amortized over their estimated useful lives on a straight line
basis. The estimated useful life of an identifiable intangible asset is based on a number of factors, including
the effects of obsolescence, demand, competition, the level of maintenance expenditures required to obtain
the expected future cash flows from the asset and other economic factors (such as the stability of the
industry, known technological advances, etc.).
The estimated useful lives of intangible assets are as follows:
Non-compete agreements 3 years
Leasehold benefit 7 years
Internal-use Software 1 – 5 years
Customer Contracts 1 year
Customer Relationships 6 years
g. Software Development Costs
The costs incurred for the development of software that will be sold, leased or otherwise marketed are
capitalized when technological feasibility has been established. In certain situations in which technological
feasibility is established by completing a working model, substantially all development costs could be
expensed when costs qualifying for capitalization are not material. Current engineering costs related to
routine updates, customer support issues, and other modifications that do not extend the life or improve the
marketability of the existing software are expensed as incurred.
h. Impairment of long-lived assets and intangible assets
The Group reviews long-lived assets and certain identifiable intangible assets subject to amortization
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. During this review, the Group re-evaluates the significant assumptions used in
determining the original cost and estimated lives of long-lived assets. Although the assumptions may vary
from asset to asset, they generally include operating results, changes in the use of the asset, cash flows and
other indicators of value. Management then determines whether the remaining useful life continues to be
appropriate or whether there has been an impairment of long-lived assets based primarily upon whether
expected future undiscounted cash flows are sufficient to support the assets’ recovery. If impairment exists,
the Group would adjust the carrying value of the asset to fair value, generally determined by a discounted
cash flow analysis.
i. Concentration of Credit Risk
Financial instruments that potentially subject the Group to concentrations of credit risk consist of
cash and cash equivalents, time deposits, derivative financial instruments and accounts receivables. The
Group maintains its cash and cash equivalents, time deposits, derivative financial instruments with banks
having good reputation, good past track record, and who meet the minimum threshold requirements under
the counterparty risk assessment process, and reviews their credit-worthiness on a periodic basis. Accounts
receivables of the Group are typically unsecured. As there is no independent credit rating of the customer
available with the Group, Management reviews the creditworthiness of customers based on their financial
position, past experience and other factors. The Group entities perform ongoing credit evaluations of their
customers’ financial condition and monitor the creditworthiness of their customers to which they grants
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2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
credit terms in the normal course of business. Refer note 20 on ’Segment information’ for details relating to
customers with revenue that accounted for 10% or more of total revenue and their outstanding total
accounts receivables and unbilled accounts receivable as of March 31, 2015 and 2014.
j. Accounts receivables and allowance for accounts receivables
Accounts receivables are recorded at invoiced amounts, net of the Group’s estimated allowances for
doubtful accounts. The Group performs ongoing credit evaluations of its customers. Allowance for
doubtful receivables is established in amounts considered to be appropriate based primarily upon write-off
history, historical collections experience, aging analysis and management’s specific evaluation of potential
losses in the outstanding receivable balances. There is judgment involved with estimating the Group’s
allowance for doubtful accounts and if the financial condition of its customers were to deteriorate, resulting
in their inability to make the required payments, the Group may be required to record additional allowances
or charges against revenues. The Group writes-off accounts receivables against the allowance when it
determines a balance is uncollectible and no longer actively pursues collection of the receivable. Amounts
recovered, if any from such debtors written off are accounted on receipt basis and disclosed as Other
income. The Group’s accounts receivables are not collateralized by any security.
k. Revenue recognition
Revenues are recognized when all of the following general revenue recognition criteria are met:
• Persuasive evidence of an arrangement exists: Evidence of an arrangement consists of a written
contract signed by both the customer and management prior to the end of the reporting period.
• Delivery or performance has occurred: The Group’s software product has met the milestones
contained in the software development contract, professional services are rendered, and any
customer acceptance provisions have been satisfied.
• Fees are fixed or determinable: Fees from customer arrangements are generally at a contractually
fixed price or based upon agreed upon time and material rates.
• Collectability is probable: Collectability is assessed on a customer-by-customer basis, based
primarily on creditworthiness as determined by credit checks and analysis, as well as customer
payment history. If it is determined prior to revenue recognition that collection of an arrangement
fee is not probable, revenues are deferred until collection becomes probable or cash is collected,
assuming all other revenue recognition criteria are satisfied.
License revenues are not accounted separately from software services revenues as professional services
are essential to the software functionality and include significant modification or customization to or
development of the underlying software code. Since these software arrangements do not qualify as a
separate unit of accounting, the software license revenues are recognized using the percentage of
completion method. When contracts contain multiple software and software-related elements (for example,
software license, maintenance and professional services) wherein Vendor-Specific Objective (‘VSOE’) exists
for all undelivered elements, we account for the delivered elements in accordance with the “Residual
Method”. VSOE of fair value for post-contract customer support services is established by a stated renewal
rates charged in stand-alone sales. VSOE of fair value of hosting services is based upon stand-alone sales of
those services.
Time and Material Contracts — Professional services revenue consists primarily of revenue received for
assisting with the development, implementation of our software, on-site support, and other professional
consulting services. In determining whether professional services revenue should be accounted as the nature
of our software products; whether they are ready for use by the customer upon receipt; the nature of our
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2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
implementation services, which typically do involve significant customization to or development of the
underlying software code; and whether milestones or acceptance criteria exist that affect the realization of
the services rendered. Substantially all of our professional services arrangements are billed on a time and
materials basis and, accordingly, are recognized as the services are performed. If there is significant
uncertainty about the project completion or receipt of payment for professional services, revenue is deferred
until the uncertainty is sufficiently resolved. Payments received in advance of rendering professional
services are deferred and recognized when the related services are performed. Work performed and expenses
incurred in advance of invoicing are recorded as unbilled receivables. These amounts are billed in the
subsequent month.
Fixed Price Contracts — For arrangements that do not qualify for separate accounting for the license
and professional services revenues, including arrangements that involve significant modification or
customization of the software, that include milestones or customer specific acceptance criteria that may
affect collection of the software license fees or where payment for the software license is tied to the
performance of professional services, software license revenue is generally recognized together with the
professional services revenue using the percentage-of-completion method. Under the percentage-of
completion method, revenue recognized is equal to the ratio of costs expended to date to the anticipated
total contract costs, based on current estimates of costs to complete the project. If there are milestones or
acceptance provisions associated with the contract, the revenue recognized will not exceed the most recent
milestone achieved or acceptance obtained. If the total estimated costs to complete a project exceed the
total contract amount, indicating a loss, the entire anticipated loss would be recognized in the current
period.
We also enter into multiple element revenue arrangements in which a customer may purchase a
combination of a software license, hosting services, maintenance, and professional services. For multiple
element arrangements that contain non-software related elements, for example our hosting services, we
allocate revenue to each element based upon VSOE of the undelivered elements, we account for the
delivered elements in accordance with the with the “Residual Method”. VSOE of fair value for the hosting,
maintenance, and other post-contract customer support services (‘PCS’) is established by a stated renewal
rate charged in stand-alone renewals of each type of PCS.
Revenue is shown net of applicable service tax, sales tax, value added tax and other applicable taxes.
The Group has accounted for reimbursements received for out of pocket expenses incurred as revenues in
the combined Statement of Operations.
l. Employee benefits
i) Provident Fund and other contribution plans: In accordance with Indian law, all employees in
India are entitled to receive benefits under the ‘Provident Fund’, which is a defined contribution
plan. Both, the employee and the employer make monthly contributions to the plan at a
predetermined rate (presently at 12%) of the employees’ basic salary. These contributions are
made to the fund which is administered and managed by the Government of India. The Group
also provides for defined contribution plans in accordance with the local laws of its Group entities.
The Group’s monthly contributions to all of the above mentioned plans are charged to Combined
Statement of Operations in the year they are incurred and there are no further obligations under
the plan beyond those monthly contributions. The Group contributed $921, $911 and $722
towards such Provident Fund and other contribution plans during the year ended March 31, 2015
March 31, 2014, and the nine months ended March 31, 2013, respectively.
ii) Superannuation Plan: The senior employees of the Indian Group entity are entitled to
superannuation, a defined contribution plan (the ‘Superannuation Plan’). The Group makes a
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2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
yearly contribution to both superannuation plan administered and managed by Life Insurance
Corporation of India (LIC) based on a specified percentage (presently at 12.5% to 15% depending
on the grade of the employee) of each covered employee’s basic salary. The Group contributed
$31, $29 and $22 towards the Superannuation Plan maintained by LIC during the year ended
March 31, 2015, March 31, 2014, and the nine months ended March 31, 2013 respectively.
iii) Pension Commitments: The Group pays contributions to a defined contribution pension scheme
for the Company and its subsidiaries. The assets of the scheme are held separately from those of
the Group in an independently administered fund. The pension cost charge represents
contributions payable by the Group to the fund and amounted to $33, $41 and $35 for the year
ended March 31, 2015, March 31, 2014, and the nine months ended March 31, 2013 respectively.
iv) Gratuity Plan: The Group provides for gratuity obligation, a defined benefit retirement plan (the
“Gratuity Plan”) covering all employees in India, when the terms of employment so provide. The
Gratuity Plan provides a lump sum payment to vested employees at retirement or termination of
employment based on the respective employee’s salary and the years of employment with the
Group. The Group determines its liability towards the Gratuity Plan on the basis of actuarial
valuation. Actuarial gains and losses arising from experience adjustments, and changes in
actuarial assumptions are recognized immediately in the combined Statement of Operations as
income or expense. These obligations are valued by independent qualified actuaries.
v) Leave encashment: Leave encashment benefit comprises of encashment of leave balances is
recognised using accrual method.
m. Financing costs
We amortize financing costs and premiums, and accrete discounts, over the remaining life of the
related debt using the effective interest amortization method. The expense is included in “Interest expense”
in our Statements of operations. We record discounts or premiums as a direct deduction from, or addition
to, the amount of the related borrowing.
n. Stock-based compensation
Stock-based compensation represents the cost related to stock-based awards granted to employees. The
Group measures stock-based compensation costs at the grant date, based on the estimated fair value of the
award and recognizes the cost on a straight-line basis (net of estimated forfeitures) over the employee
requisite service period for the entire award. Forfeitures are estimated on the date of grant and revised if
actual or expected forfeiture activity differs materially from the original estimates. The Group estimates the
fair value of stock options using a Black-Scholes valuation model. The cost is recorded in Cost of revenues,
Selling, general and administrative expenses and Research and development expenses in the combined
Statement of Operations based on the employees’ respective function.
o. Advertising and Sales commission costs
Advertising and promotion related expenses are charged to the combined Statement of Operations in
the period incurred. Advertising expense for the year ended March 31, 2015, March 31, 2014 and for the
nine months ended March 31, 2013 was approximately $1,196, $323 and $285, respectively.
Sales commissions are recognized as an expense when earned by the sales representative, generally
occurring at the time the customer order is signed.
p. Derivative Instruments
All derivative instruments are recorded in the combined Balance Sheet as either an asset or liability at
their fair value. The Group normally enters into foreign exchange forward contracts and par forward
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2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
contracts where the counter party is generally a bank, to mitigate its foreign currency risk on foreign
currency denominated inter-company balances. For derivative financial instruments to qualify for hedge
accounting, the following criteria must be met: (1) the hedging instrument must be designated as a hedge;
(2) the hedged exposure must be specifically identifiable and expose the Group to risk; and (3) it is expected
that a change in fair value of the derivative financial instrument and an opposite change in the fair value of
the hedged exposure will have a high degree of correlation. The changes in the Group’s derivatives’ fair
values are recognized in combined Statement of Operations unless specific hedge accounting and
documentation criteria are met (i.e., the instruments are accounted for as hedges).
For items to which hedge accounting is applied, the Group records the effective portion of derivative
financial instruments that are designated as cash flow hedges in Accumulated other comprehensive income,
a separate component of Stockholders’ equity, and an amount is reclassified out of accumulated other
comprehensive income into earnings to offset the earnings impact that is attributable to the risk being
hedged. Any ineffectiveness or excluded portion of a designated cash flow hedge is recognized in the
combined statement of operations. The related cash flow impacts of derivative activities are reflected as
cash flows from operating activities.
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 hedging reserve is transferred to the Statement of Operations for the year.
For derivative financial instruments that do not qualify for hedge accounting, realized gains or losses
and changes in the estimated fair value of these derivative financial instruments are recorded in Other
Income/(Expenses).
The fair value of derivatives expiring within 12 months is classified as current assets or liabilities, and
of those with longer maturity is classified as non-current assets or liabilities.
q. Income taxes
Income taxes are accounted for under the asset and liability method. Deferred income taxes reflect the
tax effect of temporary differences between asset and liability amounts that are recognized for financial
reporting purposes and the amounts that are recognized for income tax purposes. These deferred taxes are
measured by applying currently enacted tax laws. The effect on deferred tax assets and liabilities of a change
in enacted tax rates is recognized in the combined Statement of Operations in the year of change.
Valuation allowances are recognized to reduce deferred tax assets to the amount that will more likely
than not be realized. In assessing the need for a valuation allowance, management considers all available
evidence for each jurisdiction including past operating results, estimates of future taxable income and the
feasibility of ongoing tax planning strategies. When the Group changes its determination as to the amount
of deferred tax assets that can be realized, the valuation allowance is adjusted with a corresponding impact
to income tax expense in the period in which such determination is made.
The Group recognizes tax liabilities when, despite the Group’s belief that its tax return positions are
supportable, the Group believes that certain positions may not be fully sustained upon review by tax
authorities. Benefits from tax positions are measured at the largest amount of benefit that is greater than 50
percent likely of being realized upon settlement. To the extent that new information becomes available
which causes the Group to change its judgment regarding the adequacy of existing tax liabilities, such
changes to tax liabilities will impact income tax expense in the period in which such determination is made.
Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in
income tax expense.
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2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
r. Business combination
The purchase price of an acquisition is allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. To the extent the purchase price
exceeds the fair value of the net identifiable tangible and intangible assets acquired and liabilities assumed,
such excess is allocated to goodwill. The Company determines the estimated fair values after review and
consideration of relevant information, including discounted cash flows,and estimates made by
management. Acquisition-related costs are recognized separately from the acquisition and are expensed as
incurred. The cost of an acquisition also includes the fair value of any contingent consideration. Any
subsequent changes to the fair value of contingent consideration classified as liabilities are recognized in the
Statement of operations.
s. Earnings per share
Basic and diluted earnings/(losses) per share are computed as net income/(loss) divided by the
weighted-average number of common shares outstanding for the period.
3 RECENT ACCOUNTING PRONOUNCEMENTS
Recently Issued Accounting Standards
In March 2013, the FASB issued ASU No. 2013-05, Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or
Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. The amendments in this
update provide clarification regarding the release of a cumulative translation adjustment into net income
when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling
financial interest in a subsidiary or group of assets within a foreign entity. The guidance became effective
for annual reporting periods beginning after December 15, 2013, and interim periods within those annual
periods for public companies and will be effective for annual reporting periods beginning after
December 15, 2014, and interim periods within those annual periods for private companies. The Company’s
current accounting policies comply with this guidance; accordingly the Company does not expect the
amendment will have a material impact to its combined Balance Sheet or combined Statement of
Operations.
In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an
Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit
Carryforward Exists. The amendments in this update provide guidance on the presentation of unrecognized
tax benefits and will better reflect the manner in which an entity would settle, at the reporting date, any
additional income taxes that would result from the disallowance of a tax position when net operating loss
carryforwards, similar tax losses, or tax credit carryforwards exist. The guidance became effective for annual
reporting periods beginning after December 15, 2013, and interim periods within those annual periods for
public companies and will be effective for annual reporting periods beginning after December 15, 2014, and
interim periods within those annual periods for private companies. The guidance will be applied
prospectively for the year ended March 31, 2016 and interim periods of this year. The Group does not
expect the amendment will have a material impact to its Combined Balance Sheet or Combined Statement
of Operations.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASC 606),
which, when effective, will supersede the guidance in former ASC 605, Revenue Recognition. The new
guidance requires entities to recognize revenue based on the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
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3 RECENT ACCOUNTING PRONOUNCEMENTS continued
for those goods or services. The guidance is effective for annual periods beginning after December 15, 2016
and interim periods within that year for public companies and effective for annual reporting periods
beginning after December 15, 2017, and interim periods within annual periods beginning after
December 15, 2018 for private companies. Early adoption is not permitted. The Company will adopt this
standard for the year ended March 31, 2019 and interim periods of the year ended March 31, 2020. The
Group is currently evaluating the impact of this standard on its Combined Balance Sheet or Combined
Statement of Operations.
Emerging growth company
The Group is an “emerging growth company” under the federal securities laws and are subject to
reduced public company reporting requirements. In addition, Section 107 of the JOBS Act also provides
that an “emerging growth company” can take advantage of the extended transition period provided in
Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other
words, an “emerging growth company” can delay the adoption of certain accounting standards until those
standards would otherwise apply to private companies. The Group has taken the advantage of the extended
transition period for complying with new or revised accounting standards. As a result, our financial
statements may not be comparable to those of companies that comply with public company accounting
standards effective dates.
4 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Group’s financial instruments consist primarily of cash and cash equivalents, short term
investments in time deposits, restricted cash, derivative financial instruments, accounts receivables, unbilled
accounts receivable, accounts payable, contingent consideration liability and accrued liabilities. The carrying
amount of cash and cash equivalents, short term investments in time deposits, restricted cash, accounts
receivables, unbilled accounts receivable, accounts payable and accrued liabilities as of the reporting date
approximates their fair market value due to their relatively short period of time of original maturity tenure of
these instruments.
Basis of Fair Value Measurement
Fair value is defined as the exchange price that would be received for an asset or an exit price paid to
transfer a liability in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. Valuation techniques used to measure
fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The
current accounting guidance for fair value measurements defines a three-level valuation hierarchy for
disclosures as follows:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level I that are observable, unadjusted
quoted prices in markets that are not active, or other inputs that are observable or can be
corroborated by observable market data.
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4 FAIR VALUE OF FINANCIAL INSTRUMENTS continued
Level 3: Unobservable inputs that are supported by little or no market activity, which require the
Group to develop its own assumptions.The following table sets forth the financial assets,
measured at fair value, by level within the fair value hierarchy as of March 31, 2015 and 2014:
As of March 31,
2015 2014
Assets
Level 2
Derivative financial instruments (included in the following
line items in the Combined balance sheet)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28 $ 132
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15) (2)
Prepaid expenses and other current assets . . . . . . . . . . . . . 545 607
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . (13) (294)
$ 545 $ 443
Level 3
Contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (989)
$(228)
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . (723) (400)
$(1,712) $(628)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,167) $(185)
The following table presents the change in level 3 instruments:
As of March 31,
2015 2014 2013
Opening balance . . . . . . . . . . . . . . . . . . . . . . . . $ (628) $(924) $(1,084)
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,610) — —
Total (Losses)/gains recognized in Statement of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . .
(526)
(52)
22
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . — 348 138
Closing balance . . . . . . . . . . . . . . . . . . . . . . . . . $(1,712) $(628) $ (924)
Contingent consideration pertaining to the acquisition of Agile Technologies, LLC (‘Agile’) as at
March 31, 2015 and SEG Software, LLC (“SEG”) as at March 31, 2014 have been classified under level 3 as
the fair valuation of such contingent consideration has been done using one or more of the significant
inputs which are not based on observable market data.
The fair value of the contingent consideration was estimated using a discounted cash flow technique
with significant inputs that are not observable in the market. The significant inputs not supported by
market activity included our probability assessments of expected future cash flows related to our
acquisition of SEG and Agile during the earn-out period, appropriately discounted considering the
uncertainties associated with the obligation, and calculated in accordance with the terms of the asset
purchase agreement (the “SEG Agreement”) dated November 30, 2010 and the asset purchase agreement
(the “Agile Agreement”) dated December 12, 2014 respectively. The amount of total gains/(losses) included
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4 FAIR VALUE OF FINANCIAL INSTRUMENTS continued
in Statement of Operations that is attributable to change in fair value of contingent consideration arising
from acquisition of SEG were $628, $ (52) and $22 for the year ended March 31, 2015, March 31, 2014, and
the nine months ended March 31, 2013 respectively and the total (losses)/gains attributable to contingent
consideration payable for acquisition of Agile were $(102) for the year ended March 31, 2015.
The fair value of Derivative financial instruments is determined based on observable market inputs and
valuation models. The Derivative financial instruments are valued based on valuations received from the
relevant counter-party (i.e., bank). The fair value of the foreign exchange forward contract and foreign
exchange par forward contract has been determined as the difference between the forward rate on reporting
date and the forward rate on the original transaction, multiplied by the transaction’s notional amount (with
currency matching).
5 PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
As of March 31,
2015 2014
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13 $ 18
Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,907 3,809
Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,878 3,056
Furniture and Fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,179 3,144
Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 112
Office Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 618 605
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,678 $10,744
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,505) (9,515)
Property and Equipment, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,173 $ 1,229
As of March 31, 2015 and 2014, the Group has hypothecated assets with net carrying value amounting
to $45 and $73, respectively. Depreciation expense was $859, $967 and $873 for the year ended March 31,
2015, March 31, 2014, and the nine months ended March 31, 2013 respectively.
6 INTANGIBLE ASSETS
Intangible assets consist of the following:
Weighted
As of March 31, 2015 As of March 31, 2014
Average
amortisation
period (in years)
Gross
carrying
amount
Accumulated
amortization
Net
carrying
value
Gross
carrying
amount
Accumulated
amortization
Net
carrying
value
Customer contracts . . . . . . 1 $ 540 (132) 408 $ — — —
Customer relationships . . . 6 2,260 (94) 2,166
Leasehold benefit . . . . . . . 7 1,085 (1,085) — 1,085 (943) 142
Non-compete agreements . . 3 — — — 134 (134) —
Software . . . . . . . . . . . . . 3 5,553 (4,693) 860 4,931 (3,617) 1,314
Total . . . . . . . . . . . . . . . . 4 $9,438 (6,003) 3,434 $6,150 (4,694) 1,456
F - 255
Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
6 INTANGIBLE ASSETS continued
All the intangible assets have finite lives and as such are subject to amortization. Amortization expense
was $1,566 $1,555 and $3,008 for the year ended March 31, 2015 ,March 31, 2014, and the nine months
ended March 31, 2013 respectively.
The estimated aggregate amortization expense for the next five fiscal years and thereafter is as follows:
Future Year ended March 31, Amortisation
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,620
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 389
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,434
7
ACCOUNTS RECEIVABLES AND ALLOWANCE FOR DOUBTFUL DEBTS
As of March 31,
2015 2014
Customers (trade) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,322 $9,607
Less: Allowance for doubtful receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . (564) (298)
Accounts receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,758 $9,309
The Group’s credit period for its customers generally ranges from 30 – 45 days. The Group has
collectively and individually evaluated full amount of Accounts Receivables for collectibility.
As of March 31,
2015 2014 2013
Opening balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 298 $314 $ 353
Current period provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450 61 140
Reversals during current period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (110) (70) (181)
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . (74) (7) 2
Closing balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 564 $298 $ 314
The Group entities perform ongoing credit evaluations of their customers’ financial condition and
monitor the credit worthiness of their customers to which they grant credit terms in the normal course of
business. Thus it considers certain factors like historical experience and use management judgment in
assessing credit quality.
F - 256
Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
8 PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
As of March 31,
2015 2014
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 636 $ 597
Advance for expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459 423
Loans and advance to employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 128
Loans and advances to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 200
Derivative financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545 607
Advance tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,067 967
Other advances and receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 91
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,911 $3,013
Less: Allowance for doubtful loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (200)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,911 $2,813
Advance for expenses includes foreign currency advances, travel advances and advances to suppliers.
Other advances and receivables mainly include amount recoverable from statutory authorities and
miscellaneous advances.
The Group had provided advances of $Nil and $ 200 to another body corporate as of March 31, 2015
and 2014, respectively which became non-collectible and as a result, such advances were impaired by
creating an allowance for doubtful loan and written down to $Nil and $Nil as of March 31, 2015 and 2014,
respectively.
9 CAPITAL LEASE OBLIGATIONS
The Group leases vehicles under capital leases which are stated at the present value of the minimum
lease payments. The gross stated amounts for such capital leases are $74 and $112 and related accumulated
depreciation recorded under capital leases are $29 and $39, respectively as of March 31, 2015 and 2014. At
the termination of the leases, the Group has an option to receive title to the assets at no cost or for a
nominal payment.
Depreciation expenses in respects of assets held under capital leases was $19, $22 and $11 for the year
ended March 31, 2015, March 31, 2014, and the nine months ended March 31, 2013 respectively.
The following is a schedule of the future minimum lease payments under capital leases, together with
the present value of the net minimum lease payments as of March 31, 2015.
Year ended March 31, Amount
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $23
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $58
Less: Interest portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Present value of net minimum capital leases payments . . . . . . . . . . . . . . . . . . . . . . . . . . $48
F - 257
Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
10 BORROWINGS
Bank borrowing
The Company has taken a loan of $3,000 in February 2015. The loan is taken to refinance the upfront
cash payment made by Majesco related to acquisition of Agile. The loan is expected to be repaid over a
period of 3 years. The loan will bear interest at LIBOR + 2.75% and guarantee fees of .95% p.a. Interest
rate as on March 31, 2015 was 3.15%. The interest is payable half yearly at the end of the half year except
for the first installment which is deposited in advance. The loan has a roll over option at the end of tenor
subject to renewal of stand by letter of credit and re-negotiation of interest rate. The bank has right to vary
the margin over LIBOR if in its reasonable opinion it perceives a change in risk associated with the facility
and/or there are breach in terms of the agreement.
The aggregate amounts of payments of term loan year on year are as follows:
2015 – 16 2016 – 17 2017 – 18 Total
Maturities of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 750 2,250 3,000
Total transaction cost incurred for the term loan amounted to $104.
LINE OF CREDIT
On 18 November 2014, the Company entered into a secured revolving working capital line of credit
facility under which the maximum borrowing limit is $5,000. Interest rate on the said credit facility is
three-month LIBOR plus 350 basis points. The said credit facility is guaranteed by Mastek, subject to the
terms and conditions set forth in the guarantee. The agreement expires on November 11, 2015. As of
March 31, 2015, the Company had $1,470 of borrowings outstanding under this credit facility.
11 ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following: As of March 31,
2015 2014
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,935 $ 3,174
Payable to related parties as reorganization consideration . . . . . . . . . . . . . . 3,520 9,745
Statutory payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236 145
Provision for taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 890 1,137
Leave encashment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,054 1,960
Derivative financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 294
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,079 3,625
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,729 $20,080
F - 258
$132 $599 $ 2 $294
Not designated as hedging instruments
Foreign exchange forward contracts . . . . . . . . . . . . . . . . . .
$ —
$ 8
$—
$ —
$ — $ 8 $— $ —
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $132 $607 $ 2 $294
Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
12 DERIVATIVE FINANCIAL INSTRUMENTS
The following table provides information of fair values of derivative financial instruments:
Asset Liability
Noncurrent* Current* Noncurrent* Current*
As of March 31, 2015
Designated as hedging instruments under Cash Flow Hedges
Foreign exchange forward contracts . . . . . . . . . . . . . . . . . . $ 28 $545 $13 $ 15
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28 $545 $13 $ 15
As of March 31, 2014
Designated as hedging instruments under Cash Flow Hedges
Foreign exchange forward contracts . . . . . . . . . . . . . . . . . . $132 $599 $ 2 $242
Foreign exchange par forward contracts . . . . . . . . . . . . . . . . — — — 52
* The noncurrent and current portions of derivative assets are included in ‘Other assets’ and ‘Prepaid
expenses and other current assets’, respectively and of derivative liabilities are included in ‘Other
liabilities’ and ‘Accrued expenses and other liabilities’, respectively in the Combined Balance Sheet.
Cash Flow Hedges and Other derivatives
The Group uses foreign currency forward contracts and par forward contracts to hedge its risks
associated with foreign currency fluctuations relating to certain commitments and forecasted transactions.
The Group designates these hedging instruments as cash flow hedges. The use of hedging instruments is
governed by the policies of the Group which are approved by its Board of Directors.
Derivative financial instruments entered into by the Group that are not designated as hedging
instruments in hedge relationships are classified in Financial instruments at fair value through profit or loss.
The aggregate contracted USD principal amounts of the Group’s foreign exchange forward contracts
(sell) and par forward contracts (sell) outstanding as of March 31, 2015 amounted to $22,980 and $NIL
and as of March 31, 2014 amounted to $23,560 and $250, respectively. The aggregate contracted CAD
principal amounts of the Group’s foreign exchange forward contracts (sell) outstanding as of March 31,
2015 and 2014 amounted to CAD NIL and CAD 250,000. The outstanding forward contracts as of
March 31, 2015 mature between 1 month to 23 months. As of March 31, 2015, the Group estimates that
$350, net of tax, of the net gains/(losses) related to derivatives designated as cash flow hedges recorded in
accumulated other comprehensive income (loss) is expected to be reclassified into earnings within the next
12 months.
The related cash flow impacts of all of our derivative activities are reflected as cash flows from
operating activities.
The following table provides information of the amounts of pre-tax gains/(losses) recognised in and
reclassified from AOCI of derivative instruments designated as cash flow hedges:
F - 259
Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
12 DERIVATIVE FINANCIAL INSTRUMENTS continued
For the year ended March 31, 2015
Amount of
Gain/(Loss)
recognised in AOCI (effective portion)
Amount of
Gain/(Loss)
reclassified from
AOCI to
Statement of
Operations
(Revenue)
Foreign exchange forward contracts . . . . . . . . . . . . . . . . . $ 633 $ 543
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 633 $ 543
For the year ended March 31, 2014
Foreign exchange forward contracts . . . . . . . . . . . . . . . . . $ (17) $ (378)
Foreign exchange par forward contracts . . . . . . . . . . . . . . (825) (1,793)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (842) $(2,171)
For the nine months ended March 31, 2013
Foreign exchange forward contracts . . . . . . . . . . . . . . . . . $ 270 $ (2)
Foreign exchange par forward contracts . . . . . . . . . . . . . . $ 937 $ (675)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,207 $ (677)
The following table provides information of the amounts of pre-tax gains/(losses) associated with the
change in fair value of derivative instruments not designated as hedges and ineffective portion of derivative
instruments designated as hedges recognised in ‘Other income (expenses), net’ in the Combined Statements
of Operations:
For the year ended March 31, 2015
Derivative
instruments not
designated as
hedges
Derivative
instruments
designated
as hedges (ineffective portion)
Foreign exchange forward contracts . . . . . . . . . . . . . . . . . . . . $— $ —
Foreign exchange par forward contracts . . . . . . . . . . . . . . . . . . — —
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $— $ —
For the year ended March 31, 2014
Foreign exchange forward contracts . . . . . . . . . . . . . . . . . . . . $ 7 $ —
Foreign exchange par forward contracts . . . . . . . . . . . . . . . . . . — (21)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7 $(21)
For the nine months ended March 31, 2013
Foreign exchange forward contracts . . . . . . . . . . . . . . . . . . . . $ (9) $ —
Foreign exchange par forward contracts . . . . . . . . . . . . . . . . . . — (55)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (9) $(55)
F - 260
Reclassified to Revenue . . . . . . . . . . . . . . . . . . . . (543) 185 (358) 2,171 (738) 1,433 677 (230) 447
Net change . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 90 (30) 60 $1,329 (452) 877 $ 1,884 (641) 1,243
Closing balance . . . . . . . . . . . . . . . . . . . . . . . . . . $ 545 (185) 360 $ 455 (155) 300 $ (874) 297 (577)
Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
13 RETIREMENT BENEFIT OBLIGATION — GRATUITY
Employees of the Group participate in a gratuity employee benefit plan sponsored by Mastek Limited,
which is a defined benefit plan. In India, gratuity is governed by the Payment of Gratuity Act, 1972. This
plan is accounted for as multi-employer benefit plan in these combined financial statements and,
accordingly, our Combined Balance Sheets do not reflect any assets or liabilities related to these plans. Our
Combined Statements of Operations includes expense allocations for these benefits. We consider the
expense allocation methodology and results to be reasonable for all periods presented.
Plan information is as follows:
Legal name of the plan: Mastek Ltd Employees’ Group Gratuity Assurance Scheme (C. A.)
Nine Months Year ended
March 31, 2015 Year ended
March 31, 2014 ended
March 31, 2013
Group’s Total Contributions to plan . . . . . . . . . . $1,420 $701 $569
$1,420 $701 $569
Total plan assets and actuarial present value of accumulated plan benefits are as follows:
As of March 31,
2015 2014
Total plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,054 $3,600
Actuarial present value of accumulated plan benefits . . . . . . . . . . . . . . . . . . . 5,591 4,509
Total contributions received by the plan from all employers (for the period
ended) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,648
1,384
14 ACCUMULATED OTHER COMPREHENSIVE INCOME
Changes in accumulated other comprehensive income by component was as follows:
Year ended March 31, 2015
Year ended March 31, 2014
Nine months ended March 31, 2013
Other comprehensive income
Foreign currency translation adjustments
Before
tax Tax
effect Net of Tax
Before
tax Tax
effect Net of Tax
Before
tax Tax
effect Net of Tax
Opening balance . . . . . . . . . . . . . . . . . . . . . . . . $2,209 — 2,209 $2,223 — 2,223 $ 2,179 — 2,179
Change in foreign currency translation adjustments . . . (325) — (325) (14) — (14) 44 — 44
Closing balance . . . . . . . . . . . . . . . . . . . . . . . . . . $1,884 — 1,884 $2,209 — 2,209 $ 2,223 — 2,223
Unrealized gains/(losses) on cash flow hedges
Opening balance . . . . . . . . . . . . . . . . . . . . . . . . $ 455 (155) 300 $ (874) 297 (577) $(2,758) 938 (1,820)
Unrealized gains/(losses) on cash flow hedges . . . . . . 633 (215) 418 (842) 286 (556) 1,207 (411) 796
F - 261
Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
15 INCOME TAXES
Year ended March 31,
2015
Year ended March 31,
2014
Nine months ended
March 31, 2013
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(3,351) $2,954 $1,461
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,559 1,859 (54)
(Loss) / Income before provision for income taxes . . . . . . . $ (792) $4,813 $1,407
The Group’s (provision)/benefit for income taxes consists of the following:
Current:
Year ended March 31,
2015
Year ended March 31,
2014
Nine months ended March 31,
2013
U.S. Federal and state . . . . . . . . . . . . . . . . . . . . . . . . . $ 142 $ 995 $1,509
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,004 189 94
Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,146 $1,184 $1,603
Prior Period – Current Tax:
U.S. Federal and state . . . . . . . . . . . . . . . . . . . . . . . . . $ (410) $ (39) $ (800)
Total Prior Period – Current Tax . . . . . . . . . . . . . . . . . . $ (410) $ (39) $ (800)
Deferred:
U.S. Federal and state . . . . . . . . . . . . . . . . . . . . . . . . . $(1,326) $ 350 $ 202
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449 398 (24)
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (877) $ 748 $ 178
Provision for income taxes recognized in Statement of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (141) $1,893 $ 981
The total income tax expense differs from the amounts computed by applying the statutory federal
income tax rate of 39.3% as follows:
Year ended Year ended Nine months ended March 31,
2015 March 31,
2014 March 31,
2013
Net (loss) / income before taxes . . . . . . . . . . . . . . . . . . . . . . (792) 4,813 1,407
Computed tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . (311) 1,891 553
Non-deductible expenses
– Stock based compensation . . . . . . . . . . . . . . . . . . . . . . .
97
126
127
– Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 164 910
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302 (5) 154
Tax charge/(credit) of earlier year assessed in current year . . . (172) 159 (626)
Net tax credit on R&D and Sec 199 deduction . . . . . . . . . . . (238) (197) (174)
Difference arising from different tax jurisdiction . . . . . . . . . . 90 (141) (32)
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12) (104) 69
Total taxes recognized in Statement of Operations. . . . . . . . . . (141) 1,893 981
F - 262
Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
15 INCOME TAXES continued
Significant components of activities that gave rise to deferred tax assets and liabilities included on the
Balance Sheet were as follows:
As of March 31,
2015 2014
Deferred tax assets / (liability):
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
908
1,087
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 743 971
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,188 1,276
Allowance for impairment of accounts receivables . . . . . . . . . . . . . . . . . . . . . . 55 68
Carry forwarded income tax losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,582 536
Tax credit for R&D expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 195
Derivative financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (185) (150)
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 309
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,460 4,292
Less: Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,110) (731)
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,350 3,561
Current portion of deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,168 1,120
Non-current portion of deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,182 2,441
A valuation allowance is established attributable to deferred tax assets recognised on carry forward tax
losses and tax credit for R&D expenses by the Group where, based on available evidence, it is more likely
than not that they will not be realized. Significant management judgment is required in determining
provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against
deferred tax assets. The valuation allowance is based on the Group’s estimates of taxable income by
jurisdiction in which the Group operates and the period over which deferred tax assets will be recoverable.
The change in valuation allowance is $379, $(69) and $157 for the years ended March 31, 2015 and 2014,
and for the nine months ended March 31, 2013 respectively.
The Group entity in Canada has recognized valuation allowance on Deferred income tax assets
recognised on carry-forward losses and tax credit for R&D expenses amounting to $2,368 and $169 as of
March 31, 2015, $1,728 and $195 as of March 31, 2014 and $2,052 and $164 as of March 31, 2013
respectively because it is not probable that future taxable profit will be available against which these
temporary difference can be utilized.These carry forward losses and tax credit for R&D expenses do not
have any expiry date.
The Group entity in Thailand has recognized valuation allowance on Deferred income tax assets
recognised on carry-forward losses amounting to $1,032 as of March 31, 2015, $NIL as of March 31, 2014
and $NIL as of March 31, 2013 respectively because it is not probable that future taxable profit will be
available against which these temporary difference can be utilized.These carry forward losses are subject to
expiration beginning in 2020.
F - 263
Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
15 INCOME TAXES continued
Changes in unrecognised income tax benefits were as follows:
As of March 31,
2015 2014 2013
Opening balance . . . . . . . . . . . . . . . . . . . . . . . $172 $ 80 $—
Increase in unrecognized tax benefits – due to tax
positions taken in current period for prior
periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 92 80
Closing balance . . . . . . . . . . . . . . . . . . . . . . . . $310 $172 $80
As of March 31, 2015, the entire balance of unrecognised income tax benefits would affect the Group’s
effective income tax rate, if recognised. Significant changes in the amount of unrecognized tax benefits are
not reasonably possible within the next 12 months from the reporting date. The Group includes interest and
penalties relating to unrecognized tax benefits within the provision for income taxes. The total amount of
accrued interest and penalties as of March 31, 2015, 2014, and 2013 is $NIL, $NIL, and $NIL respectively.
The amount of interest and penalties expenses for the year ended March 31, 2015 2014 and for the nine
months ended March 31, 2013 is $NIL, $NIL and $NIL, respectively.
Majesco and Majesco Software and Solutions Inc. file a consolidated income tax return, and the
provision for income tax for the year ended March 31, 2015, 2014 and for the nine months ended ended
March 31, 2013 has been made accordingly.
There were no undistributed earnings in Majesco and its US subsidiaries as of March 31, 2015 and
2014. The remaining earnings of the Company from its non-US subsidiaries are considered to be
permanently reinvested. As of March 31, 2015 and 2014, the cumulative amounts of such undistributed
earnings were $2,557 and $1,271, respectively.
The determination of the amount of the unrecognized deferred tax liability relating to undistributed
earnings is not practicable because numerous possible methods could be used to facilitate the repatriation of
earnings to the U.S., and each would require evaluation of withholding taxes, evaluation of the local
taxability of dividends as well as an analysis of the Company’s historical tax position and the ability to use
foreign tax credits. Furthermore, due to the Company’s complex legal structure, the number of jurisdictions
involved, and the layers of regulatory requirements, all of which would have to be evaluated to determine
the amount of allowable dividends between legal entities and ultimately to the U.S., such an effort would
require significant amount of Company resources. Because any estimate would not be meaningful due to
the numerous assumptions upon which it would be based, and because of the significant resources, this
exercise would require, the Company has determined that it is not practical to estimate the amount of
unrecognized deferred tax liabilities.
In US and India, the income tax returns are subject to examination by the appropriate tax authorities
for the year ended June 30, 2010 and onwards and March 31, 2011 and onwards, respectively.
16 EMPLOYEE STOCK OPTION PLAN
Certain employees of the Group participate in Mastek Limited’s employee stock option plan. Under
this plan, Mastek grants options to employees of Mastek and its subsidiaries which are subject to service
conditions. Options issued under the various plans have varying terms as provided in separate stock option
agreements and vest in a graded manner over a maximum period of 4 years and expire within a maximum
period of 11 years from the date of grant. New equity shares of Mastek are issued under the various plans
upon exercise of these stock options.
F - 264
Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
16 EMPLOYEE STOCK OPTION PLAN continued
The summary of the various Mastek’s employee stock option plans is as follows:
Particulars Plan III Plan IV Plan V Plan VI Plan VII
Years of issue 2004 2007 2008 2010 2013
No. of stock options 1,400,000* 1,000,000 1,500,000 2,000,000 2,500,000
First vesting of
stock options
Completion of
1 Year from
the grant date
Completion of
1 Year from
the grant date
Completion of
1 Year from
the grant date
Completion of
1 Year from
the grant date
Completion of
1 Year from
the grant date
Exercise Period Within 2 Years
from the date
of vesting
Exercise Price Market Price on
the grant date
Within 7 Years
from the date
of vesting
Market Price on
the grant date
Within 7 Years
from the date
of vesting
Refer below
note**
Within 7 Years
from the date
of vesting
Refer below
note**
Within 7 Years
from the date
of vesting
Refer below
note**
* In April 2006, the number of stock options was increased to 1,400,000 stock options because Mastek
issued bonus shares in the ratio of 1:1.
** Determined by the Mastek’s Compensation Committee. Such price may be the face value of the share
from time to time or may be the Market Price on the date of grant or any price as may be decided by
the Mastek’s Compensation committee.
The total amount of compensation expense recognised in Majesco’s Statement of Operations is as
follows:
Year ended
March 31, 2015
Year ended
March 31, 2014
Nine months
ended March 31, 2013
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . $ 41 $ 50 $ 17
Research and development expenses . . . . . . . . . . 8 24 18
Selling, general and administrative expenses . . . . 199 247 288
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $248 $321 $323
As of March 31, 2015, the total future compensation cost related to non-vested options not yet
recognized in the Statement of Operations was $1,352 and the weighted average period over which these
awards are expected to be recognized was 2.58 years. The weighted average remaining contractual life of
options expected to vest as of March 31, 2015 is 9.58 years.
F - 265
Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
16 EMPLOYEE STOCK OPTION PLAN continued
Activity in the stock options granted under the Mastek’s stock option plans granted to Majesco’s
employees during the year was as follows:
Year ended March 31, 2015
Weighted
Year ended March 31, 2014
Weighted
Nine months ended March 31, 2013
Weighted
Particulars
Number
of
options
Average
Exercise
Price*
Number
of
options
Average
Exercise
Price*
Number
of
options
Average
Exercise
Price*
Outstanding at the beginning of the year . . . . . . . 1,337,775 $2.85 858,623 $3.23 860,575 $3.64
Granted during the year . . . . . . . . . . . . . . . . . . . 848,389 2.37 563,750 2.31 40,000 2.42
Forfeited during the year . . . . . . . . . . . . . . . . . . (546,805) 2.94 (82,598) 3.43 (30,418) 3.19
Expired during the year . . . . . . . . . . . . . . . . . . . (300) 5.07 (2,000) 5.87 (11,534) 5.81
Exercised during the year . . . . . . . . . . . . . . . . . . (143,294) 2.08 — — — —
Transfer adjustments . . . . . . . . . . . . . . . . . . . . . 103,250 2.27 — — — —
Outstanding at the end of the year . . . . . . . . . . . . . 1,599,015 $1.45 1,337,775 $2.85 858,623 3.57
Exercisable at the end of the year . . . . . . . . . . . . . 503,156 $2.33 422,387 $4.00 297,038 5.05
* The per share value has been converted at year end rate 1 US$ = Rs. 62.50 ,Rs. 59.92 and Rs. 54.29 as
of March 31, 2015, 2014 and 2013, respectively.
The weighted average grant date fair values of options granted during the year ended March 31, 2015,
2014 and for the nine months ended March 31, 2013 is $2.31, $1.08 and $1.23, respectively per option. The
weighted average grant date fair value of vested options as of March 31, 2015 and 2014 is $1.41 and $2.05,
respectively per option. The Aggregate Intrinsic Value of options outstanding is $263 and options
exersicable is NIL as of March 31, 2015.
The Group calculated the fair value of each option grant on the date of grant using the Black-Scholes
pricing method with the following assumptions:
As of March 31,
Variables (range) 2015 2014 2013
Expected term of share options . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6 Years
8.70%
6 Years
7.90%
6 Years
8.12%
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47.77% 48.94% 49.97%
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.56% 2.91% 1.54%
The volatility is determined based on annualized standard deviation of the continuously compounded
rate of return on the stock over the time to maturity of the options. The risk free interest rates are
determined using the expected life of options based on the zero-coupon yield curve for Government
Securities in India. The expected dividend is based on the average dividend yields for the preceding seven
years. Weighted average price is based on latest available closing market price on the stock exchange with
the highest trading volume on the date of grant.
F - 266
Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
16 EMPLOYEE STOCK OPTION PLAN continued
Summary of outstanding options as of March 31, 2015 is as follows:
Number of
shares arising
Wtd. Avg.
Wtd. Avg.
remaining
Exercise Price Range* out of options Exercise Price* contractual life
$0.1 – $3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,342,000 2.21 9.72
$3.1 – $6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247,015 4.38 2.84
$6.1 – $7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 6.38 5.79
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,599,015 2.57 8.63
Summary of exercisable options as of March 31, 2015 is as follows:
Number of
shares arising
Wtd. Avg.
Wtd. Avg.
remaining
Exercise Price Range* out of options Exercise Price* contractual life
$0.1 – $3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271,141 1.94 8.02
$3.1 – $6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222,015 4.40 4.82
$6.1 – $7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 6.38 5.79
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503,156 3.12 6.56
* The per share value has been converted at year end rate 1 US$ = Rs 62.50 as of March 31, 2015.
In accordance with SAB Topic 14, Majesco uses the simplified method for estimating the expected
term when measuring the fair value of employee stock options using the Black-Scholes option pricing
model. Majesco believes the use of the simplified method is appropriate due to the employee stock options
qualifying as “plain-vanilla” options under the following criteria established by SAB Topic 14:
• stock options are granted at-the-money;
• exercisability is conditional only on the completion of a service condition through the vesting
date;
• employees who terminate their service prior to vesting forfeit the options;
• employees who terminate their service after vesting are granted limited time to exercise their stock
options (typically 30 - 90 days) and;
• stock options are nontransferable and nonhedgable
Given our limited history with employee grants, we use the “simplified” method in estimating the
expected term for our employee grants. The “simplified” method, as permitted by applicable regulations, is
calculated as the average of the time-to-vesting and the contractual life of the options.
F - 267
Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
17 OTHER INCOME/(EXPENSES)
Other income/(expenses) consists of following:
(Loss) on derivative instruments not designated as hedges
and ineffective portion of derivative instruments
Year ended March 31,
2015
Year ended March 31,
2014
Nine months ended
March 31, 2013
designated as hedges . . . . . . . . . . . . . . . . . . . . . . . . $ — $ (14) $ (65)
Foreign exchange gain . . . . . . . . . . . . . . . . . . . . . . . . . 187 271 32
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 994 289 106
Other income/(expenses) . . . . . . . . . . . . . . . . . . . . . . . . $1,181 $546 73
18 EARNINGS PER SHARE
The basic and diluted earnings/(loss) per share were as follows:
Year ended March 31,
2015
Year ended March 31,
2014
Nine months ended
March 31, 2013
Net income/(Loss) . . . . . . . . . . . . . . . . . . . . . $ (651) $ 2,904 $ 439
Basic and dilutive weighted average outstanding
equity shares . . . . . . . . . . . . . . . . . . . . . . . 183,450,000 183,450,000 183,450,000
Earnings per share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.00) $ 0.02 $ 0.00
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.00) 0.02 0.00
19 RELATED PARTIES TRANSACTIONS
The following tables summarize the liabilities with related parties:
As of March 31,
2015
As of March 31,
2014
Reorganization consideration payable to Majesco Ltd for MSSIPL . . . . . . $3,520 $3,672
Reorganization consideration payable to Mastek Ltd for Mastek MSC Sdn
Bhd., Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3,477
Reorganization consideration payable to Mastek Ltd for Majesco UK Ltd . . — 1,871
Reorganization consideration payable to Mastek Ltd for Majesco Canada
Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 725
$3,520 $9,745
20 SEGMENT INFORMATION
The Group operates in one segment as software solutions provider for the insurance industry. The
Group’s chief operating decision maker (the “CODM”) of the Group is the Chief Executive Officer. The
CODM manages the Group’s operations on a consolidated basis for purposes of allocating resources. When
evaluating the Group’s financial performance, the CODM reviews all financial information on a
consolidated basis. Majority of the Group’s principal operations and decision-making functions are located
in the United States.
F - 268
Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
20 SEGMENT INFORMATION continued
The following table sets forth revenues by country based on the billing address of the customer:
Year ended March 31,
2015
Year ended March 31,
2014
Nine months ended March 31,
2013
USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $62,084 $63,328 $53.324
UK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,828 8,684 7,470
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,209 5,715 3,449
Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,347 3,511 2,866
Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448 900 758
India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700 213 402
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666 486 3
$79,282 $82,837 $68,272
The following table sets forth the Group’s property and equipment, net by geographic region:
As of March 31,
2015 2014
USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 474 $ 556
India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 698 673
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
—
—
—
$1,173 $1,229
We provide a significant volume of services to many customers. Therefore, a loss of a significant customer
could materially reduce our revenues. The Group had no customer for the year ended March 31,
2015 ,one customer for the year ended March 31, 2014 and two customer for the nine months period ended
March 31, 2013 that accounted for 10% or more of total revenue. The Group had no customer as of
March 31, 2015 and one customer as of March 31, 2014 that accounted for 10% or more of total accounts
receivables and unbilled accounts receivable. Presented in the table below is information about our major
customer:
Year ended March 31, 2015
% of
combined
Year ended March 31, 2014
% of
combined
Nine months ended March 31, 2013
% of
combined
Customer A
Amount revenue Amount revenue Amount revenue
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . $6,884 8.7% $16,386 19.8% $13,350 19.6%
Accounts receivables and unbilled accounts
receivable . . . . . . . . . . . . . . . . . . . . . . . . $ 41 0.3% $ 1,873 10.9% $ 2,309 12.6%
Customer B
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . $5,903 7.4% $ 4,769 5.8% $ 7,120 10.4%
Accounts receivables and unbilled accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . $ 378 2.8% $ 428 2.5% $ 1,266 6.9%
F - 269
Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
21 COMMITMENTS
Capital Commitments
The Group had outstanding contractual commitments of $81 and $33 as of March 31, 2015 and 2014,
respectively for capital expenditures relating to acquisition of property, equipment and new network
infrastructure.
Operating Leases
The Group leases certain office premises under operating leases. Many of these leases include a renewal
option on a periodic basis at the Group’s option, with the renewal periods extending in the range of 2 – 5
years. Rental expense for operating leases amounted to $2,379, $2,040 and $1,472 for the year ended
March 31, 2015, 2014 and for the nine months ended March 31, 2013, respectively. The schedule for future
minimum rental payments over the lease term in respect of operating leases is set out below.
Year ended March 31, Amount
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 655
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Beyond 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Total minimum lease payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,045
22 ACQUISITIONS
On December 12, 2014, Majesco entered into an agreement with Agile to acquire its technology
management consulting business. The acquisition was completed effective as of January 1, 2015. Agile is
innovative technology management consulting company, providing a unique blend of premium information
technology (‘IT’) services to customers located throughout the United States. Majesco acquired Agile to
expand its insurance business in US.
The following table summarizes the consideration transferred to acquire Agile and the amounts of
identified assets acquired and liabilities assumed at the acquisition date:
Fair value of consideration transferred
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,000
Deferred payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,430
Contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,610
Total consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,040
F - 270
Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
22 ACQUISITIONS continued
Recognized amount of identifiable assets acquired and liabilities assumed
Amount
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 158
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,152
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Customer contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2260
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (307)
Accrued payroll and payroll taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (283)
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (95)
Total fair value of assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,520
Fair value of consideration paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,040
Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,520
Acquisition of Agile includes a contingent consideration arrangement that requires additional
consideration to be paid by Majesco to the sellers of Agile on an annual basis based on meeting certain
revenue, EBITDA and new business target norms. The range of the undiscounted amounts Majesco could
pay under contingent consideration agreement is between zero and $ 3,510. The fair value of contingent
consideration recognized on the acquisition date of $ 1,610 was estimated by applying discounted cash flow
approach. That measure is based on significant Level 3 inputs not observable in market. Key assumptions
include:
1. A discount rate of 25%
2. Probability of payment to be made by Majesco as 100%
As of March 31, 2015, the contingent consideration was re-measured at its fair value. The change in
fair value amounted to $102 which was charged to Statement of Operations and credited to contingent
consideration liability.
The goodwill of $ 2,520 arising from the acquisition consists largely of the synergies and economies of
scale expected from combining the operations of Majesco and Agile. Further, though workforce has been
valued, it is not recognized separately, but subsumed in goodwill. Goodwill deductible for tax purpose
amounts to $ 710.
The changes in the varying amount of goodwill are as follows:
Changes in carrying amount of the goodwill
As of March 31,
2015 2014
Opening value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,676 11,676
Addition of goodwill related to acquisition of Agile . . . . . . . . . . . . . . . . . . 2,520 —
Closing value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,196 11,676
No impairment loss has been recognised on goodwill.
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Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
22 ACQUISITIONS continued
Details of identifiable intangible assets acquired are as follows: Weighted average
amortisation
period (in years)
Amount
assigned
Residual
value
Customer contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 $ 540 —
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2,260 —
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 $2,800 —
Revenues and gross profit specific to the Agile business for the period January 1, 2015 to March 31,
2015 were $2,446 and $849, respectively. As the Company has begun eliminating overlapping processes and
expenses and integrating its products and sales efforts with those of the acquired Agile business, it is
impractical to determine the earnings specific to the Agile business for the period January 1, 2015 to
March 31, 2015, included in the Statement of operations.
Pro-Forma Financial Information (Unaudited):
The following unaudited pro-forma financial information is presented to illustrate the estimated effect
of the Agile asset acquisition, the related financing of funds and tax effects from these transactions.
The unaudited pro-forma information for the periods set forth below gives effect to 2015 and 2014
acquisitions as if they had occurred as of April 1, 2013. Majesco has a fiscal year-end of March 31st and
Agile has a fiscal year-end of December 31st. The unaudited pro-forma financial information for the fiscal
year ended March 31, 2015 and March 31, 2014 reflects the Statement of Operations of Majesco for its
fiscal year ended March 31, 2015 and March 31, 2014 and of Agile for 9 months ended September 30, 2014
and fiscal year ended December 31, 2013.
The unaudited pro-forma financial information are presented for illustrative purposes only, and are not
necessarily indicative of the financial condition or results of operations of future periods or the financial
condition or results of operations that actually would have been realized had the entities been combined
during the periods presented.
The following unaudited pro-forma summary presents consolidated information of Majesco as if the
business combination had occurred on April 1, 2013:
Unaudited
Pro forma
year ended March 31, 2015
Unaudited
Pro forma
year ended March 31, 2014
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,916 91,191
Earnings/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (756) 1,642
There are no material non-recurring pro forma adjustments directly attributable to the business
combination included in the reported pro forma revenue and earnings. These pro-forma amounts have been
calculated after applying Majesco’s accounting policies and adjusting the results of Agile to reflect the
additional depreciation, amortization, and interest expense that would have been charged assuming the fair
value adjustments to property, plant and equipment and intangible assets had been applied from April 1,
2013 with consequential tax effects.
During the year ended March 31, 2015, Majesco incurred $104 as acquisition related costs. These
expenses are included in statement of operations for the year ended March 31, 2015. However, the pro
forma income from operations for the year ended March 31, 2015 was adjusted to exclude $104 of
acquisition related cost. Such cost was included in the pro forma income from operations for the year ended
March 31, 2014.
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Majesco
Notes to Combined Financial Statements (All amounts are in thousands of US Dollars except per share data and as stated otherwise)
23 NON CONTROLLING INTEREST
The subsidiaries of the Company are all 100% subsidiaries through direct and step down holdings
except in case of Vector Insurance Services LLC (‘Vector’), where the Group holded 90% equity interest till
December 2014.
ASC 810 ‘Consolidation’ requires that the non-controlling interest continue to be attributed its share of
losses even if that attribution results in a deficit non-controlling interest balance. The Group is attributing
relevant gains and losses to such non-controlling interest for every financial year. During the year ended
March 31, 2015, 2014, and the nine months period ended March 31, 2013 the profit attributable to the
holders of the non-controlling interest of Vector amounted to $15, $16 and $(13), respectively.
On January 21, 2015, Vector had bought back 10% shares held by minority shareholders for a
consideration of $5. On acquisition, group reversed the amount payable to non-controlling interest of $88
and the balance of $83 was recorded as additional paid-in-capital. Subsequent to this buy-back, Vector
signed an agreement of merger with Majesco dated February 15, 2015. The said merger has been effected
from March 5, 2015 as per approval letter received from State of Indiana dated March 5, 2015. This merger
has no impact on the group’s financial position or results of its operations.
24 SUBSEQUENT EVENTS
For the combined financial statements as of and for the years ended March 31, 2015 and March 31,
2014, we have evaluated subsequent events through June 18, 2015, the date the combined financial
statements were available to be issued and determined that no subsequent events had occurred that would
require additional disclosure.
25 QUARTERLY RESULTS
(Unaudited) Quarter ended
June 30, 2014 September 30, 2014 December 31, 2014 March 31, 2015
Revenue. . . . . . . . . . . . . . . . . . . . . . . . . 16,882 19,074 21,610 21,716
Income from operations . . . . . . . . . . . . . . (2,295) (290) 1,510 (883)
Net Income . . . . . . . . . . . . . . . . . . . . . . (862) (223) 1,369 (935)
Net income/(loss) attributable to Owners of
the Company . . . . . . . . . . . . . . . . . . .
(874)
(223)
1,365
(935)
Basic EPS . . . . . . . . . . . . . . . . . . . . . . (0.00) (0.00) 0.01 (0.01)
Diluted EPS . . . . . . . . . . . . . . . . . . . . . (0.00) (0.00) 0.01 (0.01)
(Unaudited) Quarter ended
June 30, 2013 September 30, 2013 December 31, 2013 March 31, 2014
Revenue . . . . . . . . . . . . . . . . . . . . . . . . 21,725 20,368 22,200 18,544
Income from operations . . . . . . . . . . . . . 885 1,846 3,036 (1,526)
Net Income . . . . . . . . . . . . . . . . . . . . . . 571 1,529 1,762 (943)
Net income/(loss) attributable to Owners of
the Company . . . . . . . . . . . . . . . . . . .
564
1,531
1,755
(946)
Basic EPS . . . . . . . . . . . . . . . . . . . . . . 0.00 0.01 0.01 (0.01)
Diluted EPS . . . . . . . . . . . . . . . . . . . . . 0.00 0.01 0.01 (0.01)
F - 273
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of New York, State of New York, on the 19th day of June 2015.
MAJESCO
By: /s/ Ketan Mehta
Ketan Mehta
President and Chief Executive Off icer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form
10-K has been signed by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Signature Title Date
/s/ Ketan Mehta
Ketan Mehta
President and Chief Executive Officer
(Principal Executive Officer)
June 19, 2015
/s/ Farid Kazani
Farid Kazani
Chief Financial Officer and Treasurer
(Principal Financial Officer)
June 19, 2015
/s/ Bithindra N. Bhattacharya
Bithindra N. Bhattacharya
Finance Controller
(Principal Accounting Officer)
June 19, 2015
/s/ Arun K. Maheshwari
Arun K. Maheshwari
Director June 19, 2015
/s/ Ashank Desai
Ashank Desai
Director June 19, 2015
/s/ Atul Kanagat
Atul Kanagat
Director June 19, 2015
F - 274
EXHIBIT INDEX
2.1 Agreement and Plan of Merger, dated as of December 14, 2014, by and between Majesco and
Cover-All(1)
2.2 Amendment No. 1 to Agreement and Plan of Merger dated as of February 18, 2015, by and
among Majesco, Cover-All and RENN(1)
3.1 Amended and Restated Articles of Incorporation of Majesco, dated March 20, 2011, as
amended (incorporated by reference to Exhibit 3.1 to Majesco’s registration statement on form
S-4 (333-202180) filed on April 1, 2015)
3.2 Bylaws of Majesco, dated April 6, 1993, as amended (incorporated by reference to Exhibit 3.3
to Majesco’s registration statement on form S-4 (333-202180) filed on April 1, 2015)
4.1 Form of common stock certificate of Majesco(incorporated by reference to Exhibit 4.1 to
Majesco’s registration statement on form S-4 (333-202180) filed on April 1, 2015)
10.1+ Form of Majesco Indemnification Agreement with directors and executive officers
(incorporated by reference to Exhibit 10.1 to Majesco’s registration statement on form S-4
(333-202180) filed on April 1, 2015)
10.2+ Majesco 2015 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to Majesco’s
registration statement on form S-4 (333-202180) filed on April 1, 2015)
10.3+ Form of Incentive Stock Option Award Agreement (incorporated by reference to Exhibit 10.4
to Majesco’s registration statement on form S-4 (333-202180) filed on April 1, 2015)
10.4+ Form of Non-Qualified Stock Option Award Agreement (incorporated by reference to Exhibit
10.5 to Majesco’s registration statement on form S-4 (333-202180) filed on April 1, 2015)
10.5+ Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.6 to
Majesco’s registration statement on form S-4 (333-202180) filed on April 1, 2015)
10.6+ Form of Employee Stock Option Scheme of Majesco Limited — Plan I (incorporated by
reference to Exhibit 10.7 to Majesco’s registration statement on form S-4 (333-202180) filed on
April 1, 2015)
10.7+ Form of Option Award Letter (incorporated by reference to Exhibit 10.8 to Majesco’s
registration statement on form S-4 (333-202180) filed on April 1, 2015)
10.8+ Form of Majesco Performance Bonus Plan (incorporated by reference to Exhibit 10.9 to
Majesco’s registration statement on form S-4 (333-202180) filed on April 1, 2015)
10.9+ Form of Majesco Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.10
to Majesco’s registration statement on form S-4 (333-202180) filed on April 1, 2015)
10.10+ Employment Letter Agreement between Majesco and Ketan Mehta, dated as of September 4,
2013 (incorporated by reference to Exhibit 10.11 to Majesco’s registration statement on form
S-4 (333-202180) filed on April 1, 2015)
10.11+ Employment Letter Agreement between Majesco and William Freitag, dated as of January 1,
2015 (incorporated by reference to Exhibit 10.12 to Majesco’s registration statement on form
S-4 (333-202180) filed on April 1, 2015)
10.12+ Employment Letter Agreement between Majesco and Edward Ossie, dated December 1,
(incorporated by reference to Exhibit 10.13 to Majesco’s registration statement on form S-4
(333-202180) filed on April 1, 2015)
10.13+ Employment Letter Agreement between Majesco and Prateek Kumar, dated as of April 11,
2003 (incorporated by reference to Exhibit 10.14 to Majesco’s registration statement on form
S-4 (333-202180) filed on April 1, 2015)
10.14+ Employment Letter Agreement between Majesco and Chad Hersh, dated as of November 14,
2014 (incorporated by reference to Exhibit 10.15 to Majesco’s registration statement on form
S-4 (333-202180) filed on April 1, 2015)
10.15+ Employment Letter Agreement between Majesco and Lori Stanley, dated as of June 29,
2011(incorporated by reference to Exhibit 10.16 to Majesco’s registration statement on
F - 275
form S-4 (333-202180) filed on April 1, 2015)
10.16 Lease between 5 Penn Plaza LLC and Systems Task Group International Ltd. (as predecessor
in interest to Majesco), dated as of March 1, 2005 (incorporated by reference to Exhibit 10.18
to Majesco’s registration statement on form S-4 (333-202180) filed on April 1, 2015)
10.17 Credit Facility Agreement between ICICI Bank Limited (“ICICI”), New York Branch and
Majesco, dated as of March 25, 2011 (incorporated by reference to Exhibit 10.19 to Majesco’s
registration statement on form S-4 (333-202180) filed on April 1, 2015)
10.18 Revolving Credit Note in Favor of ICICI dated as of March 25, 2011 (incorporated by
reference to Exhibit 10.20 to Majesco’s registration statement on form S-4 (333-202180) filed
on April 1, 2015)
10.19 Security Agreement between ICICI and Majesco, dated as of March 25, 2011 (incorporated by
reference to Exhibit 10.21 to Majesco’s registration statement on form S-4 (333-202180) filed
on April 1, 2015)
10.20 Guaranty Agreement between ICICI and Mastek Limited, dated as of June 10, 2012
(incorporated by reference to Exhibit 10.22 to Majesco’s registration statement on form S-4
(333-202180) filed on April 1, 2015)
10.21 Subordination Agreement between ICICI and Majesco, dated as of March 25, 2011
(incorporated by reference to Exhibit 10.23 to Majesco’s registration statement on form S-4
(333-202180) filed on April 1, 2015)
10.22 Facility Letter between Punjab National Bank (International) Limited and Majesco, dated as
of January 9, 2015 (incorporated by reference to Exhibit 10.24 to Majesco’s registration
statement on form S-4 (333-202180) filed on April 1, 2015)
10.23 Agreement between Punjab National Bank (International) Limited and Majesco, dated as of
January 14, 2015 (incorporated by reference to Exhibit 10.25 to Majesco’s registration
statement on form S-4 (333-202180) filed on April 1, 2015)
10.24 Standby Letter of Credit from YES Bank Ltd. in favor of Punjab National Bank
(International) Limited, dated January 29, 2015, as amended (incorporated by reference to
Exhibit 10.26 to Majesco’s registration statement on form S-4 (333-202180) filed on April 1,
2015)
10.25 Asset Purchase and Sale Agreement by and among Majesco, Agile Technologies, LLC and
solely with respect to Sections 7.8 and 9, William K. Freitag, John M. Johansen and Robert
Buhrle, dated December 12, 2014 (incorporated by reference to Exhibit 10.27 to Majesco’s
registration statement on form S-4 (333-202180) filed on April 1, 2015)(2)
10.26 Amendment No. 1 to Amendment Asset Purchase and Sale Agreement, dated as of January 1,
2015, by and among Majesco, Agile Technologies, LLC, William K. Freitag, John M. Johansen
and Robert Buhrle (incorporated by reference to Exhibit 10.28 to Majesco’s registration
statement on form S-4 (333-202180) filed on April 1, 2015)
10.27 Share Purchase Agreement, dated September 15, 2014, between Mastek Limited and
MajescoMastek, for shares of MajescoMastek Canada Limited (incorporated by reference to
Exhibit 10.29 to Majesco’s registration statement on form S-4 (333-202180) filed on April 1,
2015)
10.28 Business Transfer Agreement, dated January 29, 2015, between Mastek (UK) Limited and
Majesco UK Limited(1) (incorporated by reference to Exhibit 10.30 to Majesco’s registration
statement on form S-4 (333-202180) filed on April 1, 2015)
10.29 Share Purchase Agreement, dated September 18, 2014, between Mastek Limited and
MajescoMastek, for shares of Mastek MSC Sdn Bhd. (incorporated by reference to Exhibit
10.31 to Majesco’s registration statement on form S-4 (333-202180) filed on April 1, 2015)
F - 276
10.30 Scheme of Arrangement among Mastek Limited, Minefields Computers Limited, Majesco
Software and Solutions India Private Limited and their respective shareholders and creditors
(incorporated by reference to Exhibit 10.32 to Majesco’s registration statement on form S-4
(333-202180) filed on April 29, 2015)(2)
10.31 Voting Agreement, dated December 14, 2014 by and between Majesco and RENN Universal
Growth Investment Trust PLC(1)
21 Subsidiaries of Majesco(1)
31.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(1)
31.2 Certification of the Chief Financial Officer pursuant to Rule13a-14(a) of the Exchange Act, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(1)
32.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act
and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002(3)
32.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act
and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002(3)
+ Denotes a management contract or compensatory plan.
(1) Filed herewith.
(2) Schedules or similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K.
Majesco agrees to furnish supplementally a copy of any such omitted schedules or attachments to the
SEC upon request; provide, however, that Majesco may request confidential treatment pursuant to
Rule 24b-2 under the Exchange Act for any schedule or attachment so furnished.
(3) Furnished herewith.
F - 277
153
DECLARATION
Our Company certifies that all relevant provisions of Chapter VIII read with Schedule XVIII of the SEBI ICDR
Regulations have been complied with and no statement made in this Preliminary Placement Document is contrary
to the provisions of Chapter VIII read with Schedule XVIII of the SEBI ICDR Regulations same and that all
approvals and permissions required to carry on the business have been obtained, are currently valid and have been
complied with. Our Company further certifies that all the statements in this Preliminary Placement Document are
true and correct.
Signed by:
Mr. Farid Kazani
Managing Director
Date: January 23, 2018
Place: Mumbai
154
DECLARATION
We, the Directors of the Company certify that:
(i) the Company has complied with the provisions of the Companies Act, 2013 and the rules made thereunder;
(ii) the compliance with the Companies Act, 2013 and the rules does not imply that payment of dividend or
interest or repayment of debentures, if applicable, is guaranteed by the Central Government;
(iii) the monies received under the offer shall be used only for the purposes and objects indicated in the
Preliminary Placement Document (which includes disclosures prescribed under Form PAS-4).
Signed by:
_________________
Mr. Farid Kazani
Managing Director
I am authorized by the Securities Issue Committee, a committee of the Board of Directors of the Company, vide
resolution number 1 dated January 23, 2018 to sign this form and declare that all the requirements of Companies
Act, 2013 and the rules made thereunder in respect of the subject matter of this form and matters incidental thereto
have been complied with. Whatever is stated in this form and in the attachments thereto is true, correct and
complete and no information material to the subject matter of this form has been suppressed or concealed and is
as per the original records maintained by the promoter subscribing to the Memorandum of Association and the
Articles of Association.
It is further declared and verified that all the required attachments have been completely, correctly and legibly
attached to this form.
Signed:
_________________
Mr. Farid Kazani
Managing Director
Date: January 23, 2018
Place: Mumbai
The following has been enclosed:
a) Copy of Board Resolution
b) Copy of Shareholders Resolutions
155
MAJESCO LIMITED
Registered and Corporate Office
Mastek New Development Centre, MBP-P-136
Mahape, Navi Mumbai – 400 710
Maharashtra, India
Website: www.majesco.com
CIN: L72300MH2013PLC244874
Contact Person: Mr. Nishant Shirke, Company Secretary and Compliance Officer
Details of Compliance Officer
Nishant Shirke
Company Secretary and Compliance Officer
Mastek New Development Centre, MBP-P-136,
Mahape, Navi Mumbai - 400 710, Maharashtra, India
Tel: +91 22 6791 4545; Fax: +91 22 2778 1332; E-mail: [email protected]
GLOBAL COORDINATOR AND BOOK RUNNING LEAD MANAGER
Edelweiss Financial Services Limited
14th Floor, Edelweiss House, Off C.S.T. Road
Kalina, Mumbai – 400 098, Maharashtra, India
STATUTORY AUDITORS OF OUR COMPANY
M/s. Varma & Varma
Chartered Accountants
424, 4th C Main, 6th Cross
Ombr Layout Banaswadi, Bangalore – 560 043
Karnataka, India
LEGAL ADVISER TO THE COMPANY
As to Indian law
Khaitan & Co
One Indiabulls Centre, 13th Floor, Tower 1
841, Senapati Bapat Marg, Mumbai – 400 013
Maharashtra, India
LEGAL ADVISER TO THE COMPANY AS TO US LAW
Sheppard, Mullin, Richter & Hampton LLP
30 Rockefeller Plaza
New York, NY 10112, United States
INTERNATIONAL LEGAL COUNSEL TO THE GCBRLM WITH
RESPECT TO INTERNATIONAL SELLING AND TRANSFER RESTRICTIONS
Duane Morris & Selvam LLP
16 Collyer Quay
Floor 17
Singapore 049318