in a Dynamic Environment - Domain-b

eduction in cost of software licenses procured by0.62% reduction in recruitment and training costs by0.33% reduction in travel and conveyance costs by 0.34% reduction in ‘other expenses’ by 0.31%.The reductions in the above items of expenses are resultsof cost control measures instituted throughout theCompany.However, rent costs as a percentage of revenues went upfrom 1.76% in fiscal 2008 to 2.20% in fiscal 2009 mainlydue to renting of additional space commensurate withgrowth of business.Other incomeOther income comprises interest received on deposits withbanks, dividends received on investments in subsidiaries,dividends from mutual funds and gains/losses due toexchange rate fluctuations.Net ‘other income’ was a gain of Rs.689.82 crore in fiscal2008, which in fiscal 2009 was a loss of Rs.456.24 crore.The primary reason for the decrease in ‘other income’ isthe net exchange loss of Rs.746.11 crore in fiscal 2009 ascompared to net exchange gain of Rs.511.32 crore in fiscal2008. This was partially offset by higher interest incomeof Rs.82.24 crore in fiscal 2009 (Rs.36.48 crore in fiscal2008), higher dividend income of 127.85 crore in fiscal2009 (Rs.111.08 crore in fiscal 2008), higher profit on saleof mutual funds and other current investments of Rs.48.98crore in fiscal 2009 (Rs.13.49 crore in fiscal 2008).Forward and options contracts accountingTCS Limited enters into various forward and optioncontracts to manage its exposure to exchange rates, inaccordance with its risk management policies andprocedures. These contracts are generally entered intowith banks as counterparties and are for a maximumperiod of eight years. The Company designates its hedginginstruments as cash flow hedges upon completion of theformal documentation and testing for effectiveness whichis done periodically, applying the recognition andmeasurement principles set out in the “FinancialInstruments: Recognition and Measurement” (AccountingStandard 30). All such hedging instruments are measuredat fair value, at the reporting dates. Changes in the fairvalue between the reporting dates of such instrumentsdesignated as effective hedge of future cash flows arerecognised in the ‘shareholders’ funds’ and the ineffectiveportion is recognised as ‘other income’ (net) in the profitand loss account.On sale or termination of any effective hedge instrumentbefore maturity, hedge accounting is discontinued andcumulative gains or losses on such instruments areretained in the ‘shareholders’ funds’ until the maturity ofthe instrument and thereafter transferred to the profitand loss account. If a hedged transaction is no longerexpected to occur, the net cumulative gain or lossrecognised in ‘shareholders’ funds’ is transferred to ‘otherincome’ in the profit and loss account for the period. Onsale or termination of hedge instruments on maturity,the resultant gains or losses are taken to the profit andloss account for the period.Forward contracts and currency options outstanding atthe reporting dates, other than designated cash flowhedges, are stated at their fair values and any gains orlosses are recognised as ‘other income’ in the profit andloss account for the period.Exchange loss of Rs.982.88 crore have been recognised inthe year ended March 31, 2009 (Exchange gain ofRs.527.63 crore for the year ended March 31, 2008) onforeign exchange forward contracts and currency optioncontracts .Foreign exchange loss (net of the revaluation of all currentassets and liabilities in foreign currencies as at March 31,2009) was Rs.746.11 crore in fiscal 2009 as compared to anet foreign exchange gain of Rs.511.32 crore in fiscal 2008.Profit before interest, depreciation and taxes (PBIDT)The PBIDT in fiscal 2009 was Rs.5,564.59 crore (Rs.5,466.06crore in fiscal 2008). The profit as a percentage ofrevenues went down from 29.89% in fiscal 2008 to24.84% in fiscal 2009. The decrease in the PBIDT of 5.05%as a percentage of revenues during fiscal 2009 isattributable to: increase in ‘total employee cost’ of 0.65% increase in the cost of services rendered by businessassociates of 0.78% decrease in overseas business expense other thanemployee cost of 0.40% decrease in other operating expenses of 1.79% net loss in fiscal 2009 over net gain in fiscal 2008 in‘other income’ of 5.81%.Interest costsInterest expenses increased from Rs.3.42 crore in fiscal2009 to Rs.7.44 crore in fiscal 2009 mainly attributable tofinance charges related to lease contract entered intoduring fiscal 2009.DepreciationDepreciation charge decreased from Rs.458.78 crore infiscal 2008 to Rs.417.46 crore in fiscal 2009. Depreciationcharge was 1.86% of revenues in fiscal 2009 (2.51% in67