Wipro Ltd. - Quarterly/Annual Result Disclosures and Notes dated 31 Mar 2021
Auditor and Management Disclosures and Notes for the annual results dated 31 Mar 2021
Operating Activities
1. Adjustments for decrease (increase) in trade receivables, current – This item includes increase or decrease in both Current and Non-current Trade Receivables
2. Adjustments for decrease (increase) in other current assets - This item includes increase or decrease in both Current and Non-current Other Assets
3. Adjustments for other financial assets, current - This item includes increase or decrease in Unbilled receivables and contract assets
4. Adjustments for increase (decrease) in trade payables, current - This item includes increase or decrease in Current and Non-current Trade payables, Accrued Expenses, Provisions and Other Liabilities
5. Adjustments for other financial liabilities, current - This item includes increase or decrease in Contract Liabilities
6. Other adjustments to reconcile profit (loss) - This item includes Gain on sale of property, plant and equipment, net Investing Activities
7. Payments to acquire or redeem entity's shares - This item includes Payment for buy back of shares, including transaction cost and Payment of tax on buyback of shares
8. Cash advances and loans made to other parties – This item includes Loans to subsidiaries Notes for Asset and Liabilities 1. Other non-current financial assets – includes Derivative assets and Other financial assets
2. Other non-current assets – includes Non-current tax assets (net) and Other non-current assets
3. Other current financial assets- includes Derivative assets, Unbilled receivables and Other financial assets
4. Other current assets- includes Contract assets and Other Current Assets
5. Other non-current financial liabilities – includes Lease liabilities & Other Financial Liability
6. Other non-current liabilities – includes Non-current tax liabilities (net) and Other non-current liabilities
7. Other current financial liabilities – includes Derivative liabilities, Lease liability and Other financial liabilities
8. Other current liabilities – includes Contract liabilities and Other Current liability
1. The audited consolidated financial results of the Company for the three months and year ended March 31, 2021 have been approved by the Board of Directors of the Company at its meeting held on April 15, 2021. The Company confirms that its statutory auditors, Deloitte Haskins & Sells LLP have issued an audit report with unmodified opinion on the consolidated financial results. Since the financial results of the Company for the three months and year ended March 31, 2021 are audited, regulation 33(3) (e) of SEBI (LODR) Regulations, 2015 is not applicable.
2. The above consolidated financial results have been prepared from the interim condensed consolidated financial statements, which are prepared in accordance with International Financial Reporting Standards and its interpretations ("IFRS"), as issued by the International Accounting Standards Board ("IASB"). All amounts included in the consolidated financial results (including notes) are reported in millions of Indian rupees (? in millions) except share and per share data, unless otherwise stated.
3. Estimation uncertainty relating to the global health pandemic on COVID-19 In assessing the recoverability of receivables including unbilled receivables, contract assets and contract costs, goodwill, intangible assets, and certain investments, the Company has considered internal and external information up to the date of approval of these consolidated financial results including credit reports and economic forecasts. The Company has performed sensitivity analysis on the assumptions used herein. Based on the current indicators of future economic conditions, the Company expects to recover the carrying amount of these assets. The Company basis its assessment believes that the probability of the occurrence of forecasted transactions is not impacted by COVID-19. The Company has also considered the effect of changes, if any, in both counterparty credit risk and own credit risk while assessing hedge effectiveness and measuring hedge ineffectiveness and continues to believe that there is no impact on effectiveness of its hedges. The impact of COVID-19 remains uncertain and may be different from what we have estimated as of the date of approval of these consolidated financial results and the Company will continue to closely monitor any material changes to future economic conditions.
4. List of subsidiaries and investments accounted for using equity method as at March 31, 2021 are provided in the table below:
4. All the above direct subsidiaries are 100% held by the Company except that the Company holds 83.4% of the equity securities of Encore Theme Technologies Private Limited, 66.67% of the equity securities of Wipro Arabia Co. Limited and 55% of the equity securities of Women's Business Park Technologies Limited are held by Wipro Arabia Co. Limited. The remaining 16.6% equity securities of Encore Theme Technologies Private Limited will be acquired subject to and after receipt of certain regulatory approvals/confirmations. # 51% of equity securities of Wipro Doha LLC are held by a local shareholder. However, the beneficial interest in these holdings is with the Company. The Company controls 'The Wipro SA Broad Based Ownership Scheme Trust', 'Wipro SA Broad Based Ownership Scheme SPV (RF) (PTY) LTD incorporated in South Africa and Wipro Foundation in India. ** Step Subsidiary details of Wipro Portugal S. A, Wipro do Brasil Technologia Ltda, Designit Spain Digital, S.L, HealthPlan Services, Inc, International TechneGroup Incorporated, Wipro Appirio, Inc. (formerly known as Appirio, Inc), Wipro Designit Services, Inc (formerly known as Rational Interaction, Inc) and Wipro Weare4C UK Limited (formerly known as Weare4C UK Limited) are as follows:
5. Segment Information The Company is organized into the following operating segments: IT Services, IT Products and India State Run Enterprise segment ("ISRE"). IT Services: As announced on November 12, 2020, in order to broad base our growth, effective January 1, 2021, the Company re-organized IT Services segment.to four Strategic Market Units ("SMUs") - Americas 1, Americas 2, Europe and Asia Pacific Middle East Africa ("APMEA"). Americas 1 and Americas 2 are primarily organized by industry sector, while Europe and APMEA are organized by countries. Americas 1 includes Healthcare and Medical Devices, Consumer Goods and Lifesciences, Retail, Transportation and Services, Communications, Media and Information services, Technology Products and Platforms, in the United States of America and entire business of Latin America ("LATAM"). Americas 2 includes Banking, Financial Services and Insurance, Manufacturing, Hi-tech, Energy and Utilities industry sectors in the United States of America and entire business of Canada. Europe consist of United Kingdom and Ireland, Switzerland, Germany, Benelux, Nordics and Southern Europe. APMEA consist of Australia and New Zealand, India, Middle East, South East Asia, Japan and Africa. The corresponding information for the three months ended December 31,2020, March 31,2020 and year ended March 31,2020 has been re-stated to give effect to the above changes.
Revenue from each customer is attributed to respective SMUs based on the location of the customers primary buying center of the services. With respect to certain strategic global customers, while the revenue is generated from multiple countries based on customer's buying centers, the total revenue related to these strategic global customers have been attributed to a single SMU based on the geographical location of key decision makers. Prior to this change, IT services segment was organized by seven industry vertical, Banking, Financial Services and Insurance ("BFSI"), Health Business unit ("Health BU"), Consumer Business unit ("CBU"), Energy, Natural Resources & Utilities ("ENU"), Manufacturing ("MFG"), Technology ("TECH") and Communications ("COMM"). Key service offerings to customers include software application development and maintenance, research and development services for hardware and software design, business application services, analytics, consulting, infrastructure outsourcing services and business process services. IT Products: The Company is a value-added reseller of security, packaged and SaaS software for leading international brands. In certain total outsourcing contracts of the IT Services segment, the Company delivers hardware, software products and other related deliverables. Revenue relating to these items is reported as revenue from the sale of IT Products. ISRE: This segment consists of IT Services offerings to entities or departments owned or controlled by Government of India and/ or any State Governments. The Chairman of the Company has been identified as the Chief Operating Decision Maker ("CODM") as defined by IFRS 8, "Operating Segments." The Chairman of the Company evaluates the segments based on their revenue growth and operating income. Assets and liabilities used in the Company's business are not identified to any of the operating segments, as these are used interchangeably between segments. Management believes that it is currently not practicable to provide segment disclosures relating to total assets and liabilities since a meaningful segregation of the available data is onerous. Information on reportable segment for the three months ended March 31, 2021, December 31, 2020 and March 31, 2020, and year ended March 31, 2021 and March 31, 2020 are as follows:
a) Effective January 1, 2021, revenue from sale of traded cloud-based licenses is no longer reported in IT Services revenue and finance income on deferred consideration earned under total outsourcing contracts is not included in segment revenue. Further, for evaluating performance of the individual operating segments, stock compensation expense is allocated on the basis of accelerated amortization as per IFRS 2. Segment information for the three months ended December 31, 2020 and March 31, 2020 and year ended March 31, 2020 has been re-stated to give effect to these changes. b) "Reconciling items" includes elimination of inter-segment transactions and other corporate activities. C) Revenue from sale of company owned intellectual properties is reported as part of IT Services revenues. D) For the purpose of segment reporting, the Company has included the impact of "foreign exchange gains / (losses), net" in revenues amounting to Rs 886, Rs. 566 and Rs. 993 for the three months ended March 31,2021, December 31,2020, March 3'1,2020 respectively, and ? 2,995 and Rs. 3,169 for the year ended March 31, 2021 and 2020 respectively, which is reported as a part of operating profit in the interim condensed consolidated statement of income. e) During the three months ended March 31, 2021, December 31, 2020 and year ended March 31, 2021, the Company has contributed Rs. Nil,Rs. Nil, and Rs. 991, respectively towards COVID-19 and is reported in Reconciling items. f) Other operating income/(loss) of? Nil, Rs. Nil and Rs. 395 is included as part of IT Services segment results for three months ended March 31, 2021, December 31, 2020 and March 31, 2020 respectively, and Rs. (81) and Rs. 1,144 for the year ended March 31, 2021 and 2020 respectively. Refer to Note 6 g) Segment results for the three months ended March 31, 2021, and December 31, 2020 and year ended March 31, 2021, are after considering the impact of impairment charge of Rs. Nil,Rs. 990 and Rs. 1,250 in Americas 1 and Rs. Nil, Rs. Nil and Rs. 192 in Europe, respectively. Further, an impairment charge of Rs. Nil, Rs. 674 and Rs. 674 for the three months ended March 31, 2021, and December 31, 2020 and year ended March 31, 2021, respectively towards certain marketing-related intangible assets and software platform recognized on acquisitions, is allocated to all IT Services SMUs. The remaining impairment charge of? Nil, Rs. Nil and Rs. 302 for the three months ended March 31, 2021, and December 31, 2020 and year ended March 31, 2021, respectively is included under unallocated. h) Segment results for the three months and year ended March 31,2021, are after considering additional amortization of Rs. 795 in Americas 2 due to change in our estimate of useful life of the customer-related intangibles in an earlier business combination.
6. Consolidated Balance Sheet:
7. Consolidated Statement of cash flows:
8. Other operating income/(loss), net The Company has partially met the first and second-year business targets pertaining to sale of hosted data center business concluded during the year ended March 31, 2019. Change in fair value of the callable units pertaining to achievement of the business targets amounting to Rs. Nil, Rs. Nil and Rs. 395 for the three months ended March 31, 2021, December 31,2020 and March 31,2020 respectively, and Rs. (81) and Rs. 992 for the year ended March 31, 2021 and March 31, 2020 respectively, has been recognized under other operating income/(loss), net. The Company concluded the sale of assets pertaining to Workday business and Cornerstone On Demand business in Portugal, France and Sweden during the year ended March 31, 2020. Gain arising from such transaction of Rs. Nil for the three months ended March 31, 2020 and Rs. 152 for the year ended March 31,2020, has been recognized under other operating income/(loss), net.
9. Business combination During the year ended March 31, 2021, the Company has completed four business combinations (which individually are not material) for a total consideration of Rs. 13,724. These include (a) Rs. 1,643 towards acquisition of IVIA Services de Informatica Ltd a. ("IVIA") on August 14, 2020, a specialized IT services provider to financial services, retail and manufacturing sectors in Brazil (b) Rs. 5,268 towards acquisition of 4C NV and its subsidiaries ("4C") on August 11, 2020, a Salesforce multi-cloud partner in Europe, U.K. and the Middle East (c)Rs. 841 towards acquisition of Encore Theme Technologies Private Limited ("ETT'), a Finastra trade finance solutions partner across the Middle East, Africa, India and Asia Pacific on December 15, 2020, and (d) Rs. 5,972 towards acquisition of Eximius Design, LLC and and Eximius Design India Private Limited ("Eximius1) on February 25, 2021, a leading engineering services company with expertise in semiconductor, software and systems design. The following table presents the provisional purchase price allocation: The total consideration for IVIA includes a deferred earn-out component of Rs. 497, which is linked to achievement of revenues and earnings over a period of 3 years ending September 30, 2023. The fair value of the earn-out liability was estimated by applying the discounted cashflow approach considering discount rate of 5.7% and probability adjusted revenue and earnings estimates. This earn-out liability was fair valued at Rs. 460 and recorded as part of provisional purchase price allocation. The total consideration for ETT includes a deferred earn-out component of Rs. 305, which is linked to achievement of revenues and earnings over a period of 18 months ending March 31,2022. The fair value of the earn-out liability was estimated by applying the discounted cash-flow approach considering discount rate of 7.4% and probability adjusted revenue and earnings estimates. This earn-out liability was fair valued at Rs. 196 and recorded as part of provisional purchase price allocation. The total consideration for Eximius includes a deferred earn-out component of Rs. 1,738, which is linked to achievement of revenues and earnings over a period of 2 years ending March 31, 2023. The fair value of the earn-out liability was estimated by applying the discounted cash-flow approach considering discount rate of 2.3% and probability adjusted revenue and earnings estimates. This earn-out liability was fair valued at Rs. 1,637 and recorded as part of provisional purchase price allocation. Net assets acquired include Rs. 1,000 of cash and cash equivalents and trade receivables valued at Rs. 1,157. The goodwill of Rs. 9,544 comprises value of acquired workforce and expected synergies arising from the business combinations. Goodwill is allocated to IT Services segment and is not deductible for income tax purposes except for Eximius Design, LLC in the United States. The pro-forma effects of these business combinations on the Company's results were not material.
10. The Indian Parliament has approved the Code on Social Security, 2020 which would impact the contributions by the Company towards Provident Fund and Gratuity. The Ministry of Labour and Employment has released draft rules for the Code on Social Security, 2020 on November 13,2020, and has invited suggestions from stake holders which are under active consideration by the Ministry. Based on an initial assessment by the Company and its Indian subsidiaries, the additional impact on Provident Fund contributions by the Company and its Indian subsidiaries is not expected to be material, whereas, the likely additional impact on Gratuity liability / contributions by the Company and its Indian subsidiaries could be material. The Company and its Indian subsidiaries will complete their evaluation once the subject rules are notified and will give appropriate impact in the financial results in the period in which, the Code becomes effective and the related rules to determine the financial impact are published.
11. Buyback of equity shares During the year ended March 31,2021, the Company has concluded the buyback of 237,500,000 equity shares (at a price of Rs. 400 per equity share) as approved by the Board of Directors on October 13, 2020. This has resulted in a total cash outflow of Rs. 116,445 (including tax on buyback of Rs. 21,445). In line with the requirement of the Companies Act 2013, an amount of Rs. 1,427 and Rs. 115,018 has been utilized from share premium and retained earnings respectively. Further, capital redemption reserve (included in other reserves) of Rs. 475 (representing the nominal value of the shares bought back) has been created as an apportionment from retained earnings. Consequent to such buyback, the paid- up equity share capital has reduced by Rs. 475.
12. Earnings per share for each of the three months ended June 30, September 30, December 31 and March 31 will not add up to earnings per share for the year ended March 31, 2021, on account of buyback of equity shares.
13. On December 22,2020, as part of strategic partnership, the Company entered into a definitive agreement to acquire the IT units of Metro AG in Germany and Romania. Considering the terms and conditions of the agreement, the Company has concluded that this transaction does not meet the definition of Business under IFRS 3. The Company paid an advance of? 4,463 (Euro 52 million) towards purchase of net assets.
14. On March 4, 2021, the Company entered into a definitive agreement to acquire CAPCO, a global management and technology consultancy providing digital, consulting and technology services to financial institutions in the Americas, Europe and the Asia Pacific for a total consideration of USD 1,450 million. The acquisition is subject to customary closing conditions and regulatory approvals and is expected to be concluded in the quarter ending June 30,2021.
15. Events after the reporting period On April 1,2021, the Company entered into a definitive agreement to acquire Ampion, an Australia-based provider of cyber security, DevOps and quality engineering services for a total consideration of AUD 150 million. The acquisition is subject to customary closing conditions and regulatory approvals and is expected to be concluded in the quarter ending June 30, 2021.
Rishad A. Premji Chairman
The audited standalone financial results for the three months and year ended March 31, 2021 have been approved by the Board of Directors of the Company at its meeting held on April 15, 2021. The Company confirms that its statutory auditors, Deloitte Haskins & Sells LLP have issued audit report with unmodified opinion on the standalone financial results for the three months and year ended March 31, 2021.
1. The above standalone financial results have been prepared from the interim condensed standalone financial statements, which are prepared in accordance with Indian Accounting Standards ("Ind AS"), the provisions of the Companies Act, 2013 ("the Companies Act"), as applicable and guidelines issued by the Securities and Exchange Board of India ("SEBI"). The Ind AS are prescribed under Section 133 of the Companies Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and amendments issued thereafter. All amounts included in the standalone financial results (including notes) are reported in millions of Indian rupees (? in millions) except share and per share data, unless otherwise stated.
2. The Company publishes this standalone financial result along with the consolidated financial results. In accordance with Ind AS 108, Operating Segments, the Company has disclosed the segment information in the interim condensed consolidated financial statements and is incorporated in the consolidated financial results.
3. Estimation uncertainty relating to the global health pandemic on COVID-19 In assessing the recoverability of receivables including unbilled receivables, contract assets and contract costs, goodwill, intangible assets, and certain investments, the Company has considered internal and external information up to the date of approval of these standalone financial results including credit reports and economic forecasts. The Company has performed sensitivity analysis on the assumptions used herein. Based on the current indicators of future economic conditions, the Company expects to recover the carrying amount of these assets. The Company basis its assessment believes that the probability of the occurrence of forecasted transactions is not impacted by COVID-19. The Company has also considered the effect of changes, if any, in both counterparty credit risk and own credit risk while assessing hedge effectiveness and measuring hedge ineffectiveness and continues to believe that there is no impact on effectiveness of its hedges. The impact of COVID-19 remains uncertain and may be different from what we have estimated as of the date of approval of these standalone financial results and the Company will continue to closely monitor any material changes to future economic conditions.
4. Other expenses for the three months and year ended March 31, 2021, includes an amount of Rs Nil and Rs. 991 million towards COVID-19 contributions, respectively.
5. The Indian Parliament has approved the Code on Social Security, 2020 which would impact the contributions by the Company towards Provident Fund and Gratuity. The Ministry of Labour and Employment has released draft rules for the Code on Social Security, 2020 on November 13, 2020, and has invited suggestions from stake holders which are under active consideration by the Ministry. Based on an initial assessment by the Company and its Indian subsidiaries, the additional impact on Provident Fund contributions by the Company and its Indian subsidiaries is not expected to be material, whereas, the likely additional impact on Gratuity liability / contributions by the Company and its Indian subsidiaries could be material. The Company and its Indian subsidiaries will complete their evaluation once the subject rules are notified and will give appropriate impact in the financial results in the period in which, the Code becomes effective and the related rules to determine the financial impact are published.
6. Earnings per share for each of the three months ended June 30, September 30, December 31 and March 31 will not add up to earnings per share for the year ended March 31, 2021, on account of buyback of equity shares.
7. Buyback of equity shares During the year ended March 31,2021, the Company has concluded the buyback of 237,500,000 equity shares (at a price of Rs. 400 per equity share) as approved by the Board of Directors on October 13, 2020. This has resulted in a total cash outflow of Rs. 116,445 (including tax on buyback of Rs. 21,445). In line with the requirement of the Companies Act 2013, an amount of Rs. 1,427 and Rs. 115,018 has been utilized from securities premium reserve and retained earnings respectively. Further, capital redemption reserve of Rs. 475 (representing the nominal value of the shares bought back) has been created as an apportionment from retained earnings. Consequent to such buyback, the paid-up equity share capital has reduced by Rs. 4