The fundamental shift in the way businesses operate that came about in
 2008-09, has taken more solid shape in 2010-11.The business environment
 has become more complex and uncertain, forcing organizations around the
 world to become more nimble, outcome-focused, and to do more with less.
 The business need to collaborate better within the ecosystem and
 respond faster in the marketplace is increasing demand for
 transformational IT solutions. On the other hand, IT services companies
 need to align their operating protocols and offerings in line with this
 scenario, and offer services that enable their customers to achieve
 their business goals. Your Company has focused on doing exactly this,
 and is investing in the required resources, and developing solutions
 that cater to select verticals such as manufacturing, media &
 entertainment, health sciences, travel & hospitality, and technology.
 
 Our objective in the year 2010-11 was to understand certain
 domain-specific business challenges in-depth and define our service
 offerings accordingly.  We are also fine-tuning some of our existing
 service offerings in-line with this objective and are enhancing our
 value proposition for existing as well as new customers. Understanding
 our customers business challenges is a core focus for us.
 
 Dynamic Business Environment
 
 The export demand for IT, and particularly for product engineering
 services, is slowly returning to normalcy after nearly two years of
 sluggishness, even though protectionism-led problems are still very
 strong in western markets.  Furthermore, margin related pressures
 continue to exist and are expected to grow further, primarily due to
 commoditization of traditional service lines, increase in wages and the
 sunset of the STPI scheme. To counter this, we are adopting new
 engagement models that are based on business outcomes and are also
 developing solutions that can be rapidly customized and deployed for
 customers. Such services have the potential to become one of our key
 differentiators. This will also be a testimony to the fact that we
 understand the domains we operate in.
 
 To become more competitive, your Company continues to invest in
 capabilities that will help us deliver business transformation
 
 solutions in service-lines such as enterprise collaboration, cloud
 computing, software as a service, social business and mobility. These
 services will enable us to offer next generation solutions to clients
 in India and our core markets i.e. USA and the UK. We have also entered
 into strategic partnerships with other technology companies such as IBM
 and QlikTech to expand the breadth of our solution offerings in niche
 areas.
 
 Business Overview
 
 The aftereffects of the recession considerably elongated the customer
 acquisition cycle, especially in our core markets.  This resulted in
 our overall revenue dropping by 5% to Rs. 129.16 Crores compared to Rs.
 136.17 Crores during the previous year. We reported a lower profit
 after tax & exceptional item of Rs. 8.39 Crores last year as compared
 to Rs. 13.78 Crores in 2009-10. While our export business has been slow
 to pick up, our India business has been consistent over the years.
 Domestic revenue grew by 21% from Rs. 24.63 Crores in FY10 to Rs. 29.71
 Crores in FY11. During the year, we also earned the distinction of
 crossing 200 customers in India. We have achieved this milestone within
 the first five years of entering the Indian market. It is a significant
 achievement, which showcases the trust Indian enterprises are placing
 in your Company.
 
 On the project execution front, we are taking several steps to control
 costs and ensure optimum resource utilization. We continue to train our
 employees on technical and non-technical fronts, including
 next-generation technologies to ensure that we meet the highest
 delivery expectations of our global and Indian customers and improve
 productivity constantly. We recognize that the next phase of growth
 will demand subtle, yet critical, modifications to our front-end
 operations. We are working on adding a consulting layer to our
 customer-facing processes for increasing the depth of our existing
 relationships as well as to accelerate new client acquisition.
 
 A major development is that we appointed Sunil Bhatia as CEO & Managing
 Director of Blue Star Infotech Ltd. on April 15th, 2011. Sunil will
 also be a Member of the Board of Directors of the Company. Sunil has
 over 22 years of experience in building and growing businesses with
 revenues exceeding USD 200 million, and has worked for leading
 companies such as Accenture, IBM, Satyam, and in multiple countries
 across Asia and in the US. He has deep exposure across industries such
 as Communications, High-Tech, Financial Services, Industrial, Retail
 and the Public sector.
 
 His rich experience, combined with a proven track record with customers
 and a consultative approach, creates strong synergies with our
 strategic goals and current focus areas, and makes me believe that he
 will successfully lead the company through its next growth phase and
 the era of globalization we are now in.
 
 In Conclusion
 
 Although the global economy is recovering and discretionary IT and R&D
 spends are expected to grow in the near-term, we believe that the
 business environment in FY12 will be far more challenging for mid-sized
 IT service companies.  However, we are confident that our verticalized
 approach to enable global enterprises derive measurable business
 outcomes will pay back rich dividends. We continue to put into place
 key elements which will enable us to capitalize when demand from our
 core markets returns during FY12. The expected demand uptake, coupled
 with our strategy to de-risk our business through effective foreign
 exchange management, better resource utilization and cost
 rationalization, makes us confident that your Company will be able to
 meet expectations of its customers, employees and shareholders.
 
 We thank you for your continued support.
 
 Sincerely,
 
 Suneel M Advani
 Chairman & Managing Director
 
 Mumbai, June 20, 2011