California Software

We are pleased to present our Annual report on the business and
 operations for the year ended March 31, 2008.
 
 Financial Results - Highlights All figures in Rupees Crores except EPS
 
                                                        Consolidated
                                            Year ended       Year ended
 Details                                March 31, 2008   March 31, 2007
 
 Total Revenues                                 236.38        168.94
 Operating Profits                               25.20         17.12
 Interest & finance charges                       1.44          1.53
 Depreciation                                     2.91          2.55
 Profit before Extraordinary items & 
 Minority interest                               20.84         13.03
 Prior Period adjustments                         0.58          2.36
 Extraordinary items                             (0.16)          Nil
 Minority Interest adj for share of 
 subsidiary profits/ (Losses)                    (0.77)         1.69
 Profit before Tax                               21.20          8.98
 Provision for Taxation
 Current Tax                                      4.68          1.13
 Deferred Tax                                     1.04         (0.12)
 Profit after tax                                15.47          7.96
 Profit balance brought forward from 
 previous year                                    8.13          6.74
 Transfer on Amalgamation                         1.96             -
 Surplus available for appropriation             25.56         14.71
 Appropriations
 Dividend Proposed                                1.23          0.67
 Dividend Distribution Tax                        0.21          0.11
 Transferred to General Reserve                    NIL          0.20
 Balance carried to Balance Sheet                24.12         13.72
 Paid-up Equity Share Capital                    12.36          9.04
 Reserves excluding revaluation reserves         91.46         55.47
 Earning Per Share for the year (Rs)
 i) Basic                                        13.94         10.29
 ii) Diluted                                     13.94          9.74
 
              Standalone
 Year ended                   Year ended
 March 31, 2008           March 31, 2007
 
  69.08                           50.19
  12.60                            7.91
   0.61                            0.64
   1.43                            1.25
  10.54                            6.01
      -                               -
    Nil                             Nil
     NA                              NA
  10.54                            6.01
   2.38                            0.18
   0.92                           (0.12)
   7.24                            5.95
  16.99                           12.03
   1.96                               -
  26.20                           17.98
   1.23                            0.67
   0.21                            0.11
    NIL                            0.20
  24.75                           16.99
  12.36                            9.04
  94.27                           59.68
   6.53                            7.69
   6.53                            7.27
 
 Dividend
 
 Keeping in view the profits earned by the Company in the current year,
 and also taking into account the future expansion plans, your Directors
 are pleased to recommend a dividend of 10% for the financial year ended
 March 31, 2008. The total outflow on account of dividend and
 distribution tax provided for in the accounts is Rs. 1.45 Crores.
 Dividend, if approved by the shareholders at the forthcoming Annual
 General Meeting will be paid to those shareholders whose names appear
 in the Shareholders Register as on the record date fixed at the AGM.
 
 Results of operations
 
 I) Consolidated Results
 
 During the year, your Company on a consolidated basis with all its
 subsidiaries earned total revenue of Rs.236.38 Crores as against Rs.
 168.94 Crores earned during the previous year - an increase of Rs.67.44
 Crores (nearly 40%). The operating profit during the year is Rs.25.20
 Crores as against Rs.17.12 Crore of the previous year. After taking
 into account the tax provisions and adjustments for minority interest,
 prior period adjustments and extraordinary items if any, the profit
 after tax for the year is Rs.15.47 Crores as against Rs.7.96 Crores of
 the previous year - an increase of Rs.7.50 Crores (nearly 94%). 
 
 The results of operations of recently acquired subsidiaries have been
 consolidated into the accounts from the effective date of acquisition
 on which the subsidiary relationship came into existence. The results
 of a sustained growth strategy through strategic acquisitions and
 realignment have started yielding results.
 
 II) Standalone Results
 
 During the year, your Company, on a standalone basis, earned total
 revenue of Rs. 69.08 Crore as against Rs.50.19 Crores earned during the
 previous year - an increase of Rs.18.89 Crores (nearly 38 %). The
 operating profit during the year is Rs.12.60 Crores as against Rs.7.91
 Crores of the previous year - increased by 59%. After taking into
 account the tax provisions and adjustments, the profit after tax for
 the year was Rs.7.24 Crores as against Rs. 5.95 Crores of the previous
 year - an increase of Rs.1.29 Crores (nearly 22%). The higher turnover
 and improved margins has resulted in increase in the profits.
 
 Business
 
 During the year under report, your Company performed very well and
 registered total revenues of Rs. 236.38 Crores compared to Rs. 168.94.
 Crores (consolidated basis) achieved during the previous year. The
 Company expanded operations by adding personnel and additional offshore
 development space in India. Strong emphasis on marketing & business
 development led to increased business from existing clients as well as
 new client acquisition.
 
 Acquisitions
 
 With the objective of significantly enhancing the scale and size of
 operations, your Company continued to make strategic acquisitions to
 achieve growth. During the year, the group made the following
 synergistic acquisitions in the following companies:
 
 i - Aspire Communications, India
 
 In July 2007, the Company signed a Share Purchase Agreement (SPA) to
 acquire majority stake in Aspire Communication Pvt. Ltd, India and its
 subsidiary Aspire Peripherals P Ltd and to acquire majority stake in
 Aspire Soft, USA through its subsidiary CSWL Inc. USA. The acquisition
 would help the Company to further augment its Product Engineering
 Services.  This company has offices in Mysore, Bangalore, and San Jose.
 Aspire focuses on providing Hardware Design Services to Technology
 companies.
 
 ii - International Innovations Inc.
 
 In February 2008, the Company through its Subsidiary HealthNet
 International Inc. has acquired 100% equity stake in International
 Innovations Inc. USA. Founded in April 2003, International Innovations
 is a technology consulting company specializing in Enterprise
 Information Management Solutions. The acquisition would help the
 Company to augment its Enterprise Solutions Division.
 
 iii - Acquisition of balance 49% stake in Inatech Infosolutions
 Pvt.Ltd:
 
 The Company has entered into a share purchase agreement with the
 shareholders of Inatech Infolsoutions Private Limited on May 9, 2008 to
 facilate the conversion of Inatech Infosolutions Private Limited into a
 wholly Owned subsidiary of the Company. Pursuant to the terms of the
 agreement, sale of balance 49% shares is deemed to be effective January
 1, 2008.
 
 Amalgamation of Webspectrum Software Limited with the Company
 
 Pursuant to the scheme of amalgamation between the Company and its
 Wholly owned Subsidiary, Webspectrum Software Limited as approved by
 the Board of Directors of the Company at their meeting held on 23
 January, 2007 and as sanctioned by the Honourable High Court of
 Judicature at Madras vide its Order dated February 19, 2008, the
 undertaking Webspectrum software Limited stood transferred to and
 vested in the Company on and from April 1, 2006.
 
 Review of subsidiaries
 
 I - CSWL, Inc. USA and its subsidiaries CSWL Inc. sales revenues
 improved to US$ 35.59 million (equivalent to Rs.  142.32 Crore approx)
 on a consolidated basis during the year, compared to US .00 million
 (equivalent to Rs.126.41 Crores) achieved during the previous year due
 to acquisitions as well as business growth.
 
 The subsidiary made a net consolidated profit of $ 1,128,435 (approx
 Rs.4.51 Crores) as compared to net consolidated profit after tax of US$
 12,321 (equivalent to Rs 0.05 Crores) last year. The improvement in
 profits was due to strategic acquisitions, divestments and better
 margins in existing operations.
 
 The results of existing subsidiaries HealthNet International Inc.,
 Codex Co.  Ltd and its holding Company Waldron Limited, Informed
 Decisions Corporation are included for the full year under review. The
 results of Aspire Soft and International Innovations Inc. have been
 incorporated with effect from effective date of acquisition of 1st
 July, 2007 and 1st February, 2008 respectively.
 
 II - Team Frontline Ltd.
 
 Team Frontline has achieved total revenue of Rs.7.59 Crores and a
 profit of Rs.0.06 Crores in the fiscal year 2007-08 as against the
 total revenues of Rs.6.81 Crores and a profit after tax of Rs.0.04
 Crores in the previous fiscal year. The improvement was mainly on
 account of the improvement in sales combined with reduction in selling
 and distribution expenditure.
 
 III - Inatech Infosolutions Pvt. Ltd
 
 The consolidated results of Inatech including its wholly owned UK
 subsidiary have been taken into the Companys consolidated results. The
 financial results of Inatech, Egypt have been taken into consideration
 from 1st November, 2007. Inatech,on a consolidated basis, reported
 revenues of Rs.64.32 Crores and profit after tax of Rs 4.30 Crores
 against the consolidated reported revenues of Rs 16.92 Crores and
 profits after tax of Rs 2.27 Crore of the previous year. The
 performance is on the lines of the expectations of your Company
 
 IV - Aspire Communications Pvt, Ltd
 
 The Consolidated results of Aspire including its Wholly owned
 Subsidiary Aspire Peripherals Limited have been taken into Companys
 Consolidated results from 1st July, 2007 (the date on which majority
 stake has been acquired by the Company). Aspire on a consolidated basis
 has reported revenues of Rs.1.46 Crore and net loss of Rs.1.13 Crores
 
 V - EastPoint Solutions Limited
 
 This company was incorporated as a wholly owned subsidiary in the year
 2007 in order to make appropriate foray in Business Process Outsourcing
 area (BPO) either on start up basis or with suitable investments
 /acquisitions of existing companies in this space. As on date the
 Company is yet to commence any commercial activity and there are no
 revenues or profits for the period ended March 31, 2008.
 
 Consolidated Results Publication
 
 In terms of approval dated 6th May, 2008 by the Central Government
 under Section 212 (8) of the Companies Act, 1956, a copy of the Balance
 Sheet, Profit and Loss Account, Report of the Board of Directors and
 the Report of the Auditors of the above subsidiary companies have not
 been attached with the Balance Sheet of the Company. The Company will
 make available these documents upon request in writing to the Company
 Secretary at the Registered Office of the Company by any member of the
 Company interested in obtaining the same.
 
 However, as required under the Listing Agreements with the Stock
 Exchanges, the Consolidated Financial Statements of the Company and all
 its Subsidiaries as prepared in accordance with Indian GAAP is enclosed
 and form part of the Annual Report and Accounts.
 
 Awards and Recognition:
 
 Your Company, a CMMi Level 5 certified company, has received awards and
 recognition across the world by achieving
 
 - 21st in Deloitte Technology Fast
 
 - 171 in Deloitte Technology Fast 500 in Asia Pacific
 
 - 130 in Dataquest India
 
 New property at Pallikaranai:
 
 Your Company has purchased its own property at Pallikaranai, Chennai
 measuring 95,292 Sq.ft. to house its software development centres. The
 new office is situated approximately 8 km away from the present
 corporate office. The new premises will cater to the future expansion
 plans of the Company. The corporate office and development centres will
 be moved to new premises in the month of August, 2008.
 
 Capital Market Developments
 
 The market capitalization of your Company stood at Rs.102.63 crores as
 on March 31, 2008, based on the closing quotations on the National
 Stock Exchange.
 
 Increase in Share Capital
 
 The total number of shares of your Company stand enhanced to
 1,23,65,006 equity shares of Rs 10 each Issued and Paid Up capital
 Rs.12,36,50,060 as at March 31, 2008 subsequent to the following
 allotments of equity shares during the year
 
 i - Preferential allotment of 23,93,600 equity shares in August 2007.
 
 ii - Preferential allotment of 9,25,000 equity shares in August 2007
 upon conversion of 83,25,000 Fully Convertible Debentures (FCDs).
 
 Employee Stock Purchase Scheme
 
 Under the Employee Stock Offer Plan (ESOP), of the Company, 4,00,000
 shares were issued to California Software Employees Welfare Trust
 formed in the year 1999 at a price of Rs.50/- per share including
 premium of Rs.40/-.
 
 The trust has since inception of the scheme in 1999 till March 31, 2008
 allotted the entire 4,00,000 shares in six tranches to 97 selected
 employees on receipt of full consideration of Rs.50/- per equity share.
 The shares when allotted under ESPS were subject to lock in for a
 period of one year from the date of allotment.
 
 Directors
 
 During the year, Mr.Robert V Chandran, the Chairman of the Company
 passed away in a tragic accident on January 7,2008. The Directors place
 on record their rich tribute for Mr. Robert Chandrans invaluable
 contributions to your Companys growth. He has given the Company a
 dynamic leadership.
 
 Mr. Fuminobhu Oda retired from the Board on August 22, 2007. The
 Directors place on record their appreciation for the services rendered
 during his tenure on the Board of your Company.
 
 As per article 121 of the Articles of Association, Prof.TT.Narendran
 retires by rotation in the forthcoming Annual General Meeting and being
 eligible offers himself for re-appointment
 
 Mr. Clyde Michael Bandy was appointed on February 8, 2008 as Additional
 Director/Chairman of the Company. He will hold office up to the date of
 the ensuing Annual General Meeting. The Company has received notice
 under Section 257 of the Companies Act, 1956 from a member proposing
 Mr.  Bandy for appointment to the office of Director.
 
 Auditors
 
 The statutory auditors, M/s Price Waterhouse, Chennai, Chartered
 Accountants, retire at the ensuing Annual General Meeting and have
 confirmed their eligibility and willingness to accept the office, if
 re- appointed.
 
 Particulars of Employees
 
 In terms of the provisions of section 217(2A) of the Companies Act
 1956, read with the Companies (Particulars of Employees) Rules 1975 as
 amended, the names and other particulars of the employees are required
 to be set out in the Annexure to the Directors Report and form part of
 this report as Annexure. However as per the provision of the Section
 219 (1) (b) (iv) of the said Act, the Annual Report excluding the
 aforesaid Annexure information is being sent to all the members of the
 Company and others entitled thereto. Members who are interested in
 obtaining such particulars may write to the Company Secretary at the
 Registered Office of the Company for the same.
 
 Conservation of energy, technology absorption, foreign exchange
 earnings and outgo
 
 The particulars as prescribed under sub-section (1) (e) of section 217
 of the Companies Act, 1956, read with the Companies (Disclosure of
 particulars in the report of Board of Directors) Rules, 1988, are set
 out in the Annexure forming part of this report.
 
 Directors Responsibility statement
 
 Pursuant to section 217 (2AA) of the Companies (Amendment) Act, 2000,
 the Directors confirm that:
 
 - In the preparation of the annual accounts for the year under report,
 the applicable accounting standards have been followed;
 
 - Appropriate accounting policies have been selected and applied
 consistently and have made judgements and estimates that are reasonable
 and prudent so as to give a true and fair view of the state of affairs
 of the Company as at March 31, 2008;
 
 - Proper and sufficient care has been taken for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Companies Act, 1956, for safeguarding the assets of the Company and for
 preventing and detecting fraud and other irregularities;
 
 - The annual accounts have been prepared on a going concern basis.
 
 Compliance of Conditions of Corporate Governance
 
 The Certificate from the Auditors of the Company regarding compliance
 of conditions of Corporate Governance stipulated by the SEBI is annexed
 to this report.
 
 Acknowledgement
 
 Your Directors thank the Government and regulatory authorities in India
 and other countries of operation, financial institutions, Canara Bank,
 investors, customers, business and technology partners and vendors for
 their support and cooperation during the year and look forward to
 continued support during the coming years. Your Directors place on
 record their appreciation of the valuable contribution made by the
 employees at all levels.
 
 For and on behalf of the Board of Directors
 
 Chennai                   Dr. P.J. George                   S. Santhosh
 June 26, 2008                   Director              Managing Director