HCL Technologies Ltd — Annual Report 2021

Apr 23, 2021

HCL Technologies Limited and Subsidiaries

Consolidated Financial Statements

Years Ended March 31, 2019, 2020 and 2021

With Report of Independent Auditors

Page

Independent Auditors' Report 1
Consolidated Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 5
Consolidated Statements of Comprehensive Income 6
Consolidated Statements of Equity 7
Consolidated Statements of Cash Flows 10
Notes to Consolidated Financial Statements 12

KPMG Assurance and Consulting Services LLP Buildtng No.10, 8th Floor, Tower•C DLF Cyber City, Phase II Gurugram • 122 002, (India)

Telephone: +91 124 307 4000 Fax: +91 124 254 9101 Internet: www.kpmg.com/in

Independent Auditors' Report

The Board of Directors HCL Technologies Limited :

We have audited the accompanying consolidated financial statements of HCL Technologies Limited and its subsidiaries (the "Company"), which comprise the consolidated balance sheets as of March 31 , 2021 and 2020, and the related consolidated statements of income, comprehensive income, equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors ' Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors' 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 control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly , we express no such opinion. An audit also includes evaluating the appropriateness of accounting pol icies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion , the fiscal year March 31 , 2021 and 2020 consolidated financial statements referred to above present fairly , in all material respects, the financial position of HCL Technologies Limited and its subsidiaries as of March 31, 2021 and 2020, and the results of their operations and their cash flows for the years then ended in accordance with U.S. generally accepted accounting principles.

Emphasis of Matter

As discussed in Note 2(g) to the consolidated financial statements, the Company adopted new accounting guidance for Leases, Accounting Standards Codification Topic 842, Leases (Topic 842), as of April 1, 2019. Our opinion is not modified with respect to this matter.

Other Matter

The accompanying consolidated financial statements of HCL Technologies Limited and its subsidiaries for the year ended March 31 , 2019 were audited by other auditors whose report thereon dated May 9, 2019, expressed an unmodified opinion on those financial statements.

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Gurugram, Haryana, India Apri l 23, 2021

HCL Technologies Limited and Subsidiaries Consolidated Balance Sheets

Amount in thousands, except share and per share data

	As of March 31,
	2020	2021
ASSETS
Current assets
Cash and cash equivalents	\$640,138	\$890,959
Term deposits with banks	16,255	323,073
Deposit with corporations	451,924	662,085
Investment securities, available for sale	923,591	926,406
Accounts receivable, net	1,867,997	1,868,553
Unbilled receivable	480,752	528,123
Inventories	12,080	12,793
Other current assets	685,676	675,948
Total current assets	5,078,413	5,887,940
Deferred income taxes, net	300,894	326,277
Investments in affiliates	5,022	6,356
Other investments	5,145	5,745
Property and equipment, net	825,204	854,053
Operating lease right-of-use assets	346,938	327,123
Intangible assets, net	1,732,052	1,616,785
Goodwill	2,156,195	2,370,031
Other assets	548,305	600,236
Total assets (a)	\$10,998,168	\$11,994,546

HCL Technologies Limited and Subsidiaries Consolidated Balance Sheets

Amount in thousands, except share and per share data

	As of March 31,
	2020	2021
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY
Current liabilities
Current portion of finance lease liabilities	\$23,034	\$24,746
Current portion of operating lease liabilities	71,537	69,737
Accounts payable	222,341	320,017
Short term borrowings	243,770	61
Current portion of long term debt	52,795	10,798
Accrued employee costs	420,767	582,151
Contract liabilities	356,753	421,064
Income taxes payable	141,835	175,952
Other current liabilities	1,596,113	767,349
Total current liabilities	3,128,945	2,371,875
Long term debt	376,382	523,564
Deferred income taxes, net	11,586	20,144
Operating lease liabilities, net of current portion	255,231	240,304
Finance lease liabilities, net of current portion	32,837	19,954
Accrued employee costs	149,927	187,437
Contract liabilities	49,250	70,479
Other liabilities	93,294	68,880
Total liabilities (a)	\$4,097,452	\$3,502,637
Commitments and contingencies (Note 26)
Redeemable non-controlling interests	69,784	79,985
HCL Technologies Limited Shareholders' Equity Equity shares, ` 2 par value, authorized 3,000,000,000 shares and 3,017,000,000 shares as of March 31, 2020 and March 31, 2021, respectively (Note 20)
Issued and outstanding 2,713,665,096 shares as of March 31, 2020 and March 31, 2021, respectively	93,788	93,788
Additional paid-in capital Retained earnings	412,327 7,746,112	412,327 8,974,914
Accumulated other comprehensive loss	(1,426,694)	(1,078,358)
HCL Technologies Limited Shareholders' Equity	6,825,533	8,402,671
Non-controlling interest	5,399	9,253
Total equity	6,830,932	8,411,924
Total liabilities, redeemable non-controlling interests and equity	\$10,998,168	\$11,994,546

a) Consolidated assets at March 31, 2020 and March 31, 2021 include assets of certain variable interest entities (VIEs') that can only be used to settle the liabilities of those VIEs'. Consolidated liabilities at March 31, 2020 and March 31, 2021, include liabilities of certain VIEs' for which the VIEs' creditors do not have recourse to HCL Technologies Limited and Subsidiaries (See Note 10).

HCL Technologies Limited and Subsidiaries Consolidated Statements of Income

Amount in thousands, except share and per share data

	Year ended March 31,
	(1) 2019	2020	2021
Revenues	\$8,632,425	\$9,935,959	\$10,174,688
Cost of revenues (exclusive of depreciation and amortization) (1)	5,478,026	6,188,123	6,094,399
Gross profit	3,154,399	3,747,836	4,080,289
Research and development expenses (1)	132,074	180,981	188,961
Selling, general and administrative expenses (1)	1,027,677	1,222,089	1,279,672
Depreciation, amortization and impairment	306,673	399,233	538,242
Other (income) expenses, net	(135,059)	(76,567)	(126,304)
Finance cost (1)	24,893	51,293	37,404
Income before income taxes	1,798,141	1,970,807	2,162,314
Provision for income taxes	354,332	412,663	474,067
Net income	1,443,809	1,558,144	1,688,247
Net (loss) income attributable to redeemable non-controlling interest/ non-controlling interest	3,057	4,437	7,574
Net income attributable to HCL Technologies Limited shareholders	\$1,440,752	\$1,553,707	\$1,680,673
Earnings per equity share (See note 23)
Basic	\$0.52	\$0.57	\$0.62
Diluted	\$0.52	\$0.57	\$0.62
Weighted average number of equity shares used in computing earnings per equity share
Basic	2,750,726,403	2,713,085,729	2,713,665,096
Diluted	2,751,714,943	2,713,665,096	2,713,665,096

(1) Cost of revenues, research, and development, selling, general and administrative expenses, finance cost for the year ended March 31, 2019 have been restated pursuant to adoption of ASU No. 2017-07 "Compensation - Retirement Benefits (Topic 715)" effective March 31,2020. The impact of such restatement was not material to the Group's consolidated financial statements.

HCL Technologies Limited and Subsidiaries

Consolidated Statements of Comprehensive Income

Amount in thousands, except share and per share data

	Year ended March 31,
	2019	2020	2021
Net income attributable to HCL Technologies Limited shareholders	\$1,440,752	\$1,553,707	\$1,680,673
Add: Net (loss) income attributable to redeemable non-controlling interest / non-controlling interest	\$3,057	\$4,437	\$7,574
Other comprehensive income (loss) net of taxes:
Change in unrealized gain (loss) on cash flow hedges, net of taxes (\$217), \$14,121 and (\$22,306) for the years ended March 31, 2019, 2020 and 2021, respectively.	3,752	(65,255)	65,604
Change in unrealized gain (loss) on securities available for sale, net of taxes \$151, (\$309) and (\$902) for the years ended March 31, 2019, 2020 and 2021, respectively.	(573)	713	1,577
Change in unrealized gain (loss) on defined benefit plan, net of taxes (\$900), \$2,490 and (\$156) for the years ended March 31, 2019, 2020 and 2021, respectively.	3,709	(10,057)	(80)
Change in foreign currency translation	(315,328)	(464,730)	281,235
Other comprehensive income (loss)	(308,440)	(539,329)	348,336
Add: Comprehensive loss attributable to non-controlling interest	-	(205)	252
Total comprehensive income	\$1,135,369	\$1,018,610	\$2,036,835

HCL Technologies Limited and Subsidiaries Consolidated Statements of Equity

Amount in thousands, except share and per share data

	Equity shares			Retained earnings
	Shares	Par value	Additional paid-in capital	Ordinary shares subscribed	Other unappropriated reserves	SEZ reinvestment reserve*	Accumulated other comprehensive loss	Total Equity	Redeemable non controlling interest
Balances as at March 31, 2018	1,392,246,384	\$56,715	\$412,658	\$2	\$5,709,736	\$47,562	(\$578,925)	\$5,647,748	\$-
Shares issued for exercised options	396,120	11	-	(2)	-	-	-	9	-
Buyback of equity shares (see note 20)	(36,363,636)	(983)	(331)	-	(539,565)	-	-	(540,879)	-
Expenses on buyback of equity shares Stock options exercised pending allotment	- -	- -	- -	- 1	(1,603) -	- -	- -	(1,603) 1	- -
of shares Redeemable non-controlling interest	-	-	-	-	-	-	-	-	59,050
Dividend to redeemable non-controlling interest Change in fair value of redeemable non controlling interest	- -	- -	- -	- -	- (5,560)	- -	- -	- (5,560)	(1,972) 5,560
Cash dividend	-	-	-	-	(188,604)	-	-	(188,604)	-
Transfer to special economic zone (SEZ) reinvestment reserve *	-	-	-	-	(62,839)	62,839	-	-	-
Transfer from special economic zone (SEZ) reinvestment reserve *	-	-	-	-	44,082	(44,082)	-	-	-
Net income	-	-	-	-	1,440,752	-	-	1,440,752	3,057
Other comprehensive income (loss)	-	-	-	-	-	-	(308,440)	(308,440)	-
Balances as at March 31, 2019	1,356,278,868	\$55,743	\$412,327	\$1	\$6,396,399	\$66,319	(\$887,365)	\$6,043,424	\$65,695

* The Company has created SEZ Reinvestment Reserve out of profits of the eligible SEZ Units in terms of the specific provisions of Section 10AA(1) of the Income Tax Act, 1961 ("the Act"). The said reserve should be utilized by the Company for acquiring Plant and Machinery in terms of Section 10AA(2) of the Act.

HCL Technologies Limited and Subsidiaries Consolidated Statements of Equity

Amount in thousands, except share and per share data

	Equity shares			Retained earnings
	Shares	Par value	Additional paid-in capital	Ordinary shares subscribed	Other unappropriated reserves	SEZ reinvestment reserve*	Accumulated other comprehensive loss	HCL Technologies Limited Shareholders' Equity	Non controlling Interest	Total Equity	Redeemable non controlling interest
Balances as at March 31, 2019 Shares issued for exercised options	1,356,278,868 553,680	\$55,743 16	\$412,327 -	\$1 (1)	\$6,396,399 -	\$66,319 -	(\$887,365) -	\$6,043,424 15	\$- -	\$6,043,424 15	\$65,695 -
Issue of bonus shares (see note 20) Cash dividend	1,356,832,548 -	38,029 -	- -	- -	(38,029) (228,204)	- -	- -	- (228,204)	- -	- (228,204)	- -
Change in non controlling interest	-	-	-	-	-	-	-	-	5,576	5,576	-
Dividend to redeemable non controlling interest	-	-	-	-	-	-	-	-	-	-	(4,400)
Change in fair value of redeemable non controlling interest	-	-	-	-	(4,080)	-	-	(4,080)	-	(4,080)	4,080
Transfer to special economic zone (SEZ) reinvestment reserve *	-	-	-	-	(101,012)	101,012	-	-	-	-	-
Transfer from special economic zone (SEZ) reinvestment reserve *	-	-	-	-	62,480	(62,480)	-	-	-	-	-
Net income	-	-	-	-	1,553,707	-	-	1,553,707	28	1,553,735	4,409
Other comprehensive income (loss)	-	-	-	-	-	-	(539,329)	(539,329)	(205)	(539,534)	-
Balances as at March 31, 2020	2,713,665,096	\$93,788	\$412,327	\$-	\$7,641,261	\$104,851	(\$1,426,694)	\$6,825,533	\$5,399	\$6,830,932	\$69,784

* The Company has created SEZ Reinvestment Reserve out of profits of the eligible SEZ Units in terms of the specific provisions of Section 10AA(1) of the Income Tax Act, 1961 ("the Act"). The said reserve should be utilized by the Company for acquiring Plant and Machinery in terms of Section 10AA(2) of the Act. See accompanying notes to the consolidated financial statements.

HCL Technologies Limited and Subsidiaries Consolidated Statements of Equity

Amount in thousands, except share and per share data

	Equity shares				Retained earnings
	Shares	Par value	Additional paid-in capital	Other unappropriated reserves	SEZ reinvestment reserve*	Accumulated other comprehensive loss	HCL Technologies Limited Shareholders' Equity	Non controlling Interest	Total Equity	Redeemable non controlling interest
Balances as at March 31, 2020	2,713,665,096	\$93,788	\$412,327	\$7,641,261	\$104,851	(\$1,426,694)	\$6,825,533	\$5,399	\$6,830,932	\$69,784
# Cash dividend	-	-	-	(440,051)	-	-	(440,051)	-	(440,051)	-
Dividend to redeemable non controlling interest	-	-	-	-	-	-	-	-	-	(4,400)
Dividend to non-controlling interest	-	-	-	-	-	-	-	(13)	(13)	-
Change in non-controlling interest	-	-	-	-	-	-	-	432	432	-
Change in fair value of redeemable non- controlling interest	-	-	-	(11,210)	-	-	(11,210)	-	(11,210)	11,210
Purchase of redeemable non controlling interest	-	-	-	(610)	-	-	(610)	-	(610)	(1,000)
Transfer to special economic zone (SEZ) reinvestment reserve *	-	-	-	(203,236)	203,236	-	-	-	-	-
Transfer from special economic zone (SEZ) reinvestment reserve *	-	-	-	72,112	(72,112)	-	-	-	-	-
Net income	-	-	-	1,680,673	-	-	1,680,673	3,183	1,683,856	4,391
Other comprehensive income	-	-	-	-	-	348,336	348,336	252	348,588	-
Balances as at March 31, 2021	2,713,665,096	\$93,788	\$412,327	\$8,738,939	\$235,975	(\$1,078,358)	\$8,402,671	\$9,253	\$8,411,924	\$79,985

includes final dividend paid to shareholders of ` 2/- per equity share of (\$72,466) for the financial year ended March 31, 2020 recommended by the Board of Directors in their meeting on May 07, 2020 and approved by the shareholders at the Annual General Meeting held on September 29, 2020.

* The Company has created SEZ Reinvestment Reserve out of profits of the eligible SEZ Units in terms of the specific provisions of Section 10AA (1) of the Income Tax Act, 1961 ("the Act"). The said reserve should be utilized by the Company for acquiring Plant and Machinery in terms of Section 10AA (2) of the Act.

HCL Technologies Limited and Subsidiaries

Consolidated Statements of Cash Flows

Amount in thousands

	Year ended March 31,
	2019	2020	2021
Cash flows from operating activities
Net income	\$1,443,809	\$1,558,144	\$1,688,247
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation, amortization and impairment	306,673	399,233	538,242
Deferred income taxes	(86,500)	14,949	(35,600)
(Gain) loss on sale of property and equipment	(402)	58	(13,726)
Gain on sale of investment securities and other investments, net	(23,435)	(17,690)	(15,310)
Equity in earnings of affiliates	(580)	(53)	(1,334)
Provision for doubtful accounts and bad debts, net	3,211	28,052	2,517
Others, net	(6,155)	29,143	12,931
	1,636,621	2,011,836	2,175,967
Changes in assets and liabilities, net of effects of acquisitions
Accounts receivable and unbilled receivable	(251,167)	(494,659)	78,290
Current assets, operating lease right-of-use assets and other assets (1)	(254,003)	(32,720)	87,219
Accounts payable	60,437	(20,107)	79,747
Accrued employee costs	96,480	72,697	157,553
Current liabilities, operating lease liabilities and other liabilities	52,521	206,003	23,361
Net cash provided by operating activities	1,340,889	1,743,049	2,602,137
Cash flows from investing activities
Purchase of property and equipment and intangibles	(519,948)	(262,572)	(262,045)
Proceeds from sale of property and equipment	4,399	4,333	20,687
Acquisition of business, net of cash acquired	(402,508)	(878,610)	(164,602)
Investment in term deposit with banks	(277,797)	(36,227)	(327,138)
Proceeds from term deposit with banks on maturity	332,819	290,419	24,572
Investment in term deposits with corporations	(204,117)	(704,465)	(897,635)
Proceeds from term deposits with corporations on maturity	486,497	457,972	705,508
Purchase of investment securities	(3,458,026)	(4,975,060)	(2,811,215)
Proceeds from sale or maturity of investment securities	3,537,522	4,323,970	2,853,510
Purchase of other investment	(4,949)	(2,340)	(876)
Purchase of redeemable non-controlling Interests	-	-	(1,610)
Investment in equity method investee Dividend from equity method investee	(320) -	(160) 199	- -
Net cash used in investing activities	(506,428)	(1,782,541)	(860,844)

HCL Technologies Limited and Subsidiaries

Consolidated Statements of Cash Flows

Amount in thousands

	Year ended March 31,
	2019	2020	2021
Cash flows from financing activities
(Decrease) Increase of principal under finance lease obligations, net	7,664	17,157	(20,286)
Proceeds from short term borrowings	201,206	278,466	109,851
Repayment of short term borrowings	(100,000)	(131,419)	(363,427)
Proceeds from long term debt	444,590	21,468	505,573
Repayment of long term debt	(26,837)	(55,754)	(439,819)
Buyback of equity shares	(540,018)	-	-
Expenses on Buy Back of Equity Shares	(1,684)	-	-
Capital contribution from redeemable non-controlling Interests	41,000	-	-
Dividend to redeemable non-controlling Interests	(1,972)	(4,400)	(4,400)
Payment for deferred consideration on business acquisition	(3,788)	(41,489)	(864,633)
Proceeds from issuance of equity shares	8	15	-
Proceeds from subscription of shares pending allotment	1	-	-
Dividend to non-controlling Interests	-	-	(13)
Dividend paid	(188,589)	(228,182)	(439,965)
Net cash used in financing activities	(168,419)	(144,138)	(1,517,119)
Effect of exchange rate changes on cash and cash equivalents and restricted cash (1)	(67,185)	(33,990)	26,816
Net increase (decrease) in cash and cash equivalents and restricted cash (1)	598,857	(217,620)	250,990
Cash and cash equivalents and restricted cash at the beginning of the year (1)	260,415	859,272	641,652
Cash and cash equivalents and restricted cash at the end of the year	859,272	641,652	892,642
Supplemental disclosures of cash flow
Cash payments for income taxes	\$402,750	\$378,812	\$477,837
Assets acquired under finance lease obligation	\$25,379	\$49,661	\$25,857
Cash payments for interest expenses	\$2,348	\$19,127	\$18,767

(1) The Group has adopted Accounting Standards Update No. 2016-18 (ASU 2016-18) "Restricted Cash - Statement of Cash Flows (Topic 230)" effective March 31, 2020. Accordingly, for year ended March 31, 2019 restricted cash and restricted cash equivalents movements have been reclassified from the head Other current, operating lease right-of-use assets and other assets and included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the consolidated statements of cash flows.

1. ORGANIZATION AND NATURE OF OPERATIONS

HCL Technologies Limited (the "Company" or the "Parent Company") along with its subsidiaries (hereinafter collectively referred to as the "Group") is primarily engaged in providing a range of IT and Business Services, Engineering and R&D services and Products & Platforms services. The Company was incorporated in India in November 1991. The Group leverages its global technology workforce and Intellectual properties to deliver solutions across following industry verticals - Financial Services, Manufacturing, Life sciences & Healthcare, Public services, Retail & CPG, Technology & Services and Telecom, Media, Publishing and Entertainment.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation and principles of consolidation

The accompanying consolidated financial statements include the accounts of HCL Technologies Limited and its subsidiaries and are prepared on the basis of US generally accepted accounting principles ("US GAAP").

The Group uses the United States Dollar ('\$' or 'USD') as its reporting currency.

These consolidated financial statements include the accounts of all subsidiaries which are more than 50% owned and controlled by the Company. In addition, relationships with other entities are reviewed to assess if the Company is the primary beneficiary in any variable interest entity. If it is determined that the Company is the primary beneficiary, then that entity is consolidated. All intercompany accounts and transactions are eliminated on consolidation. Non-controlling interest represents the non controlling partner's interest in the proportionate share of net assets and results of operations of the Company's majority owned subsidiaries. Non-controlling interest in subsidiaries that is redeemable outside of the Company's control for cash or other assets is reflected in the mezzanine section between liabilities and equity in the consolidated balance sheets at the redeemable value, which approximates fair value. Redeemable non-controlling interest is adjusted to its fair value at each balance sheet date. Any resulting increases or decreases in the estimated redemption amount are affected by corresponding charges or credits to retained earnings. Cumulative dividend payable on preference shares is reflected in net loss (gain) attributable to redeemable non-controlling interest in the consolidated statements of income.

Issuance of shares by a subsidiary to third parties reduces the proportionate ownership interest of the Company in the subsidiary. A change in the carrying value of the investment in such subsidiary due to direct sale of un-issued equity shares is accounted for as a capital transaction and is recognized in equity when the transaction occurs.

The Group accounts for investments by the equity method where its investment in the voting stock gives it the ability to exercise significant influence over the affiliate. In the case of investments in Limited Liability Partnerships (LLPs), significant influence is presumed to exist where the Company has more than a 5% partnership interest.

The Group's equity in the profits (losses) of affiliates is included in the consolidated statements of income unless the carrying amount of an investment is reduced to zero and the Group is under no guaranteed obligation or otherwise committed to provide further financial support. The Group's share of net assets of affiliates is included in the carrying amount of the investment in the consolidated balance sheet.

(b) Use of estimates

The preparation of financial statements in conformity with US GAAP requires the management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, expenses and other comprehensive income (loss) that are reported and disclosed in the consolidated financial statements and accompanying notes. These estimates are based on the management's best knowledge of

HCL Technologies Limited and Subsidiaries Notes to Consolidated Financial Statements March 31, 2021

(Amount in thousands, except per share data and as stated otherwise)

current events, historical experience, actions that the Group may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. Significant estimates and assumptions are used, but not limited to accounting for costs expected to be incurred to complete performance under IT service arrangements, allowance for uncollectible accounts receivables and unbilled receivables, income taxes, future obligations under employee benefit plans and performance incentives, the measurement of lease liabilities and right of use assets, the useful lives of property, equipment and intangible assets, impairment of property, equipment, intangible assets and goodwill, estimates used to determine the fair value of assets acquired, including intangible assets and goodwill, and liabilities assumed in business combinations, valuation allowances for deferred tax assets, and other contingencies and commitments. Changes in estimates are reflected in the financial statements in the period in which the changes are made. Actual results could differ from those estimates.

In view of pandemic relating to COVID -19, the group has considered and taken into account internal and external information and has performed sensitivity analysis based on current estimates in assessing the recoverability of receivables, unbilled receivables, goodwill, intangible assets, other assets, impact on revenues and costs, impact on leases and effectiveness of its hedging relationships, including but not limited to the assessment of liquidity and going concern assumption. However, the actual impact of COVID-19 on the Group's financial statements may differ from that estimated and the Group will continue to closely monitor any material changes to future economic conditions.

(c) Functional currency and translation

The functional currency of each entity in the Group is its respective local currency except for few subsidiaries outside India where the local currency is not representative of the functional currency. The functional currency of the Company is INR. The translation from functional currency into USD (the reporting currency) for assets and liabilities is performed using the exchange rates in effect at the balance sheet date, and for revenue, expenses and cash flows is performed using an appropriate daily weighted average exchange rate for the respective periods. The gains (losses) resulting from such translation are reported as a component of 'other comprehensive income (loss)'.

Foreign currency denominated monetary assets and liabilities are re-measured into the functional currency at exchange rates in effect at the balance sheet date. Foreign currency transaction gains and losses are recorded in the consolidated statement of income within 'other income'. Any exchange difference in intercompany balances arising because of elimination of intercompany transactions is recorded in foreign currency translation under 'other comprehensive income (loss)'.

(d) Revenue recognition

Contracts involving provision of services and material

Revenue is recognized when, or as, control of a promised service or good transfers to a client, in an amount that reflects the consideration to which the Group expects to be entitled in exchange for transferring those products or services. To recognize revenues, the following five step approach is applied: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenues when a performance obligation is satisfied. A contract is accounted when it is legally enforceable through executory contracts, approval and commitment from all parties, the rights of the parties are identified, payment terms are defined, the contract has commercial substance and collectability of consideration is probable.

Time-and-material/Volume based/ Transaction based contracts

Revenue with respect to time-and-material, volume based and transaction based contracts is recognized as the related services are performed through efforts expended, volume serviced, transactions processed etc. that correspond with value transferred to customer till date which is related to our right to invoice for services performed, in accordance with the practical expedient in ASC 606-10-55-18.

Fixed Price contracts

Revenue related to Fixed price contracts where performance obligations and control are satisfied over a period of time like technology integration, complex network building contracts, system implementations and Application development is recognized based on progress towards completion of the performance obligation using a cost-to-cost measure of progress (i.e., percentage-of-completion (POC) method of accounting). Revenue is recognized based on the costs incurred to date as a percentage of the total estimated costs to fulfill the contract. Any revision in cost to complete would result in increase or decrease in revenue and such changes are recorded in the period in which they are identified. Provisions for estimated losses, if any, on contracts-in-progress are recorded in the period in which such losses become probable based on the current contract estimates. Contract losses are determined to be the amount by which the estimated direct and incremental cost to complete exceeds the estimated future revenues that will be generated by the contract and are included in Cost of revenues and recorded in other accrued liabilities.

Revenue related to other fixed price contracts providing maintenance and support services, are recognized based on our right to invoice for services performed for contracts in which the invoicing is representative of the value being delivered, in accordance with the practical expedient in ASC 606-10-55-18. If invoicing is not consistent with value delivered, revenues are recognized as the service is performed based on the cost to cost method described above.

In arrangements involving sharing of customer revenues, revenue is recognized when the right to receive is established.

Revenue from product sales are shown net of applicable taxes, discounts and allowances. Revenue related to product with installation services that are critical to the product is recognized when installation of product at customer site is completed and accepted by the customer. If the revenue for a delivered item is not recognized for non-receipt of acceptance from the customer, the cost of the delivered item continues to be in inventory.

Proprietary Software Products

Revenue from distinct proprietary perpetual license software is recognized at a point in time at the inception of the arrangement when control transfers to the client. Revenue from proprietary term license software is recognized at a point in time for the committed term of the contract. In case of renewals of proprietary term licenses with existing customers revenue from term license is recognized at a point in time when the renewal is agreed on signing of contracts. Revenue from support and subscription (S&S) is recognized over the contract term on a straight-line basis as the company is providing a service of standing ready to provide support, when-and-if needed, and is providing unspecified software upgrades on a when-and-if available basis over the contract term. In case software are bundled with one year of support and subscription either for perpetual or term based license, such support and subscription contracts are generally priced as a percentage of the net fees paid by the customer to purchase the license and are generally recognized as revenues ratably over the contractual period that the support services are provided.

HCL Technologies Limited and Subsidiaries Notes to Consolidated Financial Statements March 31, 2021

(Amount in thousands, except per share data and as stated otherwise)

Multiple-performance obligations

When a sales arrangement contains multiple performance obligations, such as services, hardware and Licensed IPs (software) or combinations of each of them, revenue for each element is based on a five step approach as defined above. To the extent a contract includes multiple promised deliverables, judgment is applied to determine whether promised deliverables are capable of being distinct and are distinct in the context of the contract. If these criteria are not met, the promised deliverables are accounted for as a combined performance obligation. For arrangements with multiple distinct performance obligations or series of distinct performance obligations, consideration is allocated among the performance obligations based on their relative standalone selling price. Standalone selling price is the price at which group would sell a promised good or service separately to the customer. When not directly observable, we estimate standalone selling price by using the expected cost plus a margin approach. We establish a standalone selling price range for our deliverables, which is reassessed on a periodic basis or when facts and circumstances change. If the arrangement contains obligations related to License of Intellectual property (Software) or Lease deliverable, the arrangement consideration allocated to the Software deliverables, lease deliverable as a group is then allocated to each software obligation and lease deliverable using the guidance for recognizing Software revenue (ASC 606-10-55) and the lease revenue, as amended.

Revenue recognition for delivered elements is limited to the amount that is not contingent on the future delivery of products or services, future performance obligations or subject to customer-specified return or refund privileges.

Revenue from certain activities in transition services in outsourcing arrangements are not capable of being distinct or represent separate performance obligation. Revenues relating to such transition activities are classified as Contract liabilities and subsequently recognized over the period of the arrangement. Direct and incremental costs in relation to such transition activities which are expected to be recoverable under the contract and generate or enhance resources of the Company that will be used in satisfying the performance obligation in the future are considered as contract fulfillment costs classified as deferred contract cost and recognized over the period of arrangement. Certain upfront non-recurring incremental contract acquisition costs and other upfront fee paid to customers are deferred and classified as Deferred contract cost and amortized to revenue or cost, usually on a straight line basis, over the term of the contract unless revenues are earned and obligations are fulfilled in a different pattern. The undiscounted future cash flows from the arrangement are periodically estimated and compared with the unamortized costs. If the unamortized costs exceed the undiscounted cash flow, a loss is recognized.

In instances when revenue is derived from sales of third-party vendor services, material or licenses, revenue is recorded on a gross basis when the Group is a principal in the transaction and net of costs when the Group is acting as an agent between the customer and the vendor. Several factors are considered to determine whether the Group is a principal or an agent, most notably being whether group controls the goods or services before it is transferred to customer, latitude in deciding the price being charged to customer. Revenue is recognized net of discounts and allowances, value-added and service taxes, and includes reimbursement of out-of-pocket expenses, with the corresponding out-of-pocket expenses included in cost of revenues.

Volume discounts, or any other form of variable consideration is estimated using either the sum of probability weighted amounts in a range of possible consideration amounts (expected value), or the single most likely amount in a range of possible consideration amounts (most likely amount), depending on which method better predicts the amount of consideration realizable. Transaction price includes variable consideration only to the extent it is probable that a significant reversal of revenues recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price may involve judgment and are based largely on an assessment of our anticipated performance and all information that is reasonably available to us.

HCL Technologies Limited and Subsidiaries Notes to Consolidated Financial Statements March 31, 2021

(Amount in thousands, except per share data and as stated otherwise)

Revenue recognized but not billed to customers is classified either as Contract assets or Unbilled receivable in our consolidated balance sheet. Contract assets primarily relate to unbilled amounts on those contracts utilizing the cost to cost method of revenue recognition and right to consideration is not unconditional. Unbilled receivable represents contracts where right to consideration is unconditional (i.e. only the passage of time is required before the payment is due). A contract liability arises when there is excess billing over the revenue recognized.

Revenue from sales-type leases is recognized when risk of loss has been transferred to the client and there are no unfulfilled obligations that affect the final acceptance of the arrangement by the client.

Interest attributable to sales-type leases and direct financing leases included therein is recognized on an accrual basis using the effective interest method.

(e) Inventories

Inventories represent items of finished goods that are specific to execute composite contracts and also include finished goods which are interchangeable and not specific to any project. Inventory is carried at the lower of cost or net realizable value. The net realizable value is determined with reference to selling price of goods less the estimated cost necessary to make the sale. Cost of goods that are procured for specific projects is assigned by specific identification of their individual costs. Cost of goods which are interchangeable and not specific to any project is determined using weighted average cost formula. Inventories also include goods held by customer care department at customer's site for which risk and rewards have not been transferred to customers.

(f) Property and equipment

Property and equipment are stated at historical cost less accumulated depreciation which is computed using the straight-line method over the estimated useful lives of the assets, which are as follows:

Asset description	Asset life (in years)
Buildings	20
Computer and networking equipment	4 to 5
Software	3
Furniture, fixtures and office equipment	5 to 7
Plant and equipment	10
Vehicles	5

Leasehold improvements are amortized on a straight-line basis over the shorter of the lease period or the estimated useful life of the asset. The cost of software obtained for internal use is capitalized and amortized over the estimated useful life of the software.

Advances paid towards the acquisition of property and equipment and cost of property and equipment not put to use before the balance sheet date are classified as capital work-in-progress (Note 7).

(g) Leases (effective from April 01, 2019)

A lease is a contract that contains right to control the use of an identified asset for a period of time in exchange for consideration.

Group as Lessee

Group is Lessee in case of office space, accommodation for its employees and IT equipment. These leases are evaluated to determine whether it contains a lease and they are classified as Finance lease or Operating lease in accordance with Financial Accounting Standard Board's (FASB) guidance under ASC 842, 'Accounting For Leases'.

All leases with a term of more than 12 months are recognized as right-of-use assets along with associated lease liabilities, in the consolidated balance sheet.

Right-of-use assets represent the Group's right to control the underlying assets under lease, and the lease liability is the obligation to make the lease payments related to the underlying assets under lease. Right-ofuse assets are for finance lease and operating lease.

Operating lease - Right-of-use asset is measured initially based on the lease liability adjusted for any initial direct costs, prepaid rent, and lease Incentives. Right-of-use asset is depreciated based on straight line method over the lease term or useful life of right-of-use asset, whichever is less.

Finance lease – Right-of-use asset is capitalized at the lower of the net present value of the total amount of rent payable under the leasing agreement (excluding finance charges) or the fair market value of the leased asset. Finance lease assets are depreciated on a straight-line basis, over a period consistent with the Group's normal depreciation policy for tangible fixed assets, but not exceeding the lease term. Interest charges are expensed over the period of the lease in relation to the carrying value of the finance lease obligation.

Subsequently, right-of-use asset is measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of lease lability.

The lease liabilities are measured at the lease commencement date and determined using the present value of the minimum lease payments not yet paid and the Group's incremental borrowing rate, which approximates the rate at which the Group would borrow in the country where the lease was executed. The lease payment comprises fixed payment less any lease incentives, variable lease payment that depends on an index or a rate, exercise price of a purchase option if the Group is reasonably certain to exercise the option and payment of penalties for terminating the lease, if the lease term reflects the group exercising an option to terminate the lease. Lease Liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payment made and remeasuring the carrying amount to reflect any reassessment or modification, if any.

The Group has elected to not recognize leases with a lease term of 12 months or less in the consolidated balance sheet, including those acquired in a business combination, and lease costs for those short-term leases are recognized on a straight-line basis over the lease term in the consolidated statement of income. For all asset classes, the Group has elected the lessee practical expedient to combine lease and non-lease components and account for the combined unit as a single lease component in case there is no separate payment defined under the contract.

Group as Lessor

When substantially all the risks and rewards of property ownership have been transferred to the Group, as determined by the test criteria in FASB's guidance under ASC 842, the lease qualifies as a finance lease which is further sub classified into Sales type lease or Direct finance lease. For a sales-type lease, the net investment in the lease is measured at commencement date as the sum of the lease receivable, the estimated guaranteed and unguaranteed residual value of the equipment. Any selling profit or loss arising from a salestype lease is recorded at lease commencement.

Operating lease income and expense is recognized on a straight-line basis over the term of the lease.

When arrangements include multiple performance obligations, the company allocates the consideration in the contract between the lease components and the non-lease components on a relative standalone selling price basis.

(h) Impairment of long-lived assets and long-lived assets to be disposed off

In accordance with the provisions of ASC Topic 360, "Accounting for Impairment or Disposal of Long Lived Assets", long-lived assets, other than goodwill, are tested for impairment, based on undiscounted cash flows, whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable and, if impaired, written down to fair value.

(i) Investment securities

Investment securities consist of available-for-sale debt securities and other investments.

Available-for-sale securities having a readily determinable fair value are carried at fair value based on quoted market prices and other observable market inputs. Temporary unrealized gains and losses, net of the related tax effect are excluded from income and are reported as a separate component of 'other comprehensive income (loss)', until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a investment by investment basis and are included in earnings. Purchase and sale of available for sale securities are accounted for at trade date.

Other Investments in equity securities are measured at fair value with changes in fair value recognized in net income and other investments in equity securities that do not have readily determinable fair values are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions.

(j) Research and development

Research and development cost are expensed as incurred. Costs that are incurred to develop the finished product after technological feasibility has been established are capitalised as an intangible asset. Expenditure incurred on equipment and facilities acquired or constructed for research and development activities and having alternative future use is capitalized as property and equipment.

(k) Cash equivalents, deposits with banks and restricted cash

The Group considers all highly liquid investments with an original maturity of three months or less, at the date of purchase/investment, to be cash equivalents. Restricted cash represents margin money deposits against guarantees, letters of credit and bank balance earmarked towards unclaimed dividend. Restrictions on margin money deposits are released on the expiry of the term of guarantees and letters of credit.

Term deposits with banks and corporations represent term deposits earning fixed rate of interest with maturities ranging from more than three months to twenty-four months at the date of purchase/investment. Interest on term deposits with banks and corporations is recognized on an accrual basis.

(l) Income taxes

Income taxes are accounted for using the asset and liability method. Under this method, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each balance sheet date, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. If it is determined that it is more likely than not that future tax benefits associated with a deferred

HCL Technologies Limited and Subsidiaries Notes to Consolidated Financial Statements March 31, 2021

(Amount in thousands, except per share data and as stated otherwise)

income tax asset will not be realized, a valuation allowance is provided. The effect on deferred income tax assets and liabilities due to change in the tax rates is recognized in income in the period that includes the enactment date. Tax benefits earned on exercise of employee stock options in excess of compensation charged to income are credited to income tax expense in the consolidated statement of income. Provision for income taxes also includes the impact of provisions established for uncertain income tax positions, as well as the related interest and penalties.

(m) Earnings per share

Basic earnings per share are computed using the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of equity and dilutive equity equivalent shares outstanding during the period, using the treasury stock method for options and reverse treasury stock method for buy back, except where results would be anti-dilutive.

(n) Employee benefits

Defined contribution plan

Contributions to other defined contribution plans in subsidiaries outside India are recognized as expense when employees have rendered services entitling them to such benefits.

In certain subsidiaries outside India, the Group provide retirement benefit pension plans in accordance with the local laws. The liability is actuarially determined (using the projected unit credit method) at the end of each year.

Defined benefit plan

Provident fund:

Employees in India receive benefits from a provident fund. The employee and employer each make monthly contributions to the plan. A portion of the contribution is made to the provident fund trust managed by the Group; while the balance contribution is made to the Government administered Pension fund. The Group has an obligation to fund any shortfall on the yield of the Trust's investments over the administered interest rates.

Gratuity:

Employees in India are entitled to benefits under the Gratuity Act, a defined benefit retirement plan covering eligible employees of the Group. This plan provides for a lump-sum payment to eligible employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee's salary and tenure of employment (subject to a maximum amount as prescribed under the Gratuity Act). The Group accounts for liability based on actuarial valuation using the projected unit credit method at the end of each year. The Group has unfunded gratuity obligations except in respect of certain employees in India, where the Group contributes towards gratuity liabilities to the Gratuity Fund Trust, which invests the contributions in a scheme with the Life Insurance Corporation of India as permitted by law.

Compensated absences:

The employees of the Group are entitled to compensated absences. The employees can carry forward up to the specified portion of the unutilized accumulated compensated absences and utilize it in future periods or receive cash at retirement or termination of employment. The Group records an obligation for compensated absences in the period in which the employee renders the services that increases this entitlement. The Group measures the expected cost of compensated absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the end of the reporting period. The Group recognizes accumulated compensated absences based on actuarial valuation using the projected unit credit method as the end of each year. Non-accumulating compensated absences are recognized in the period in which the absences occur. The Group recognizes actuarial gains and losses immediately in the statement of income.

(o) Dividend

Final dividend proposed by the Board of Directors is recognized upon approval by the shareholders who have the right to decrease but not increase the amount of dividend recommended by the Board of Directors. Interim dividends are recognized on declaration by the Board.

(p) Derivative and hedge accounting

Foreign exchange forward contracts and options are purchased to mitigate the risk of changes in foreign exchange rates associated with forecasted transactions denominated in certain foreign currencies, and interest rate swaps are entered to mitigate interest rate fluctuation risk on our indebtedness. In accordance with FASB guidance ASC 815, "Accounting for Derivative Instruments and Hedging Activities", the Group recognizes all derivatives as assets or liabilities measured at their fair value, regardless of the purpose or intent of holding them. Changes in fair value for derivatives not designated in a hedge accounting relationship are marked to market at each reporting date and the related gains (losses) are recognized in the consolidated statement of income as 'foreign exchange gains (losses)' and finance cost as applicable.

The foreign exchange forward contracts, options and interest rate swaps in respect of forecasted transactions which meet the hedging criteria are designated as cash flow hedges. Changes in the derivative fair values that are designated as effective cash flow hedges are deferred and recorded as component of 'other comprehensive income (loss)' (OCI) until the hedged transaction occurs and are then recognized as 'foreign exchange gains (losses)' and 'finance cost' as applicable in the consolidated statement of income. The ineffective portion of hedging derivatives is immediately recognized in the consolidated statement of income.

In respect of derivatives designated as hedges, the Group contemporaneously and formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also formally assesses both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item.

Hedge accounting is discontinued prospectively from the last testing date when (1) it is determined that the derivative financial instrument is no longer effective in offsetting changes in the fair value or cash flows of the underlying exposure being hedged; (2) the derivative financial instrument matures or is sold, terminated or exercised; or (3) it is determined that designating the derivative financial instrument as a hedge is no longer appropriate. When hedge accounting is discontinued the deferred gains or losses on the cash flow hedge remain in 'other comprehensive income (loss)' until the forecasted transaction occurs. Any further change in the fair value of the derivative financial instrument is recognized in current period earnings.

See Note 12 for additional information.

(q) Goodwill and intangibles

Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. Goodwill is not amortized but is reviewed for impairment annually or more frequently if indicators arise. Goodwill is tested annually on March 31, for impairment, or sooner when circumstances indicate impairment may exist, using a fair-value approach at the reporting unit level. A reporting unit is the operating segment, or a business, which is one level below that operating segment (the "component" level) if discrete financial information is prepared and regularly reviewed by the management at that level. Components are aggregated as a single reporting unit if they have similar economic characteristics. In accordance with ASC topic 350, "Intangibles - Goodwill and Other", all assets and liabilities of the acquired businesses including goodwill are assigned to reporting units. The evaluation is based upon a comparison of the estimated fair value of the reporting unit to which the goodwill has been assigned with the sum of the carrying value of the assets and liabilities for that reporting unit. The fair value used in this evaluation is

estimated based upon discounted future cash flow projections for the reporting unit. These cash flow projections are based upon a number of estimates and assumptions.

Intangible assets are initially valued at fair market value using generally accepted valuation methods appropriate for the type of intangible asset. Certain Licensed IPRs which include the right to modify, enhance or exploit are amortised in proportion to the expected benefits over the useful life which could range up to 15 years. Intangible assets with definite lives are amortized over the estimated useful lives and are reviewed for impairment, if indicators of impairment arise. The evaluation of impairment is based upon a comparison of the carrying amount of the intangible asset with the estimated future undiscounted net cash flows expected to be generated by the asset. If estimated future undiscounted cash flows are less than the carrying amount of the asset, the asset is considered impaired. The impairment expense is determined by comparing the estimated fair value of the intangible asset to its carrying value, with any shortfall from fair value recognized as an expense in the current period. The intangible assets with definite lives are amortized over the estimated useful lives of the assets as under:

Asset description	Asset life (in years)
Customer relationships	1 to 10
Customer contracts	0.5 to 10
Technology	2.5 to 15
Licensed IPRs	5 to 15
Assembled workforce	5
Non-compete agreements	3 to 5
Intellectual property rights	4 to 6
Brand and others	2 to 5

(r) Recently issued accounting pronouncements

Adoption of new accounting principles

In August 2018, the FASB issued Accounting Standards Update No. 2018-13 (ASU 2018-13) "Fair value measurement (Topic 820)". The amendments in this Update apply to all entities that are required, under existing GAAP, to make disclosures about recurring or nonrecurring fair value measurements. The amendments in this Update modify the disclosure requirements on fair value measurements in Topic 820, including the consideration of costs and benefits. The Group has adopted this ASU effective April 01, 2020 and the adoption did not have any material impact on its consolidated financial statements.

New accounting pronouncements

In June 2016, the FASB issued Accounting Standards Update No. 2016-13 (ASU 2016-13) "Financial Instruments—Credit Losses" which require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is to be deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The amendments are effective for the fiscal year beginning April 01, 2023 including interim periods within those fiscal years. The Group is currently in the process of evaluating the impact that adoption of this standard will have on its consolidated financial statements.

In January 2017, the FASB issued Accounting Standards Update No. 2017-04 (ASU 2017-04) "Intangibles— Goodwill and Other (Topic 350)", Simplifying the Test for Goodwill Impairment, which eliminates Step 2 of the goodwill impairment test that had required a hypothetical purchase price allocation. Rather, entities should apply the same impairment assessment to all reporting units and recognize an impairment loss for the amount

HCL Technologies Limited and Subsidiaries Notes to Consolidated Financial Statements March 31, 2021

(Amount in thousands, except per share data and as stated otherwise)

by which a reporting unit's carrying amount exceeds its fair value, without exceeding the total amount of goodwill allocated to that reporting unit. Entities will continue to have the option to perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendments are effective for the fiscal year beginning April 01, 2022 including interim periods within those fiscal years. The Group is currently in the process of evaluating the impact that adoption of this standard will have on its consolidated financial statements.

In August 2017, the FASB issued Accounting Standards Update No. 2017-12 (ASU 2017-12) "Derivatives and Hedging (Topic 815)". The amendments in this Update more closely align the results of cash flow and fair value hedge accounting with risk management activities through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in the financial statements. The amendments address specific limitations in current GAAP by expanding hedge accounting for both non financial and financial risk components and by refining the measurement of hedge results to better reflect an entity's hedging strategies. Thus, the amendments will enable an entity to include the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is presented. The amendments are effective for fiscal years beginning April 01, 2021. Early application is permitted in any interim period after issuance of the Update. The Group does not expect the adoption of this update to have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14, "Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans." The ASU modifies the disclosure requirements with respect to defined benefit pension plans. The ASU is effective for the Company beginning April 1, 2022. Early adoption is permitted. The Company is in the process of assessing the impact of this ASU on its consolidated results of operations, cash flows, financial position and disclosures.

In May 2019, the FASB issued ASU No. 2019-05, "Financial Instruments—Credit Losses (Topic 326)." The ASU provides final guidance that allows entities to make an irrevocable one-time election upon adoption of the new credit losses standard to measure financial assets measured at amortized cost (except held-tomaturity securities) using the fair value option. The amendments are effective for the fiscal year beginning April 01, 2023, including interim periods within those fiscal years. The Group is currently in the process of evaluating the impact that adoption of this standard will have on its consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740). The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The ASU amendments are effective for fiscal years beginning April 01, 2022. Early adoption of the amendments is permitted. The Group is currently in the process of evaluating the impact that adoption of this standard will have on its consolidated financial statements.

3. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Group to concentration of credit risk consist principally of cash equivalents, short term deposits with banks and corporations, accounts receivables, unbilled receivables, finance lease receivables, investment securities and derivative instruments. The cash resources of the Group are invested with mutual funds, banks, financial institutions and corporations after an evaluation of the credit risk. By their nature, all such financial instruments involve risks, including the credit risk of non-performance by counterparties. In the management's opinion, as of March 31, 2020 and March 31, 2021, there was no significant risk of loss in the event of non-performance of the counterparties to these financial instruments, other than the amounts already provided for in the financial statements.

The customers of the Group are primarily corporations based in the United States of America and Europe and accordingly, accounts receivables, unbilled receivables and finance lease receivables are concentrated in the respective countries. The Group periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends, analysis of historical bad debts and ageing of accounts receivables, unbilled receivables and finance lease receivables.

4. CASH AND CASH EQUIVALENTS

The cash and cash equivalents as of March 31, 2020 and 2021 are as follows:

	March 31, 2020	March 31, 2021
Deposits with banks, having maturities less than three
months	\$110,908	\$397,821
Other cash and bank balances	529,230	493,137
Total	\$640,138	\$890,959

5. TRANSFER OF FINANCIAL ASSETS

The Group has revolving accounts receivable based facilities of \$319,000 permitting it to sell certain accounts receivables to banks on a non-recourse basis in the normal course of business. The aggregate maximum capacity utilized by the Group at any time during the years ended March 31, 2020 and 2021 was \$120,491 and \$98,209, respectively. Outstanding utilization against this facility as of March 31, 2020 and 2021 is \$63,177 and \$7,659, respectively.

During years ended March 31, 2020 and 2021, the Group has sold finance lease receivables of \$52,094 and \$41,301 on non-recourse basis and re-purchased finance lease receivables of Nil and \$68,899, respectively.

Gains or losses on the sales are recorded at the time of transfer of these receivables and are immaterial. The Group has no outstanding service obligation.

6. ACQUISITIONS IN CURRENT YEAR

Acquisition of CISCO SON Product

On May 29, 2020, the Group had signed a definitive agreement to acquire Cisco Self-Optimizing Network (SON) product and associated business from Cisco System, Inc., a California based company for a consideration of \$49,999.

The Cisco SON technology is a powerful platform that uses machine learning and a set of applications to automate the Radio Access Network (RAN). SON is a multi-vendor multi-technology (MVMT) solution that optimizes the Radio Access Networks (RAN) for 2G-5G.

Acquisition has been consummated effective October 25, 2020. The Group paid \$48,763 on acquisition date and balance \$1,236 was paid subsequently.

Total purchase consideration of \$49,999 has been allocated based on management estimates to the acquired assets and liabilities as follows:

	Amount
Recoverable from Cisco (against contract liabilities)	\$10,117
Contract liabilities	(9,552)
Other Recoverable from Cisco	3,403
Property and equipment	77
Technology	12,638
Customer relationships	12,132
Customer contracts	2,022
Non-compete agreements	1,011
Goodwill	18,151
Total purchase consideration	\$49,999

The resultant goodwill was considered tax deductible on the date of acquisition and has been allocated to the Products & Platforms segment. This goodwill is attributable mainly to Group's ability to enhance the sale of products to customers in existing business of the group and targeting new customers.

The table below shows the values and lives of intangible assets recognized on acquisition:-

	Amount	Life (Years)	Basis of amortisation
Technology	\$12,638	8	On straight line basis
Customer relationships Customer contracts	12,132 2,022	8 3	In proportion of estimated revenue In proportion of estimated revenue
Non-compete agreements	1,011	4	On straight line basis
Total Intangible assets	\$27,803

Acquisition of DWS Limited

On September 21 2020, the Group had announced its intent to acquire through a wholly owned subsidiary, 100% stake in DWS Limited, a leading Australian IT, business and management consulting group for \$120,467 (AUD 158,198) payable in cash.

The suite of solutions provided by DWS covers, but not limited to, Digital Transformation, IT, Business and Management Consulting services, Data and Business Analytics, and Robotic Process Automation services.

The acquisition has been consummated on January 05, 2021 and the Group has paid \$120,467.

Total purchase consideration of \$120,467 has been preliminarily allocated based on management estimates to the acquired assets and liabilities as follows:

	Amount
Net working capital (including cash of \$6,899)	(\$4,158)
Deferred tax liabilty,net	(5,076)
Borrowing	(29,698)
Property and equipment, net	1,697
Customer relationships	20,560
Customer contracts	3,427
Brand	10,661
Goodwill	123,054
Total purchase consideration	\$120,467

The resultant goodwill is considered non tax deductible and has been allocated to the IT & Business Services segment. The acquisition is a step towards enhancing the Group's presence in the Australia and New Zealand region. The acquisition also helps the Group expand its coverage of clients and use the acquired customer base to offer its expanded portfolio of services.

The table below shows the values and lives of intangible assets recognized on acquisition:-

	Amount	Life (Years)	Basis of amortisation
Customer relationships	20,560	7 years 6months	In proportion of estimated revenue
Customer contracts	3,427	6 months	In proportion of estimated revenue
Brand	10,661	5	On straight line basis
Total Intangible assets	\$34,648

The Group is in the process of making a final determination of the fair value of assets and liabilities primarily related to certain tax matters.

ACQUISITIONS IN PREVIOUS PERIODS

Acquisition of Select IBM Software products

On December 07, 2018, the Group had signed a definitive agreement to acquire business relating to select IBM software products for a consideration of \$1,775,000.

The Group has acquired these products for security, marketing, commerce, and digital solutions along with certain assumed liabilities and in scope employees. With this the Group gets 100% control on the assets being acquired and has also taken full ownership of the research and development, sales, marketing, delivery and support for these products. Through this acquisition, the Group intends to enhance its products and platforms offering to customers across a wide range of industries and markets. IBM will pay the Company for the assumed liabilities as related services are rendered, based on an agreed basis, fair value of the same has been estimated at \$505,630.

Acquisition has been consummated effective June 30, 2019.The Group has paid \$812,500 till June 30, 2019. \$812,500 is payable after one year and \$150,000 is payable in three tranches of \$50,000 each till July 30, 2021 subject to fulfilment of certain conditions as per agreement. These payables have been fair valued at \$929,929.

The Group has paid \$812,500 on June 30,2020. The Group has also paid two tranches of purchase consideration amounting to \$90,079 till March 31, 2021.

The Group had earlier acquired certain intellectual property rights (Licensed IPRs) from IBM for some of these products and was carrying these licensed IPRs at an unamortized value of \$427,306 as of June 30, 2019. This amount has been reduced from Licensed IPRs and included in purchase price.

The purchase price including the fair value of remaining consideration and unamortized value of Licensed IPRs of \$929,929 and \$427,306 respectively, is \$2,169,735 and has been allocated based on management estimates to the acquired assets and liabilities as follows:

	Amount
Recoverable from IBM (against contract liabilities)*	\$505,630
Contract liabilities*	(509,630)
Property and equipment	290
Deferred tax asset, net	1,436
Customer related intangibles	919,890
Technology	351,730
Goodwill	900,389
Total purchase consideration	\$2,169,735

*Presented gross of \$235,630 recoverable from IBM with a corresponding contract liability for customer contracts entered by IBM for these products with service obligation commencing after June 30, 2019.

The resultant goodwill was considered tax deductible on the acquisition date and has been allocated to the Products & Platforms segment. This goodwill is attributable mainly to Group's ability to upgrade the products and enhance the sale of products to customers in existing business of the group and targeting new customers.

The table below shows the values and lives of intangible assets recognized on acquisition:

	Amount	Life (Years)	Basis of amortisation
Customer related intangibles	\$919,890	10	In proportion of estimated revenue
Technology	351,730	7 to 10	On straight line basis over the estimated life of the respective products
Total Intangible assets	\$1,271,620

Subsequent to the consummation date, the Group has received certain revised information from seller which has resulted in adjustments in the value of assets and liabilities acquired resulting into increase in intangible assets by \$16,833 and net assets by \$8,436 with corresponding decrease in goodwill by \$18,475.

Other Acquisitions

a) On April 01, 2019, the Group, through a wholly owned subsidiary, entered into an agreement to acquire 100% shareholding of a Company in US doing business in digital transformation consulting. The acquisition will enhance Group's digital consulting offerings with their strong capabilities in digital strategy development, agile program management, business transformation and organizational change management.

The total purchase price for the acquisition is \$45,005.

Total purchase consideration of \$45,005 has been allocated based on management estimates to the acquired assets and liabilities as follows:

	Amount
Net working capital (including cash of \$933)	\$9,990
Deferred tax liabilities	(2,439)
Property and equipment	316
Customer relationships	8,200
Customer contracts	1,400
Brand	800
Goodwill	26,738
Total purchase consideration	\$45,005

The resultant goodwill is not considered tax deductible and has been allocated to IT and Business Services segment.

The table below shows the values and lives of intangible assets recognized on acquisition:

	Amount	Life (Years)
Customer relationships	\$8,200	9.0
Customer contracts	1,400	1.0
Brand	800	2.0
Total Intangible assets	\$10,400

In addition to the purchase consideration, \$5,000 is payable to certain key employees over a two-year period. Payment of this amount is in the nature of long term incentive plan to the senior managers of the operating entities that includes retention and performance based bonuses. This consideration is being accounted for as post acquisition employee compensation expense in accordance with ASC 805 on "Business combination".

b) On October 10, 2019, the Group acquired 100% shareholding of a Company in India, which offers an integrated portfolio of services and solutions to its customers in key semiconductor domains. This acquisition offers an opportunity to combine acquiree's analog strength with Group's digital SOC (System on Chip) expertise to gain market share in Very Large Scale Integration design services market.

The total purchase price for the acquisition is \$25,995. The Group has paid \$25,294 till March 31, 2021.

Total purchase consideration of \$25,995 has been allocated based on management estimates to the acquired assets and liabilities as follows:

	Amount
Net working capital (including cash of \$1,838)	\$4,639
Deferred tax liabilities	(1,033)
Property and equipment	4,773
Customer relationships	4,218
Customer contracts	1,163
Brand	462
Non-Compete Agreement	252
Goodwill	11,521
Total purchase consideration	\$25,995

The resultant goodwill is not considered tax deductible and has been allocated to Engineering and R&D services segment.

The table below shows the values and lives of intangible assets recognized on acquisition:

	Amount	Life (Years)
Customer relationships	4,218	8.5
Customer contracts	1,163	1.5
Brand	462	2.5
Non-Compete Agreement	252	3.0
Total Intangible assets	\$6,095

In addition to the purchase consideration, \$2,098 is payable to certain key employees over a three-year period. Payment of this amount is in the nature of long term incentive plan to the key employees of the operating entities that includes retention and performance based bonuses. This consideration is being accounted for as post acquisition employee compensation expense in accordance with ASC 805 on "Business combination".

7. PROPERTY AND EQUIPMENT

As of March 31, 2020 and March 31, 2021, property and equipment comprises the following:

	March 31, 2020	March 31, 2021
Freehold land	\$11,826	\$10,816
Buildings	416,356	445,196
Computer and networking equipment	641,184	746,817
Software	197,470	122,772
Furniture, fixtures and office equipment	116,392	126,248
Plant and equipment	278,292	304,468
Vehicles	18,796	19,634
Capital work-in-progress	67,664	54,393
	1,747,979	1,830,344
Accumulated depreciation and amortization	(922,776)	(976,291)
Property and equipment, net	\$825,204	\$854,053

Computer and networking equipment includes assets taken on finance lease and represents right of use assets on finance lease of \$3,712 and \$7,480 as of March 31, 2020 and 2021, respectively.

Depreciation expense was \$165,276, \$193,938 and \$216,137 for the years ended March 31, 2019, 2020 and 2021, respectively.

8. GOODWILL AND INTANGIBLES

Effective April 01, 2019, consequent to reorganization of its global operations due to technological changes and business requirements with increased focus to meet customer expectations and provide better services, the Group has reorganized itself into three segments, IT and Business Services, Engineering and R&D Services, and Products & Platforms.

Accordingly, goodwill has been reallocated based on the relative fair value of each newly identified reporting segment. The Group tested goodwill for impairment prior to the reporting segments change and immediately thereafter, for events and conditions identified in accordance with the guidance in ASC 350, "Intangibles - Goodwill and Other." The fair value of the Group and its segments was calculated using a discounted cash flow model using estimated future cash flows. The results of our evaluation showed that the fair value of each operating segment exceeded its book value.

Changes in goodwill balances by reportable segment, for the year ended March 31, 2020, are as follows :

	IT and Business Services	Engineering and R&D Services	Products & Platforms	Total
Balance as at March 31, 2019	\$738,883	\$408,197	\$190,251	\$1,337,331
Acquisitions during the year	26,738	11,521	918,864	957,123
Measurement period adjustments	-	-	(23,567)	(23,567)
Effect of exchange rate changes	(29,147)	(7,623)	(77,922)	(114,692)
Balance as at March 31, 2020	\$736,474	\$412,095	\$1,007,626	\$2,156,195

Changes in goodwill balances by reportable segment, for the year ended March 31, 2021, are as follows:

	IT and Business Services	Engineering and R&D Services	Products & Platforms	Total
Balance as at March 31, 2020	\$736,474	\$412,095	\$1,007,626	\$2,156,195
Acquisitions during the period	123,054	-	18,151	141,205
Effect of exchange rate changes	39,587	3,553	29,491	72,631
Balance as at March 31, 2021	\$899,115	\$415,648	\$1,055,268	\$2,370,031

The components of intangible assets are as follows:

		March 31,2020			March 31,2021
	Gross carrying amount	Accumulated amortization	Net	Gross carrying amount	Accumulated amortization and impairment	Net
Intellectual property rights	\$2,115	(\$1,403)	\$712	\$2,839	(\$2,678)	\$161
Technology	391,951	(55,099)	336,852	416,731	(107,499)	309,232
Customer related intangibles	1,064,881	(210,561)	854,320	1,139,600	(387,774)	751,826
Licensed IPRs	707,705	(185,356)	522,349	817,018	(287,747)	529,271
Assembled workforce	37,187	(20,502)	16,685	37,955	(28,571)	9,384
Customer contracts	14,675	(14,310)	365	27,328	(21,863)	5,465
Non-compete agreements	3,498	(3,083)	415	4,688	(3,556)	1,132
Brand and others	3,656	(3,302)	354	14,005	(3,691)	10,314
	\$2,225,668	(\$493,616)	\$1,732,052	\$2,460,164	(\$843,379)	\$1,616,785

Amortization and impairment expense for the years ended March 31, 2019, 2020 and 2021 is \$141,397, \$205,295 and \$322,105, respectively.

The estimated amortization expense schedule for intangible assets based on current balance is as follows:

Year ending March 31,
2022	\$277,022
2023	248,471
2024	226,266
2025	211,802
2026	190,796
Thereafter	462,428
	1,616,785

9. INVESTMENTS IN AFFILIATES

Equity method investment

Morado Venture Partners II LLP

Morado Venture Partners II LLP, is a limited liability partnership "Venture Fund".

Equity method investment as of March 31, 2020 and 2021 is as follows:

		March 31, 2020		March 31, 2021
Name of the Affiliate	Carrying Value	Ownership Percentage	Carrying Value	Ownership Percentage
Morado Venture Partners II LLP	\$5,022	12.49%	\$6,356	12.04%
	\$5,022		\$6,356

The Group accounts for its interest in affiliate under the equity method and the gain (loss) for the years ended March 31, 2019, 2020 and 2021 are shown below:

		Year ended March 31,
Name of the Affiliate	2019	2020	2021
Morado Venture Partners II LLP	\$580	\$53	\$1,334
	\$580	\$53	\$1,334

10. VARIABLE INTEREST ENTITIES (VIEs)

In evaluating whether the Group has the power to direct the activities of a VIE that most significantly impact its economic performance, the Group considers the purpose for which the VIE was created, the importance of each of the activities in which it is engaged and decision making role, if any, in those activities that significantly determine the entity's economic performance as compared to other economic interest holders. This evaluation requires consideration of all facts and circumstances relevant to decision-making that affect the entity's future performance and the exercise of professional judgment in deciding which decision-making rights are most important.

The Group is the primary beneficiary holding 100% dividend and distribution rights in VIEs. The Group consolidates VIEs because it has the authority to manage and control the activities that significantly affect the economic performance of the VIEs.

The table below summarizes the assets and liabilities of consolidated VIEs described above.

	March 31, 2020	March 31, 2021
Current assets
Cash and cash equivalents	\$13,539	\$16,133
Term deposits with banks	16,255	24,893
Accounts receivables, net	3,528	3,343
Unbilled receivables	3,366	3,177
Other current assets	8,165	8,686
Total Current Assets	\$44,852	\$56,232
Deferred income taxes, net	7,059	8,948
Property and equipment, net	5,690	8,058
Operating lease right-of-use assets	18,519	14,492
Other assets	16,279	14,801
Total Assets	\$92,400	\$102,531
Current liabilities
Accounts payable	\$807	\$848
Accrued employee costs	1,968	2,754
Current portion of Operating leases liability	2,595	2,690
Other current liabilities	4,265	5,287
Total current liabilities	\$9,635	\$11,579
Accrued employee costs	1,562	2,293
Operating lease liabilities, net of current portion	16,785	13,093
Total liabilities	\$27,982	\$26,965

a) Assets and liabilities exclude all intercompany accounts and transactions, which are eliminated in consolidation.

b) For the years ended March 31, 2019, 2020 and 2021, total revenues, from VIEs were \$57,089, \$66,728 and \$82,396, respectively.

11. INVESTMENT SECURITIES

Available for sale investment securities consist of the following:

As of March 31, 2020:

	Carrying value	Gross unrealized holding gains	Gross unrealized holding loss	Fair value
Mutual fund units – debt	\$433,176	\$2,635	\$-	\$435,811
Corporate debt securities	488,075	-	(295)	487,780
Total	\$921,251	\$2,635	(\$295)	\$923,591
As of March 31, 2021:
	Carrying value	Gross unrealized holding gains	Gross unrealized holding loss	Fair value
Mutual fund units – debt	\$139,775	\$284	\$-	\$140,059
Corporate debt securities	781,786	4,561	-	786,347

The gross unrealized holding gains (loss) have been recorded as part of other comprehensive income (loss). The maturity profile of the investments classified as available for sale as of March 31, 2021 is set out below:

Total \$921,561 \$4,845 \$- \$926,406

	Fair value
Less than one year	\$574,616
After 1 year through 5 years	343,126
After 5 years through 10 years	8,664
	\$926,406

Proceeds from the sale of available-for-sale securities during the years ended March 31, 2019, 2020 and 2021 were \$3,537,522, \$4,323,970 and \$2,853,510, respectively.

The cost of a security sold or the amount reclassified out of 'other comprehensive income (loss)' into earnings was determined on investment by investment basis.

The table summarizes the transactions for available for sale securities:

	Year ended March 31,
	2019	2020	2021
Net realised gain	\$23,435	\$17,568	\$15,310
Reclassification into earnings on maturity out of
other comprehensive income	\$14,679	\$9,603	\$11,947

12. DERIVATIVE FINANCIAL INSTRUMENTS

In the normal course of business, the Group uses derivative financial instruments to manage foreign currency exchange rate risk and interest rate risk. Derivative transactions are governed by a uniform set of policies and procedures covering areas such as authorization, counterparty exposure and hedging practices. The Group does not enter into derivative transactions for trading or speculative purposes.

As a result of the use of derivative instruments, the Group is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate the counterparty credit risk, the Group has a policy of entering into contracts only with carefully selected, nationally recognized financial institutions, based upon their credit ratings and other factors. The Group has entered into a series of foreign exchange forward contracts, options and interest rate swaps that are designated as cash flow hedges and the related forecasted transactions extend through July 2025.

The following table presents the aggregate notional principal amounts of the outstanding derivative forward covers, together with the related balance sheet exposure:

			Balance sheet exposure
			Notional principal amounts		Asset (Liability)
	March 31,		March 31,		March 31,	March 31,
	2020		2021		2020	2021
	Foreign exchange forward denominated in:
USD /INR	\$787,370 (Sell)		\$1,012,387 (Sell)		(\$35,947)	\$22,513
GBP/ INR	£40,540 (Sell)		£56,300 (Sell)		258	(678)
GBP/USD	£95,650 (Sell)			- (Sell)	922	-
EUR / USD	€ 57,300 (Sell)		€ 20,250 (Sell)		242	210
EUR/ INR	€ 79,000 (Sell)		€ 117,000 (Sell)		3,596	6,044
AUD/INR	AUD 16,000 (Sell)		AUD 113,288 (Sell)		1,182	(1,243)
AUD/USD	AUD 4,250 (Sell)		AUD 80,400 (Sell)		205	162
SEK/INR	SEK 110,000 (Sell)		SEK 560,000 (Sell)		512	1311
CHF/USD	CHF 17,391 (Sell)			- (Sell)	105	-
CHF/ INR	CHF 35,500 (Sell)		CHF 24,500 (Sell)		(830)	1624
MXN/USD	MXN 505,861 (Sell)		MXN 257,000 (Sell)		1,282	(99)
RUB/USD	RUB 290,000 (Sell)		RUB 149,500 (Sell)		773	(19)
NOK/INR	NOK 60,000 (Sell)		NOK 115,000 (Sell)		1,077	(557)
CNY/USD	CNY 79,000 (Sell)		CNY 157,000 (Sell)		100	9
NZD/USD	NZD 1,551 (Sell)		NZD 17,350 (Sell)		42	(44)
NZD/INR		- (Sell)	NZD 2,165 (Sell)		-	70
PLN/USD	PLN 30,200 (Sell)		PLN 11,000 (Sell)		219	(6)
ZAR/USD	ZAR 118,000 (Sell)		ZAR 159,217 (Sell)		777	(128)
BRL/USD	BRL 81,000 (Sell)		BRL 80,000 (Sell)		2,274	(323)
JPY/USD	JPY 870,000 (Sell)			- (Sell)	(22)	-
JPY/INR	JPY 1,910,000 (Sell)		JPY 2,075,000 (Sell)		(113)	1,793
CAD/INR	CAD 23,000 (Sell)		CAD 23,500 (Sell)		674	(306)
SGD/INR		- (Sell)	SGD 7,691 (Sell)		-	70
SGD/USD		- (Sell)	SGD 2,300 (Sell)		-	23
IDR/USD		- (Sell)	IDR 23,200,000 (Sell)		-	8
RON/USD		- (Sell)	RON 30,000 (Sell)		-	19
CAD/USD	CAD 25,500 (Buy)		CAD 40,750 (Buy)		(943)	38
SGD/USD	SGD 40,700 (Buy)		SGD 21,950 (Buy)		(388)	48

HCL Technologies Limited and Subsidiaries Notes to Consolidated Financial Statements March 31, 2021

(Amount in thousands, except per share data and as stated otherwise)

			Notional principal amounts		Balance sheet exposure Asset (Liability)
	March 31,		March 31,		March 31,	March 31,
	2020		2021		2020	2021
GBP/USD	£34,000 (Buy)		£16,350 (Buy)		70	70
EUR/USD	€ 16,500 (Buy)		€ 8,000 (Buy)		(190)	(4)
AUD/USD		- (Buy)	AUD 3,400 (Buy)		-	-
SEK/USD	SEK 385,000 (Buy)		SEK 419,000 (Buy)		(1,527)	(70)
JPY /USD	JPY 1,590,000 (Buy)		JPY 1,255,000 (Buy)		(124)	(95)
CHF /USD	CHF 1,000 (Buy)		CHF 11,515 (Buy)		17	(12)
ZAR /USD	ZAR 35,000 (Buy)			- (Buy)	18	-
NOK /USD	NOK 202,000 (Buy)		NOK 247,500 (Buy)		(280)	218
DKK/USD	DKK 79,500 (Buy)		DKK 89,500 (Buy)		86	(31)
PHP/USD	PHP 275,000 (Buy)		PHP 500,000 (Buy)		(12)	(30)
CZK/USD	CZK 200,100	(Buy)	CZK 50,000 (Buy)		(406)	(7)
BGN/USD	-	(Buy)	BGN 8,850 (Buy)		-	(38)
ILS/USD	-	(Buy)	ILS 8,074 (Buy)		-	(19)
					(\$26,351)	\$30,521

The following table presents the aggregate notional principal amounts of the outstanding options together with the related balance sheet exposure:

			Balance sheet exposure
	Notional principal amounts		Asset (Liability)
		March 31,	March 31,	March 31,
	March 31, 2020	2021	2020	2021
Range Forward (Sell)
USD/INR	\$637,982	\$606,870	(\$12,645)	\$11,601
EUR/INR	€ 36,530	€ 13,500	412	364
GBP/INR	£15,750	£12,000	554	42
AUD/INR	AUD 8,500	-	418	-
EUR/USD	€ 2,300	-	(21)	-
SEK/INR	SEK 15,000	-	231	-
Seagull (Buy)
USD/INR	\$143,500	-	4,275	-
Seagull (Sell)
EUR/INR	-	€ 8,000	-	304
EUR/USD	€ 8,300	-	(45)	-
GBP/USD	£6,750	-	164	-
			(\$6,657)	\$12,311

The following table presents the aggregate notional principal amounts of the outstanding interest rate swaps together with the related balance sheet exposure:

	Notional principal amounts				Balance sheet exposure Asset (Liability)
	March 31, 2020	March 31, 2021		March 31, 2020	March 31, 2021
Interest rate swap (floating to fixed)	\$255,000		-	(\$7,133)		-
				(\$7,133)		-

The notional amount is a key element of derivative financial instrument agreements. However, notional amounts do not represent the amount exchanged by counterparties and do not measure the Group's exposure to credit risk as these contracts are settled at their fair values at the maturity date.

The balance sheet exposure denotes the fair value of these contracts at the reporting date and is presented in US Dollars.

The Group presents fair value of derivative instruments on a net basis in the consolidated financial statements due to the right of offset by its individual counterparties under master netting agreements.

The fair value of the derivative instruments presented on a gross basis as of each date indicated below is as follows:

	Other current assets	Other assets	Other current liabilities	Other liabilities	Total fair value
Derivatives designated as hedging
instruments: Foreign exchange contracts in an asset position	\$7,455	\$2,908	\$7,227	\$2,908	\$20,498
Foreign exchange contracts in a liability position	(7,227)	(2,908)	(23,397)	(26,317)	(59,849)
Interest rate swap contracts in a liability position	-	-	(1,678)	(5,455)	(7,133)
Net asset (liability)	\$228	\$-	(\$17,848)	(\$28,864)	(\$46,484)
Derivatives not designated as hedging instruments:
Foreign exchange contracts in an asset position	\$12,568	\$-	\$3,911	\$-	\$16,479
Foreign exchange contracts in a liability position	(3,911)	-	(6,225)	-	(10,136)
Net asset (liability)	\$8,657	\$-	(\$2,314)	\$-	\$6,343
Total Derivatives at fair value	\$8,885	\$-	(\$20,162)	(\$28,864)	(\$40,141)

March 31, 2020

	Other current assets	Other assets	Other current liabilities	Other liabilities	Total fair value
Derivatives designated as hedging instruments:
Foreign exchange contracts in an asset position	\$26,856	\$18,987	\$2,620	\$1,857	\$50,320
Foreign exchange contracts in a liability position	(2,620)	(1,857)	(2,620)	(1,860)	(8,957)
Net asset (liability)	\$24,236	\$17,130	\$-	(\$3)	\$41,363
Derivatives not designated as hedging instruments:
Foreign exchange contracts in an asset position	\$2,688	\$-	\$944	\$-	\$3,632
Foreign exchange contracts in a liability position	(944)	-	(1,219)	-	(2,163)
Net asset (liability)	\$1,744	\$-	(\$275)	\$-	\$1,469
Total Derivatives at fair value	\$25,980	\$17,130	(\$275)	(\$3)	\$42,832

March 31, 2021

The following tables set forth the fair value of derivative instruments included in the consolidated balance sheets as on March 31, 2020 and March 31, 2021:

Derivatives designated as hedging instruments:

	March 31, 2020	March 31, 2021
Unrealized gain on financial instruments classified under current assets	\$228	\$24,236
Unrealized gain on financial instruments classified under non current assets	-	17,130
Unrealized loss on financial instruments classified under current liabilities	(17,848)	-
Unrealized loss on financial instruments classified under non-current liabilities	(28,864)	(3)
	(\$46,484)	\$41,363
Derivatives not designated as hedging instruments:
	March 31, 2020	March 31, 2021
Unrealized gain on financial instruments classified under current assets	\$8,657	\$1,744
Unrealized loss on financial instruments classified under current liabilities	(2,314)	(275)
	\$6,343	\$1,469

The following table summarizes the activities in other comprehensive income (loss) ('OCI') and their effects on financial performance during the year ended March 31, 2019

Derivatives in hedging relationships	Amount of gain or (loss) recognized in OCI on derivatives (Effective portion)	Location of gain or (loss) reclassified from OCI into statement of income (Effective portion)	Amount of gain or (loss) reclassified from OCI into statement of income (Effective portion)	Location of gain or (loss) recognized in income on derivatives (Ineffective portion and amount excluded from effectiveness testing)	Amount of gain or (loss) recognized in income on derivatives (Ineffective portion and amount excluded from effectiveness testing)
Foreign exchange contracts	\$11,868	Other Income (Expense),net	\$6,418	Other Income (Expense),net		Nil
	\$11,868		\$6,418			Nil
	Derivatives not designated as hedging instruments		Location of gain or (loss) recognized in statement of income on derivatives		Amount of gain or (loss) recognized in statement of income on derivatives
Foreign exchange contracts			Other income (expense),net			\$642

The following table summarizes the activities in other comprehensive income (loss) ('OCI') and their effects on financial performance during the year ended March 31, 2020.

Derivatives in hedging relationships	Amount of gain or (loss) recognized in OCI on derivatives (Effective portion)	Location of gain or (loss) reclassified from OCI into statement of income (Effective portion)	Amount of gain or (loss) reclassified from OCI into statement of income (Effective portion)	Location of gain or (loss) recognized in income on derivatives (Ineffective portion and amount excluded from effectiveness testing)	Amount of gain or (loss) recognized in income on derivatives (Ineffective portion and amount excluded from effectiveness testing)
Foreign exchange contracts	(\$51,193)	Other Income (Expense),net	\$18,369	Other Income (Expense),net		Nil
Interest rate swap contracts	(\$6,612)	Finance cost	605	Finance cost		Nil
	(\$57,805)		\$18,974			Nil
	Derivatives not designated as		Location of gain or (loss) recognized in		Amount of gain or (loss) recognized in statement of
	hedging instruments		statement of income on derivatives		income on derivatives
Foreign exchange contracts			Other income (expense),net		\$3,052

The following tables summarize the activities in other comprehensive income (loss) ('OCI') and their effects on financial performance during the year ended March 31, 2021.

Derivatives in hedging relationships	Amount of gain or (loss) recognized in OCI on derivatives (Effective portion)	Location of gain or (loss) reclassified from OCI into statement of income (Effective portion)	Amount of gain or (loss) reclassified from OCI into statement of income (Effective portion)	Location of gain or (loss) recognized in income on derivatives (Ineffective portion and amount excluded from effectiveness testing)	Amount of gain or (loss) recognized in income on derivatives (Ineffective portion and amount excluded from effectiveness testing)
Foreign exchange contracts	\$80,720	Other Income (Expense),net	(\$1,447)	Other Income (Expense),net		Nil
Interest rate swap contracts	(\$698)	Finance cost	(\$7,915)	Finance cost		Nil
	\$80,022		(\$9,362)			Nil
	Derivatives not designated as hedging instruments		Location of gain or (loss) recognized in statement of income on derivatives		Amount of gain or (loss) recognized in statement of income on derivatives
Foreign exchange contracts			Other income (expense),net		\$38,146

The following table summarizes the activity in 'Other comprehensive income (loss)' within equity related to all derivatives classified as cash flow hedges for the year ended March 31, 2019, 2020 and 2021, respectively:

	Year ended March 31,
	2019	2020	2021
Balance as at the beginning of the year (before tax)	\$26,017	\$29,986	(\$49,390)
Unrealized gain (loss) on cash flow hedging derivatives
during the year	11,868	(57,805)	80,022
Net loss (gain) reclassified into statement of income on
occurrence of hedged transactions	(6,418)	(18,974)	9,362
Effect of exchange rate fluctuations	(1,481)	(2,597)	(1,474)
Balance as at the end of the year (before tax)	\$29,986	(\$49,390)	\$38,520
Tax (expense) benefit	(5,276)	8,845	(13,461)
	\$24,710	(\$40,545)	\$25,059

As of March 31, 2021, the estimated net amount of existing gain that is expected to be reclassified into the income statement from OCI within the next twelve months is \$21,562.

13. INVENTORY

As of March 31, 2020 and 2021, Inventory comprises the following:

March 31, 2020	March 31, 2021
\$12,080	\$12,793
\$12,080	\$12,793

14. OTHER CURRENT ASSETS

As of March 31, 2020 and March 31, 2021, other current assets comprise the following:

	March 31, 2020	March 31, 2021
Prepaid expenses	\$151,552	\$175,271
Interest receivable	33,418	30,491
Prepaid/advance taxes	20,761	17,969
Deposits	14,935	9,906
Deferred contract cost	73,883	95,710
Contract assets	69,638	45,226
Employee receivables	5,224	4,785
Derivative financial instruments	8,885	25,980
Advance to suppliers	17,308	12,974
Finance lease receivable	94,092	151,293
Restricted cash	1,382	1,521
Recoverable from IBM (against Contract liabilities)	131,607	3,552
Others	62,991	101,270
	\$685,676	\$675,948

15. OTHER ASSETS

As of March 31, 2020 and March 31, 2021, other assets comprise the following:

	March 31, 2020	March 31, 2021
Security deposits	\$33,717	\$34,651
Deferred contract cost	171,356	190,851
Unbilled receivables	158,449	151,751
Prepaid expenses	49,941	44,214
Derivative financial instruments	-	17,130
Finance lease receivable	131,378	161,057
Recoverable from IBM (against Contract liabilities)	2,890	-
Restricted cash	132	162
Others	442	420
	\$548,305	\$600,236

16. ALLOWANCES FOR ACCOUNTS RECEIVABLE

The Group maintains an allowance for uncollectible receivables on the trade receivables at the end of the year. Factors considered by the management in determining the adequacy of the allowance include the present and prospective financial condition of the debtor, the ageing of the trade receivables and any other relevant factors.

The movement in allowance for accounts receivable is given below:

	March 31, 2020	March 31, 2021
Balance at the beginning of the year	\$44,764	\$70,588
Additional provision during the year	39,630	27,617
Deductions on account of write offs and collections	(16,103)	(36,155)
Other adjustment	5,942	465
Effect of exchange rate changes	(3,645)	2,580
Balance at the end of the year	\$70,588	\$65,095

17. DEBTS

SHORT TERM BORROWINGS

The Group has unsecured short term loan amounting to \$99,999 and \$61 as of March 31, 2020 and March 31, 2021, respectively at effective interest rates of 1.7% and 5.70% respectively.

The Group has availed an unsecured bank line of credit from its bankers amounting to \$143,771 and Nil as of March 31, 2020 and March 31, 2021, respectively, at effective interest rates of 6.9% and Nil respectively

LONG TERM DEBT

	March 31, 2020	March 31, 2021
From banks	\$428,771	\$39,088
1.375% senior notes	-	495,274
Other	406	-
Less: Current portion	(52,795)	(10,798)
	\$376,382	\$523,564

The scheduled principal repayments are as follows:

	March 31, 2021
Within one year	\$10,798
One to two years	7,966
Two to three years	17,893
Three to five years	497,705
	\$534,362

The Group's borrowings are subject to certain financial and non financial covenants. At March 31, 2021, the Group was in compliance with all such covenants.

Long term debts from banks include:

Unsecured long term loans of \$422,071 and \$24,099 as of March 31, 2020 and March 31, 2021, respectively, at effective interest rates of 0.9% to 7.9% and 6.9% to 7.0%, respectively.

Term loans of \$6,700 and \$6,613 as of March 31, 2020 and March 31, 2021, respectively, at effective interest rates of 8.0% to 9.7% and secured by hypothecation of vehicles with a gross book value of \$17,067 and \$17,683 as of March 31, 2020 and March 31, 2021, respectively.

The Group has outstanding multi-option revolving credit facility from bank of \$8,376 as of March 31, 2021 secured against assets of one of its subsidiary at interest rates of 0.73% p.a.

USD \$500,000 1.375% senior notes

On March 10, 2021, the Group issued USD 500,000 unsecured notes due 2026 (the "notes"). The notes bear interest at a rate of 1.375% per annum and will mature on March 10, 2026. Interest on the notes will be paid semi-annually on March 10 and September 10 of each year, commencing from September 10, 2021. The notes are listed on Singapore Exchange Securities Trading Limited (SGX-ST).

The notes were issued at the discount price of 99.510% against par value and have an effective interest rate of 1.58% after considering the issue expenses and discount of \$4,805.

Other long term debts include:

Unsecured long term loans from a vendor of \$406 and Nil as of March 31, 2020 and March 31, 2021, respectively, at nil interest.

18. OTHER CURRENT LIABILITIES

As of March 31, 2020 and March 31, 2021, other current liabilities comprise the following:

	March 31, 2020	March 31, 2021
Advances from customers	\$33,288	\$43,703
Sales tax and other taxes payable	123,471	122,714
Accrued liabilities and expenses	464,137	504,961
Supplier's credit*	60,266	5,294
Due to related parties	2,999	1,557
Derivative financial instruments	20,162	275
Deferred consideration (including contingent consideration)	857,917	49,659
Others	33,873	39,186
	\$1,596,113	\$767,349

* The Group has negotiated extended interest bearing credit terms with certain vendors for extended payment terms up to 360 days. Interest rate on this arrangement ranges from 1.5% to 9.8%.

19. OTHER LIABILITIES

As of March 31, 2020 and March 31, 2021, other liabilities comprise the following:

		March 31, 2020	March 31, 2021
Accrued liabilities and expenses		\$3,746	\$3,988
Derivative financial instruments		28,864	3
Deferred consideration (including consideration)	contingent	48,296	-
Others		12,388	64,889
		\$93,294	\$68,880

20. EQUITY SHARES

The Company has only one class of capital stock referred to herein as equity shares. Par value of each equity share outstanding as of March 31, 2021 is \$0.03 (` 2.00).

Voting

Each holder of equity shares is entitled to one vote per share.

Dividends

Dividends declared and paid by the Company are in Indian Rupees. Dividends payable to equity stockholders are based on the net income available for distribution as reported in the standalone financial statements of the Company prepared in accordance with Indian Accounting Standards. Indian law on foreign exchange governs the remittance of dividends outside India. Such dividend payments are subject to applicable taxes.

Change in Authorised Share capital

During the current year, pursuant to the Scheme of amalgamation effective July 13, 2020 between the Company and its four wholly owned subsidiaries, the authorised shares of the erstwhile Transferor Companies have been clubbed with the authorised shares of the Company. Consequently, as of March 31, 2021, the authorised share capital of the Company has increased to 3,017,000,000 equity shares of face value of ₹2 each.

Bonus Issue

During the year ended March 31, 2020, pursuant to the approval of the shareholders through postal ballot (including remote e-voting), the Company had allotted 1,356,832,548 bonus shares of 2/- each fully paid-up on December 10, 2019 in the proportion of 1 equity share for every 1 equity share of 2/- each held by the equity shareholders of the Company as on the record date of December 07, 2019. Consequently, the Company capitalized an amount of \$38,029 from its retained earnings (other unappropriated reserves) to common stock. All references in the financial statements to number of shares, stock option data, have been retroactively restated to reflect the bonus issue unless otherwise noted.

Buyback

During the year ended March 31, 2019, the Company had completed the share buyback by extinguishing 36,363,636 fully paid-up equity shares of face value of ₹ 2/- each at a price of ₹ 1,100/- per share paid in cash for an aggregate consideration of \$540,879 (₹ 40,000 million). Same has been recorded as reduction of equity share capital by \$983 (₹ 73 million), additional paid-in capital (APIC) by \$331 (₹ 29 million) and Retained earnings by \$539,565 (₹ 39,898 million).

The expenses of \$1,603 (₹ 118 million) relating to buyback have been adjusted against retained earnings.

Liquidation

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

21. OTHER INCOME (EXPENSES), NET

For the years ended March 31, 2019, 2020 and 2021, other income (expenses), net consist of:

	Year ended March 31,
	2019	2020	2021
Interest income	\$80,918	\$63,045	\$86,274
Gain on sale of investment securities and other
investments, net	23,435	17,690	15,310
Provision for impairment of other investments	-	(4,194)	(720)
Foreign exchange gain (loss), net	25,936	(1,857)	6,269
Equity in earning of affiliates	580	53	1,334
Gain (loss) on sale of property and equipment	402	(58)	13,726
Miscellaneous income	3,788	1,888	4,111
Other income, net	\$135,059	\$76,567	\$126,304

22. INCOME TAXES

Entities in the Group file tax returns in their respective tax jurisdictions.

The Group's provisions (benefit) for income taxes consist of the following:

		Year ended March 31,
	2019	2020	2021
Current taxes
Indian taxes	\$284,509	\$264,409	\$322,009
Foreign taxes	156,323	133,305	187,659
	\$440,832	\$397,714	\$509,668
Deferred taxes
Indian taxes	(\$87,803)	\$34,366	(\$12,425)
Foreign taxes	1,303	(19,417)	(23,176)
	(\$86,500)	\$14,949	(\$35,601)
Total taxes	\$354,332	\$412,663	\$474,067

The reconciliation between the Group's provision for income tax and amount computed by applying the statutory income tax rate in India is as follows:

	Year ended March 31,
	2019	2020	2021
Income before taxes, equity in earnings of affiliates and
noncontrolling interest	\$1,798,141	\$1,970,807	\$2,162,314
Enacted tax rate in India	34.94%	34.94%	34.94%
Expected tax expense	628,351	688,679	755,599
Non-taxable export income	(224,398)	(263,083)	(223,010)
Non-taxable other income	(5,234)	(4,570)	(5,726)
Reversal of certain tax positions based on Judicial pronouncement	-	-	(30,293)
Provision (Reversal) for prior year	(27,509)	(25,658)	7,047
Differences between India and foreign tax rates	(25,241)	(31,882)	(44,419)
Amortization of goodwill and intangibles on acquisition of certain
software products from IBM relating to tax exempt units	-	37,114	-
Reversal of deferred tax liabilities due to change in tax rate in India	-	(4,494)	-
Increase (decrease) in valuation allowance	-	2,705	-
Others	8,363	13,852	14,869
Total taxes	\$354,332	\$412,663	\$474,067

Pursuant to a recent tax law amendment in India (enacted on March 28, 2021), the tax amortizable goodwill has become non-tax amortizable from financial year ending March 31, 2021. The amended law states that goodwill of a business or profession will not be considered as a depreciable asset and no depreciation on goodwill will be allowed from April 01, 2020. The same did not have deferred tax implications.

In India, the company has benefited from certain tax incentives that the Government of India has provided to Units situated in Special Economic Zones (SEZs) under the Special Economic Zone Act, 2005, which began providing services on or after April 1, 2005. The Units are eligible for a deduction of 100% of profits or gains derived from the export of services for the first five years from commencement of provision of services and 50% of such profits and gains for a further five years. Certain tax benefits are also available for a further five years subject to the Unit meeting defined conditions. The aforesaid tax benefits will not be available to units commencing operations after March 31, 2021.

Income tax charged to equity for the years ended March 31, 2019, 2020 and 2021, is as follows:

	Year ended March 31,
	2019	2020	2021
Income tax from continuing operations	\$354,332	\$412,663	\$483,399
Stockholder's equity for:-
Unrealized holding (loss) gain on available for sale
investment securities	(151)	309	902
Unrealized loss (gain) on cash flow hedge	217	(14,121)	22,306
Unrealized actuarial loss (gain) on defined benefit plan	900	(2,490)	156
Effect of exchange rate fluctuations	13,927	27,614	(9,384)
	\$369,225	\$423,975	\$497,379

In India, the Company is subject to Minimum Alternate Tax (MAT) on its book profit, which gives rise to future economic benefits in the form of adjustment of future income tax liability. MAT paid for a year can be set-off against the normal tax liability within fifteen subsequent years, expiring over the financial years between 2023 to 2035.

In India, Corporate txaxpayers can opt for a specified lower tax rate in lieu of current applicable tax rate subject to taxpayers not claiming any specified tax incentives including tax incentives available to special economic zone units and carryover of unutilized MAT credit ('new tax regime'). The Company intends to opt for new tax regime from the year in which tax payable under the new tax regime is lower than the existing tax regime (net of any outstanding MAT credit entitlement), and deferred tax assets and liabilities have been measured accordingly.

The tax returns are subject to examination by the tax authorities in the jurisdictions where the Group conducts business. The Group's two major tax jurisdictions are India and USA. The tax examination is open in India for annual year beginning April 01, 2016 onwards and in USA for annual year beginning April 01, 2017 onwards. The examination may result in assessment of additional taxes that are resolved with the authorities or through legal proceedings. The Company has significant intercompany transactions with its subsidiaries. It has filed application for bilateral advance pricing agreements in certain jurisdictions to gain certainty for its transfer pricing arrangement with its subsidiaries. Resolution of these matters involves some degree of uncertainty; accordingly, the Group recognizes income tax liability that it believes will ultimately result from the proceedings.

A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows:

	March 31, 2020	March 31, 2021
Balance at the beginning of the year	138,524	132,894
Increase due to tax position taken during the current year	-	103,243
Increase due to tax position taken during the prior year	11,675	39,964
Decrease due to tax position taken during the prior year	(5,523)	(30,889)
Effect of exchange rate fluctuations	(11,782)	4,557
Balance at the end of the year	\$132,894	\$249,769

The unrecognized tax benefits, if recognized, will affect the Group's effective tax rate, except unrecognized tax benefits of \$14,272 relating to refund claimed by the Company on dividend distribution tax. Significant changes in the amount of unrecognized tax benefits within the next 12 months cannot be reasonably estimated as the changes would depend upon the progress of tax proceedings with various tax authorities.

Income tax expense includes penalties and interest related to income tax. As of March 31, 2020 and 2021, income tax payable includes \$21,766 and \$29,388, respectively, on account of accrued interest and penalties related to uncertain tax positions.

The components of the deferred tax balances as of March 31, 2020 and 2021 are as follows:

	March 31, 2020	March 31, 2021
Deferred tax assets:
Business losses (foreign)	\$17,615	\$15,474
Allowance for accounts receivable	16,299	17,330
Accrued employee costs	79,404	129,467
Property and equipment	6,235	2,955
Minimum alternate tax	309,609	308,170
Unrealized loss on derivative financial instruments	8,845	-
Leased assets	3,742	5,238
Other temporary differences	25,233	52,215
	466,982	530,848
Less: Valuation allowance	(11,449)	(11,570)
Total deferred tax assets	\$455,533	\$519,279
Deferred tax liabilities:
Unrealized gains on investment securities	726	1,663
Unrealized gain on derivative financial instruments	-	13,461
Goodwill and Intangibles	133,691	155,153
Property and equipment	20,837	22,057
Others	10,971	20,812
Total deferred tax liabilities	\$166,225	\$213,146
Net deferred tax assets	\$289,308	\$306,133

Above table represents the gross deferred tax assets and liabilities. Amounts of deferred tax assets and liabilities presented in statement of consolidated balance sheets have been offset, wherever the Group has legally enforceable right and it is related to same taxable authority.

The components of valuation allowance as of March 31, 2020 and 2021 are as follows:

	March 31, 2020	March 31, 2021
Business losses (Foreign)	(\$10,090)	(\$8,369)
Others (Indian)	(\$1,359)	(\$3,201)

In assessing the realizability of deferred tax assets, the management considers whether it is more likely than not, that some portion, or all, of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. The management considers the projected future taxable income and tax planning strategies in making this assessment. Based on the level of historical taxable income and its tax planning strategies, including projections for future taxable income over the periods in which the deferred tax assets are deductible, the management believes that it is more likely than not that the Group will realize the benefits of those deductible differences, net of existing valuation allowances. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.

Business losses carried forward of certain subsidiaries of the Group for tax purposes amount to approximately \$91,793 and \$66,572 as of March 31, 2020 and 2021, respectively, and are available as an offset against future taxable income expiring at various dates through 2032.

The management is of the opinion that it is less likely that some of these subsidiaries would be in a position to realize the tax benefits associated with business losses carried forward. Given the uncertainties, a valuation allowance has been created against such business losses for those subsidiaries.

US and Europe based subsidiary of the Group received excess tax benefit aggregating \$891, \$758 and Nil for the year ended March 31, 2019 , 2020 and 2021,respectively, upon exercise of employee stock options which was recognized in income tax expense in consolidated statements of income.

Undistributed earnings of subsidiaries aggregate approximately \$1,690,016 and \$1,989,969 as of March 31, 2020 and 2021, respectively. The Group has the intent to reinvest the undistributed foreign earnings indefinitely in its significant overseas operations or repatriate only to the extent these can be distributed in a tax free manner. Consequently, the Company did not record a deferred tax liability on the undistributed earnings.

23. EARNINGS PER SHARE

The following is the reconciliation of the weighted average number of equity shares used in the computation of basic and diluted earnings per equity share (EPS):

	Year ended March 31,
	2019	2020	2021
Weighted average number of equity shares outstanding used in computing basic EPS Dilutive effect of stock options	2,750,726,403 988,540	2,713,085,729 579,367	2,713,665,096 -
Weighted average number of equity and equity equivalent shares outstanding used in computing diluted EPS	2,751,714,943	2,713,665,096	2,713,665,096

24. EMPLOYEE BENEFIT PLANS

India operations

The Group has employee benefit plans in the form of certain statutory and welfare schemes covering substantially all of its employees.

Defined benefit Plan

Gratuity

In accordance with the Indian law, the Group provides for gratuity, a defined benefit retirement plan (the "Gratuity Plan") covering all employees in India. The Gratuity Plan provides a lump sum payment to vested employees at retirement or termination of employment of an amount based on the respective employee's base salary and tenure of employment subject to a maximum of \$27 (` 2,000,000/-).

The reconciliation of the beginning and ending balance of the projected benefit obligation and the fair value of plan assets for the years ended March 31, 2020 and 2021, and the accumulated benefit obligation as of March 31, 2020 and 2021 is as follows:

	March 31, 2020	March 31, 2021
Change in benefit obligation
Obligation at the beginning of the year	\$64,847	\$78,376
Service cost	12,352	15,877
Interest cost	6,264	6,718
Benefits paid	(6,580)	(4,050)
Actuarial gain	7,012	4,275
Addition on account of acquisition	628	-
Foreign currency translation	(6,147)	2,651
Obligation at the end of the year	\$78,376	\$103,847
Changes in plan assets
Fair value of plan assets at the beginning of the year	\$2,830	\$3,232
Actual return on plan assets	\$147	\$2
Addition on account of acquisition	-	-
Employer contributions	5,985	4,017
Benefits paid	(5,958)	(3,846)
Foreign currency exchange rate changes	228	(625)
Plan assets at the end of the year	\$3,232	\$2,780
	March 31, 2020	March 31, 2021
Funded status	\$3,232	\$2,780
Accrued benefit obligation	(78,376)	(103,847)
Net amount recognized	(\$75,144)	(\$101,067)

HCL Technologies Limited and Subsidiaries Notes to Consolidated Financial Statements March 31, 2021

(Amount in thousands, except per share data and as stated otherwise)

	March 31, 2020	March 31, 2021
Benefit obligation current	\$10,068	\$16,618
Benefit obligation Non-current	\$65,076	\$84,449
Accumulated benefit obligation	\$75,144	\$101,067
	March 31, 2020	March 31, 2021
Net actuarial loss (gain)	\$3,591	(\$963)
Net prior service cost	(1,181)	(756)
Total accumulated other comprehensive loss (income)	\$2,410	(\$1,719)

Net gratuity cost for the year ended March 31, 2019, 2020 and 2021, comprise of the following components:

	Year ended March 31,
	2019	2020	2021
Service cost	\$11,251	\$12,352	\$15,877
Interest cost (net)	4,838	6,264	6,718
Amortization of unrecognized actuarial loss (gain)	(117)	(420)	(606)
Net gratuity cost	\$15,972	\$18,196	\$21,989

The weighted average actuarial assumptions used in accounting for the benefit obligations and net gratuity cost under the Gratuity Plan for the year ended March 31, 2019, 2020 and 2021, respectively, are given below:

	Year ended March 31,
	2019	2020	2021
Discount rate	8.50%	7.60%	6.55%
Expected rate of increase in salaries
-for next year	7.0%	8.0%	8.0%
-thereafter	7.0%	8.0%	8.0%
Expected rate of return on assets	7.5%	7.5%	7.0%

Discount rates are based on the current market yield on government securities adjusted for a suitable risk premium to reflect the additional risk for high quality bonds. The Group assesses these assumptions with its projected long-term plans of growth and prevalent industry standards. The mortality rates used are as published by one of the leading life insurance companies in India.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid during:

Total	\$210,752
Thereafter	119,502
- 2026	22,470
- 2025	20,645
- 2024	18,399
- 2023	15,144
- 2022	\$14,592
Year ending March 31,

The expected benefits are based on the same assumptions as are used to measure the Group's benefit obligations as of March 31, 2021.

Pension

Certain foreign subsidiaries of the Company provide retirement benefit pension plans in accordance with the local laws.

The reconciliation of the beginning and ending balance of the projected benefit obligation for the years ended March 31, 2020 and 2021, and the accumulated benefit obligation as of March 31, 2020 and 2021 is as follows:

	March 31, 2020	March 31, 2021
Change in benefit obligation
Service cost	-	1,275
Benefits paid	-	(11)
Actuarial gain	-	1,447
Addition on account of acquisition	-	13,579
Obligation at the end of the year	\$-	\$16,290
	March 31, 2020	March 31, 2021
Benefit obligation current	-	\$313
Benefit obligation Non-current	-	\$15,977
Accumulated benefit obligation	\$-	\$16,290
	March 31, 2020	March 31, 2021
Net actuarial loss	-	\$1,447
Total accumulated other comprehensive loss	\$-	\$1,447

Net pension cost for the year ended March 31, 2019, 2020 and 2021, comprise of the following components:

	Year ended March 31,
	2019	2020	2021
Service cost	-	-	\$1,275
Net pension cost	-	-	\$1,275

The weighted average actuarial assumptions used in accounting for the benefit obligations and net pension cost for the year ended March 31, 2019, 2020 and 2021, respectively, are given below:

	Year ended March 31,
	2019	2020	2021
Discount rate	-	-	0.58%
Expected rate of increase in salaries
-for next year	-	-	2.5%
-thereafter	-	-	2.5%

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid during:

Year ending March 31,
- 2022	\$313
- 2023	438
- 2024	462
- 2025	486
- 2026	645
Thereafter	5,189
Total	\$7,533

The expected benefits are based on the same assumptions as are used to measure the Group's benefit obligations as of March 31, 2021.

Provident fund

In accordance with Indian law, all employees of Indian entities receive benefits from a provident fund, which is a defined benefit plan. Under this plan, the employer and employee make monthly contributions to a fund managed by certain employees of the Group ("Trust"). The employees contribute 12% of their basic compensation, which is matched by an equal contribution by the employer. The Group contributes two-third of the contribution to the Government administered pension fund subject to a maximum of \$0.02 (`1,250/-) and the remaining portion is contributed to the Trust. The rate at which the annual interest is payable to the beneficiaries by the Trust is administered by the government. The Group has an obligation to fund any shortfall on the yield of the Trust's investments over the administered interest rates. The funds contributed to the Trust are invested in specific securities as mandated by law and generally consist of federal and state government bonds, debt instruments of government-owned corporations, equity and other eligible market securities.

The actuary has provided a valuation for provident fund liabilities on the basis of guidance issued by Actuarial Society of India based on the assumption mentioned below and there is no shortfall as at 31 March, 2021.

The details of the fund and plan asset position are given below: -

	March 31, 2020	March 31,2021
Fair value of plan assets at the year end	\$542,512	\$666,778
Present value of benefit obligation at year end	547,932	666,778
Net liability recognized in balance sheet (1)	(\$5,420)	\$-

(1) Amount recognized in the other comprehensive income.

Assumptions used in determining the present value obligation of the interest rate guarantee under the deterministic approach:

	March 31, 2020	March 31,2021
Government of India (GOI) bond yield	7.60%	6.65%
Remaining term of maturity	8.00 Years	7.08 Years
Expected guaranteed interest rate	8.50%	8.50%

Total contributions made by the Group in respect of this plan for the years ended March 31, 2019, 2020 and 2021 are \$20,553, \$26,079 and \$28,438, respectively.

Total contributions made by the Group towards Employees' Pension Scheme for the years ended March 31, 2019, 2020 and 2021 are \$15,486, \$18,834 and \$19,749 respectively.

Defined Contribution Plan

Superannuation

In respect to superannuation, a defined contribution plan for eligible employees who contribute to a recognized Trust under schedule IV, Part B of Income Tax 1961, Trust funds are administered on its behalf by appointed fund manager and such contributions for each year of service rendered by the employees are charged to the consolidated statements of income. The Group has no further obligations to the superannuation plan beyond its contributions. Total contributions made in respect of this plan for the years ended March 31, 2019, 2020 and 2021 are \$547, \$929 and \$1,175, respectively.

Others

Total contributions made by the Group in respect of other foreign defined contribution plans for the years ended March 31, 2019, 2020 and 2021 are \$73,891, \$86,896 and \$102,639, respectively.

Milestone Bonus

Cost of revenues, research and development, selling, general and administrative expenses, include one time special bonus paid to employees of \$80,804, \$475 and \$18,504, respectively in recognition of the Group achieving \$10 Billion revenue mark in the year ended March 31, 2021.

25. RELATED PARTY TRANSACTIONS

The Company has entered into transactions with the following related parties:

• a. Companies in which 'the Principal shareholder', or any other director has controlling interest or over which they exercise significant influence (significant interest entities); and
• b. Employees of the Group.

The related party transactions are categorized as follows:

Revenues

The Group earns revenue from rendering software development and other services to related parties. The related parties to whom these services were provided and the corresponding amounts of revenue earned are as follows:

	Year ended March 31,
	2019	2020	2021
Significant interest entities	\$3,911	\$1,867	\$1,459
Total	\$3,911	\$1,867	\$1,459

Cost of revenues and selling, general and administrative expenses

The Group outsources certain contracts to related parties and also procures personnel and licenses from them for software development and other services. These costs are recorded as part of cost of revenues and selling, general and administrative expenses.

The related parties to whom such charges were paid and the corresponding amounts are as follows:

	Year ended March 31,
	2019	2020	2021
Significant interest entities	\$30,875	\$31,151	\$12,183
Total	\$30,875	\$31,151	\$12,183

Computer equipment, software purchases and others

The Group purchases computer equipment, software and other items from certain significant interest entities. These purchases from significant interest entities during the years ended March 31, 2019, 2020 and 2021 amounted to \$70, \$193 and Nil, respectively.

Subleasing of facilities

Significant interest entities have leased certain facilities to the Group. The total amount charged for the years ended March 31, 2019, 2020 and 2021 was \$6,555, \$7,309 and \$5,872, respectively.

Interest paid on extended vendor credit:

The Group has negotiated extended interest bearing credit terms with certain related parties for extended payment terms up to 360 days and have paid interest during the years ended March 31, 2019, 2020 and 2021 of \$1,087, \$1,376 and \$974, respectively.

Loans to employees

The Group has advanced general purpose loans to its employees at rates of interest not more than 3% p.a. The repayment periods for these loans are fixed with the tenure of these loans extending up to four years. Employee loan balances outstanding as of March 31, 2020 and 2021 are \$240 and \$73, respectively.

The balances receivable from and payable to significant interest entities other than employees are summarized as follows:

	March 31, 2020	March 31, 2021
Current assets
Due from related parties
Accounts receivable, net	\$753	\$986
Unbilled receivable	16	13
Operating lease right-of-use assets	14,300	11,074
Other assets	5,852	4,286
	\$20,921	\$16,359
Dues to related parties
Accounts payable	\$38	\$1
Operating lease liabilities	14,870	11,676
Other current liabilities	25,834	2,409
	\$40,742	\$14,086

26. COMMITMENTS AND CONTIGENCIES

Capital commitments

As of March 31, 2021, the Group had contractual commitments for capital expenditure of \$47,853.

Other Contingencies

• a) The Indian Parliament has approved the Code on Social Security, 2020 which would impact the contributions by the group towards Provident Fund and Gratuity. The effective date from which the changes are applicable is yet to be notified and the final rules are yet to be framed. The Group will carry out an evaluation of the impact and record the same in the financial statements in the period in which the Code becomes effective and the related rules are published.
• b) A wholly owned subsidiary ("WOS") with a VSAT License had received a demand from Department of Telecommunications ("DoT") in February 2015 for FY 2011-12 and FY 2013-14 for an amount of \$18,192 (`1,330 million), including penalty, interest and interest on penalty. It had received provisional assessment orders for all the prior years with no demand. Demand is primarily due to DoT including IT Services revenues and related exchange gains in Adjusted Gross Revenue ("AGR"). The WOS had obtained stay in 2015 and its petition is pending adjudication at the Hon'ble Telecom Disputes Settlement and Appellate Tribunal ("TDSAT"). The IT Services business had been demerged from the WOS with effect from April 01, 2012. The Hon'ble Supreme Court has pronounced its ruling on the AGR matter relating to Unified Access Service License on October 24, 2019. Subsequent to this ruling, the Company has obtained legal opinion and is of the view that it should be able to defend its position in the above matter.
• c) The Group is involved in various lawsuits, claims and proceedings that arise in the ordinary course of business, the outcome of which is inherently uncertain. Some of these matters include speculative and frivolous claims for substantial or indeterminate amounts of damages. The Group records a liability when it is both probable that a loss has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. The Group reviews these provisions at least annually and adjusts these provisions accordingly, to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information. The Group believes that the amount or estimable range of reasonably possible loss, will not, either individually or in the aggregate, have a material adverse effect on its business, consolidated financial position, results of operations, or cash flows with respect to loss contingencies for legal and other contingencies as of March 31, 2021.

27. LEASES

The Group has taken networking and computer equipment, vehicles, office furniture and equipment on leases. Components of lease cost for operating and finance leases for the year ended March 31, 2020 and March 31, 2021 are summarized below:

	March 31, 2020	March 31, 2021
Finance Lease cost:
Amortization of right-of-use assets	\$1,306	\$1,476
Interest on lease liabilities	1,138	1,652
Operating Lease cost	96,502	92,964
Short term Lease cost	14,236	13,398
Total Lease cost	\$113,183	\$109,490

Amortization of right-of-use assets is included in depreciation and amortization, Operating and short term lease cost is included in cost of revenues, research and development, selling general and administrative expenses in consolidated statements of Income.

Right-of-use assets relating to finance lease of \$3,712 and \$7,480 as at March 31, 2020 and March 31, 2021, respectively, are included in "Property and equipment,net".

Other information

	March 31, 2020	March 31, 2021
Cash paid for amounts included in the measurement of lease
liabilities
Operating cash outflows from Finance leases	\$40,003	\$18,318
Financing cashflows from Finance leases, net	17,157	(20,286)
Operating cash outflows from Operating leases	97,793	98,561
Weighted average remaining lease term - Operating leases	5.8 years	5.3 years
Weighted average remaining lease term - Finance leases	2.5 years	2.2 years
Weighted average discount rate - Operative leases	5.35%	3.93%
Weighted average discount rate - Finance leases	3.31%	3.36%

The following table presents a maturity analysis of expected undiscounted cash flows for operating and finance leases on an annual basis for next five years and thereafter, and its reconciliation with respective lease liabilities recorded at the balance sheet date.

	Finance leases	Operating leases
Year ending March 31,
2022	\$25,880	\$82,394
2023	12,167	81,499
2024	6,296	65,165
2025	1,522	43,916
2026	818	29,238
Thereafter	-	49,967
Total lease payments	\$46,683	\$352,179
Imputed interest	(1,983)	(42,138)
Total lease liabilities	\$44,700	\$310,041

Certain lease agreements include options to terminate or extend the leases. The lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Group has given IT equipment to its customers on sales type and direct finance leases. The future lease receivables in respect of equipments given on such leases are as follows:

	Total minimum lease payments receivables	Interest included in minimum lease payments receivables	Present value of minimum lease payments receivables
Year ending March 31,
2022	\$158,761	\$7,468	\$151,293
2023	93,994	3,880	90,114
2024	40,835	1,800	39,035
2025	25,424	773	24,651
2026	6,911	104	6,807
Thereafter	462	12	450
	\$326,387	\$14,037	\$312,350

The amounts recoverable on account of such leases within one year have been included under 'other current assets' and the balance under 'other assets'.

28. SEGMENT REPORTING

Operating segments are defined as components of an enterprise for which discrete financial information is available and whose results are reviewed regularly by the chief operating decision maker (CODM), for allocation of resources and assessing performance. Till March 31, 2019, CODM evaluated the Group's performance by business segment, comprising software services, infrastructure management services and business process outsourcing services.

Consequent to reorganization of its global operations due to technological changes and business requirements with increased focus to meet customer expectations and provide better services, the group effective April 01, 2019, reorganized itself into the following segments.

IT and Business Services provide a comprehensive portfolio of IT & Business Services (Application, Infrastructure and Digital Process Operations) and Digital transformation services enabled by Digital and Analytics, IoTWoRKs, Cloud native and Cybersecurity solutions including products developed within these businesses.

Engineering and R&D Services provides comprehensive engineering services and solutions across software, embedded, mechanical, VLSI and platform engineering that support the end to end lifecycle of products – both hardware and software across diverse industries including products developed within this business.

Products & Platforms includes standalone product businesses that provide modernized software products to global clients for their technology and industry specific requirements.

Segment information previously reported for the year ended March 31, 2019, had been restated to present business segments following the change in composition of operating segments. This change in segment presentation does not affect the consolidated statements of income and comprehensive income, balance sheets or statements of cash flows.

Inter segment revenue primarily relates to software sourced internally from Products & Platform Segment by other segments for providing services to end customers.

Assets and liabilities are not identified to any reportable segments, since these are increasingly used interchangeably across segments and consequently, the management believes that it is not practicable or meaningful to provide segment disclosures relating to total assets and liabilities.

Information on reportable segments for the year ended March 31, 2019 is as follows :

HCL Technologies Limited and Subsidiaries Notes to Consolidated Financial Statements March 31, 2021

(Amount in thousands, except per share data and as stated otherwise)

	IT and Business Services	Engineering and R&D services	Products & Platforms	Total
Revenue	\$6,443,211	\$1,477,978	\$711,236	\$8,632,425
Less:Inter segment revenue	-	-	-	-
Revenue from external customers	\$6,443,211	\$1,477,978	\$711,236	\$8,632,425
Depreciation and amortization	142,683	34,663	129,327	306,673
Segment earnings	\$1,146,044	\$331,208	\$210,723	\$1,687,975

Information on reportable segments for the year ended March 31, 2020 is as follows:

	IT and Business Services	Engineering and R&D services	Products & Platforms	Total
Revenue Less:Inter segment revenue	\$7,134,934 -	\$1,661,078 -	\$1,139,947 -	\$9,935,959 -
Revenue from external customers	\$7,134,934	\$1,661,078	\$1,139,947	\$9,935,959
Depreciation and amortization	166,490	34,285	198,458	399,233
Segment earnings	\$1,266,217	\$320,792	\$358,524	\$1,945,533

Information on reportable segments for the year ended March 31, 2021 is as follows:

	IT and Business Services	Engineering and R&D services	Products & Platforms	Total
Revenue	\$7,207,197	\$1,585,166	\$1,383,721	\$10,176,084
Less:Inter segment revenue	-	-	1,396	1,396
Revenue from external customers	\$7,207,197	\$1,585,166	\$1,382,325	\$10,174,688
Depreciation, amortization and
impairment	182,617	35,346	320,279	538,242
Segment earnings	\$1,370,932	\$321,178	\$381,304	\$2,073,414

The CODM assesses the performance of the operating segments based on a measure of segment earnings. This measurement basis adjusts income before income taxes to exclude the effects of cash flow hedge accounting gains (losses), foreign exchange gains (losses), finance costs and other income.

A reconciliation of segment earnings to income before income taxes is provided as follows:

	Year ended March 31,
	2019	2020	2021
Segment earnings	\$1,687,975	\$1,945,533	\$2,073,414
Foreign exchange gain (loss)	25,936	(1,857)	6,269
Finance cost	(24,893)	(51,293)	(37,404)
Other income, net	109,123	78,424	120,035
Income before income taxes	\$1,798,141	\$1,970,807	\$2,162,314

Revenues from the geographic segments, based on domicile of the customers, are as follows:

		Year ended March 31,
	2019	2020	2021
America	\$5,139,404	\$5,736,383	\$5,730,951
Europe	2,305,639	2,726,742	2,819,556
India*	302,147	330,769	310,379
Others	885,235	1,142,065	1,313,802
	\$8,632,425	\$9,935,959	\$10,174,688

* Includes revenue billed to India based captive of global customers

No single customer represents 10% or more of the Group's total revenue during the years ended March 31, 2019, 2020 and 2021, respectively.

Group operates out of various geographies and America & Europe constitute major portion of revenue. In case of IT and Business Services and Engineering and R&D services approximately 57%, 57% and 57% of revenues are generated in America, Europe generates 28%, 28% and 28% revenue and balance is generated by other geographies during year ended March 31, 2019, 2020 and 2021 respectively. Products & Platforms segment generates approximately 89%, 60% and 53% revenue from America, 7%, 23% and 28% from Europe and balance geographies generated rest of revenue during the year ended March 31, 2019, 2020 and 2021 respectively.

29. REVENUE FROM CONTRACT WITH CUSTOMERS:

A. Disaggregate Revenue Information

The disaggregated revenue from contracts with the customers for the year ended March 31, 2019, 2020 and 2021 , respectively by contract type.

Revenues by contract type

	March 31, 2019	March 31, 2020	March 31, 2021
Fixed price	\$ 5,414,015	\$ 6,612,636	\$ 6,876,633
Time and material	3,218,410	3,323,323	3,298,055
	\$ 8,632,425	\$ 9,935,959	\$ 10,174,688

HCL Technologies Limited and Subsidiaries Notes to Consolidated Financial Statements March 31, 2021

(Amount in thousands, except per share data and as stated otherwise)

Of the above fixed price revenue, IT and Business Services, accounts for 78%, 74% and 72%, Products & Platforms accounts for 13%,17% and 20% and Engineering and R&D services accounts for 9%, 9% and 8% for the year ended March 31, 2019, 2020 and 2021, respectively. For time and material revenue, IT and Business Services, accounts for 69%, 68% and 68% and Engineering and R&D services accounts for 31%, 32% and 32%, for the year ended March 31, 2019, 2020 and 2021, respectively.

B. Remaining Performance Obligations

As of March 31, 2020, and 2021, the aggregate amount of transaction price allocated to remaining performance obligations as per the requirements of ASC 606 was \$8,814,251 and \$10,118,023, respectively out of which, approximately 36% and 38% respectively, is expected to be recognized as revenues within one year and the balance beyond one year. This is after exclusions as below:

• a) Contracts for which we recognize revenues based on the right to invoice for services performed;
• b) Variable consideration allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation in accordance with ASC 606-10-25-14(b), for which the criteria in ASC 60610-32-40 have been met or
• c) Variable consideration in the form of a sales-based or usage-based royalty promised in exchange for a license of intellectual property.

C. Contract Balances

Contract assets

A contract asset is a right to consideration that is conditional upon factors other than the passage of time. Contract assets are recognized where there is excess of revenue over the billings. Revenue recognized but not billed to customers is classified either as contract assets or unbilled receivable in our consolidated balance sheet. Contract assets primarily relate to unbilled amounts on fixed price contracts using the cost to cost method of revenue recognition. Unbilled receivables represent contracts where right to consideration is unconditional (i.e. only the passage of time is required before the payment is due).

Out of \$45,226 contract assets as on March 31, 2021, \$155 pertains to the period prior to March 31, 2020 and the balance pertains to current year.

Contract liabilities

A contract liability arises when there is excess billing over the revenue recognized. The below table discloses the movement in balance of contract liabilities:

	March 31, 2020	March 31, 2021
Balance as at beginning of the year	\$183,291	\$406,003
Additional amounts billed but not recognized as revenue	299,720	260,941
Addition on account of acquisitions	274,000	9,552
Deduction on account of revenues recognized during the year	(335,637)	(201,267)
Effect of exchange fluctuations	(15,371)	16,314
Closing balance as at year end	\$406,003	\$491,543

Deferred contract cost

Deferred contract cost primarily represents the contract fulfilment cost and cost for obtaining the contract. The below table discloses the movement in balance of deferred contract cost:

	March 31, 2020	March 31, 2021
Balance as at beginning of the year	\$178,074	\$245,239
Additional cost capitalised during the year	133,030	116,158
Deduction on account of cost amortised during the year	(56,845)	(81,596)
Effect of exchange fluctuations	(9,020)	6,760
Closing balance as at year end	\$245,239	\$286,561

30. FAIR VALUE MEASUREMENT

The Group records certain assets and liabilities at fair value on a recurring basis. The Group determines fair values based on the price it would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability.

The Group holds certain fixed income securities, equity securities and derivatives, which must be measured using the FASB's guidance for fair value hierarchy and related valuation methodologies. The guidance specifies a hierarchy of valuation techniques based on whether the inputs to each measurement are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Group's assumptions about current market conditions. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The prescribed fair value hierarchy and related valuation methodologies are as follows:

Level 1 —Quoted inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 —Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are directly or indirectly observable in active markets.

Level 3 —Valuations derived from valuation techniques, in which one or more significant inputs are unobservable inputs which are supported by little or no market activity.

In accordance with ASC Topic 820, "Fair Value Measurements and Disclosures" assets and liabilities are to be measured based on the following valuation techniques:

Market approach – Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

Income approach – Converting the future amounts based on the market expectations to its present value using the discounting method.

Cost approach – Replacement cost method.

The following table discloses the assets and liabilities measured at fair value on a recurring basis as of March 31, 2020 and the basis for that measurement:

	Fair value	Level 1 inputs	Level 2 inputs	Level 3 inputs
Assets
Deposits with banks, corporations and debt securities having maturities less than
three months	\$110,908	\$110,908	-	-
Investment securities, available for sale
Debt linked mutual funds	\$435,811	\$435,811	-	-
Corporate debt securities	\$487,780	-	\$487,780	-
Other Investments	\$5,145	-	-	\$5,145
Derivative financial instruments	\$8,885	-	\$8,885	-
Liabilities
Derivative financial instruments	\$49,026	-	\$49,026	-
Contingent consideration	\$729	-	-	\$729

The following table discloses the assets and liabilities measured at fair value on a recurring basis as of March 31, 2021 and the basis for that measurement:

	Fair value	Level 1 inputs	Level 2 inputs	Level 3 inputs
Assets Deposits with banks, corporations and debt securities having maturities less than
three months	\$397,821	\$397,821	-	-
Investment securities, available for sale
Debt linked mutual funds	\$140,059	\$140,059	-	-
Corporate debt securities	\$786,347	-	\$786,347	-
Other Investments	\$5,745	-	-	\$5,745
Derivative financial instruments	\$43,110	-	\$43,110	-
Liabilities
Derivative financial instruments	\$278	-	\$278	-

The following table provides a roll-forward of the fair value of earn-out consideration categorized as level 3 in the fair value hierarchy for the years ended March 31, 2020 and 2021.

March 31, 2020	March 31, 2021
\$1,988	\$729
40,079	-
(41,505)	(818)
282	94
(115)	(5)
\$729	\$-

The following table provides a roll-forward of the Other investments categorized as level 3 in the fair value hierarchy for the years ended March 31, 2020 and 2021.

	March 31, 2020	March 31, 2021
Opening balance	\$7,217	\$5,145
Additional investments	2,288	894
Unrealized gain (loss) on fair value changes	122	(44)
Provision for impairment of other investments	(4,087)	(720)
Effect of exchange fluctuations	(395)	470
Closing balance	\$5,145	\$5,745

Valuation Methodologies

Quoted market prices in active markets are available for investments in securities and, as such, these investments are classified within Level 1.

Investments: The Group investments consist primarily of investment in debt linked mutual funds. Fair values of investment securities classified as available -for -sale are determined using quoted prices for identical assets or liabilities in active markets and are classified as Level 1. Fair value of corporate debt securities, term deposits with banks and corporations is determined using observable markets' inputs and is classified as Level 2.

Other investments : The investment in unquoted equity securities are measured at fair value with changes recognised in net income and other investments in equity securities that do not have readily determinable fair values will be measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions. The re-measurement is calculated using unobservable inputs based on the Group's own assessment of third party valuations and respective company's financial performance, and is classified as Level 3.

Derivative financial instruments: The Group's derivative financial instruments consist of foreign currency forward exchange contracts, options and interest rate swaps. Fair values for derivative financial instruments are based on counter party and broker quotations and are classified as Level 2. See note 12 for further details on Derivative financial instruments.

Fair value of contingent consideration: The fair value measurement of contingent consideration is determined using Level 3 inputs. The Group's contingent consideration represents a component of the total purchase consideration for its acquisitions. The measurement is calculated using unobservable inputs based on the Company's own assessment of achievement of certain performance goals.

The fair value of the Group's current assets and current liabilities including short term deposits with Banks, corporations, and short term loans approximate their carrying values because of their short-term maturity.

Certain assets are measured at fair value on a non-recurring basis and therefore are not included in the recurring fair value table above. The assets and liabilities consist primarily of long term debt and other non financial assets such as goodwill and intangible assets. Goodwill and intangible assets are measured at fair value initially and subsequently when there is an indicator of impairment, and an impairment is recognized.

31. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive income attributable to HCL Technologies limited.

	Year ended March 31
	2019	2020	2021
Unrealized gain on securities available
for sale:
Opening balance (net of tax)	\$1,475	\$902	\$1,615
Unrealized gains	13,955	10,586	14,453
Reclassification adjustments into other (income) expenses, net	(14,679)	(9,603)	(11,947)
Income tax benefit (expense)	151	(309)	(902)
Effect of exchange fluctuations	-	39	(27)
Closing balance (net of tax)	\$902	\$1,615	\$3,192
Unrealized gain (loss) on cash flow hegdes:
Opening balance (net of tax)	\$20,958	\$24,710	(\$40,545)
Unrealized gain (loss)	11,868	(57,805)	80,022
Reclassification adjustments into other (income) expenses, net	(6,418)	(18,974)	9,362
Income tax benefit (expense)	(217)	14,121	(22,306)
Effect of exchange fluctuations	(1,481)	(2,597)	(1,474)
Closing balance (net of tax)	\$24,710	(\$40,545)	\$25,059
Actuarial gain on defined benefit plan:
Opening balance (net of tax)	\$3,722	\$7,431	(\$2,626)
Actuarial gain (loss)	4,937	(11,903)	774
Reclassification adjustments into employee benefit expenses*	(117)	(420)	(606)
Income tax benefit (expense)	(900)	2,490	(156)
Effect of exchange fluctuations	(211)	(224)	(92)
Closing balance (net of tax)	\$7,431	(\$2,626)	(\$2,706)
Foreign currency translation loss:
Opening balance	(\$605,080)	(\$920,408)	(\$1,385,138)
Foreign currency translation	(315,328)	(464,730)	281,235
Closing balance	(\$920,408)	(\$1,385,138)	(\$1,103,903)

* Reclassification into employee benefit expenses are recognized in cost of revenues, research and development and selling, general and administrative expenses

32. COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of accumulated other comprehensive loss at March 31, 2020 and March 31, 2021 are as follows:

	March 31,2020	March 31, 2021
Unrealized gain on securities available for sale	\$1,615	\$3,192
Unrealized gain (loss) on cash flow hedges	(40,545)	25,059
Unrealized gain on defined benefit plan	(2,626)	(2,706)
Foreign currency translation	(1,385,138)	(1,103,903)
	(\$1,426,694)	(\$1,078,358)

33. SUBSEQUENT EVENTS

• a) The Board of Directors has declared 1st Interim Dividend of 6/- per equity share of2/- each and a Special interim dividend of 10/- per equity share of2/- each for FY 2021-22. The Special Interim Dividend has been declared by the Board in recognition of the Company's recent milestone, crossing the \$10 billion mark in revenue during FY'21.
• b) The Group has evaluated all the subsequent events through April 23, 2021, which is the date on which these financial statements were issued, and no events have occurred from the balance sheet date through that date except for matters that have already been considered in the consolidated financial statements.