eClerx Services

The Directors are pleased to present their Eighth Annual Report along
 with the Audited Annual Accounts for the financial year ended March 31,
 2008.
 
 1.  Financial Highlights Consolidated Financial Information of eClerx
 Services Limited and its Subsidiaries:
                                                      (Rs. in million)
 Particulars                                  FY2008      FY2007
 
 Income from Services                        1,216.57    861.20
 Other Income                                   66.58      1.14
 Total Revenue                               1,283.15    862.34
 Operating Expenses                            724.87    430.77
 EBITDA                                        558.28    431.57
 EBITDA%                                         43.5%     50.0%
 EBIT                                          506.47    399.42
 Interest                                        2.57         -
 Taxes                                          58.06      2.69
 Net Profit after Tax                          445.84    396.73
 NPM%                                            34.7%     46.0%
 
 Your Company grew robustly during the financial year ended March 31,
 2008. Income from services grew by 56% during the year in USD terms,
 and total income for the year increased by 49% in INR terms to reach Rs
 1,283.15 million. The Company earned Profit After Taxes (PAT) for the
 year of Rs 445.84 million, representing a Year On Year (YoY) growth of
 12%.
 
 2.  Information on status of Company’s affairs
 
 Information on operational and financial performance, etc., is also
 given in the Management Discussion and Analysis Report, which is
 annexed to the Director’s Report and has been prepared in compliance
 with the terms of Clause 49 of the Listing Agreement entered into by
 the Company with Indian Stock Exchanges.
 
 3.  Dividend
 
 After considering the Company’s profitability and cash flow, your
 Directors are pleased to recommend a final dividend of Rs. 2 per share.
 The total quantum of dividend if approved by the members will be Rs.
 37.74 million while Rs. 6.42 million will be paid by the Company
 towards dividend tax and surcharge on the same.
 
 After including the interim dividend of Rs 6.50 per share already paid
 earlier, this brings the total dividend for the year to Rs 8.50 per
 share (85 %).
 
 4.  Initial Public Offer
 
 During the year, the Company completed a Public issue of 3,206,349
 equity shares of Rs. 10 each for cash at a price of Rs. 315 per equity
 share aggregating to Rs. 1,010 million. The issue comprised of a fresh
 issue of 2,316,349 equity shares aggregating to Rs. 729.65 million and
 an offer for sale by Mr. P.D Mundhra, Mr. Anjan Malik and Burwood
 Ventures Limited (being the existing shareholders of the Company), of
 890,000 equity shares aggregating to Rs. 280.35 million. The Issue
 received a good response from the investor fraternity and was
 oversubscribed by 30 times.
 
 Pursuant to the Public issue, the shares of the Company are listed on
 the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE)
 effective December 31, 2007.
 
 The actual utilisation of the IPO proceeds is as under:
                                                   (Rupees in millions)
 
 Particulars                             Planned as per
 Prospectus
 Acquisitions                               220.00
 Infrastructure Investments                 180.00
 Setting up of Additional Facilities        100.00
 General Corporate purposes                 161.00
 
 Total                                      661.00
 
 Utilisation as on           Balance
 March 31, 2008
 
  -                           220.00
  56.04                       123.96
  -                           100.00
  46.83                       114.17
 102.87                       558.13
 
 5.  Subsidiary Companies:
 
 As on March 31, 2008, the Company has the following subsidiaries:
 
 1.  eClerx Investments Limited (BVI)
 
 2.  eClerx LLC (USA)
 
 3.  eClerx Limited (UK)
 
 4.  Igentica Travel Solutions Limited (UK)
 
 5.  Electrobug Technologies Limited (UK)
 
 6.  Igentica Limited (UK)
 
 7.  E-Bug Pricing Intelligence Limited (UK)
 
 In terms of approval granted by the Ministry of Company Affairs under
 Section 212(8) of the Companies Act, 1956 vide letter No.
 47/201/2008-CL-III dated 02/04/2008, copy of the Balance Sheet, Profit
 and Loss account, Reports of the Board of Directors and Auditors Report
 of the aforementioned subsidiaries for the financial year ended March
 31, 2008 has not been attached with the Balance Sheet of the Company.
 These documents will be made available to investors upon request. These
 documents will also be available for inspection during business hours
 at the registered office of the Company by any investor. We believe
 that the consolidated accounts represent a full and fair picture of the
 state of affairs and the financial condition of the Company.
 
 6.  Fixed Deposits
 
 During the year, your Company has not accepted any deposits within the
 meaning of the provisions of Section 58A of the Companies Act, 1956.
 
 7.  Directors
 
 During the year Mr. Pradeep Kapoor, Mr. Anish Ghoshal, Mr. Vikram
 Limaye and Mr. Jimmy Bilimoria were appointed as additional Directors
 of the Company. As per the provisions of section 260 of the Companies
 Act 1956, they will hold office up to the date of the forthcoming
 Annual General Meeting of the Company. Your Company has received
 notices under Section 257 of the Act along with the requisite deposit,
 with respect to the above persons proposing their appointment as
 Directors of the Company. A resolution seeking approval of the members
 for the appointment of the above people as Directors of the Company has
 been incorporated in the notice of the forthcoming Annual General
 Meeting of the Company along with brief details about them.
 
 In accordance with the Articles of Association of your Company, Mr.
 Anjan Malik retires from office by rotation, and being eligible, offers
 himself for re-appointment at the forthcoming Annual General Meeting of
 the Company.
 
 8.  Directors’ Responsibility Statement
 
 Pursuant to Section 217(2AA) of the Companies Act, 1956, the directors
 confirm that:
 
 (a) in the preparation of the annual accounts, the applicable
 accounting standards had been followed along with proper explanation
 relating to material departures;
 
 (b) the directors had selected such accounting policies and applied
 them consistently and made judgments 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 and of the profit of the Company
 for the year ended on that date;
 
 (c) the directors had taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of this Act for safeguarding the assets of the Company and
 for preventing and detecting fraud and other irregularities;
 
 (d) the directors had prepared the annual accounts on a going concern
 basis.
 
 9.  eClerx Employees’ Stock Option Plan 2005 (ESOP 2005)
 
 Pursuant to the applicable requirements of the Securities and Exchange
 Board of India (Employee Stock Option Scheme and Employee Stock
 Purchase Scheme) Guidelines, 1999 (“the SEBI guidelines”), your Company
 had framed and instituted ESOP-2005 to attract, retain, motivate and
 reward its employees and to enable them to participate in the growth,
 development and success of the Company. Your Company has granted stock
 options from time to time under this Scheme to its permanent employees
 and selected permanent employees of its subsidiaries prior to its
 Initial Public Offering of equity shares.,
 
 The following table sets forth the particulars of stock options granted
 under eClerx ESOP-2005 as on March 31, 2008:
 
 Particulars                                     ESOP - 2005
 
 Gross options granted                               599,525 
 Pricing formula As decided by the Board
 of Directors.
 Options vested                                          Nil
 Options exercised                                       Nil
 The total number of equity shares arising as a 
 result of exercise of options                           Nil
 Options lapsed/expired                                8,150
 Variation of terms of options                           Nil
 Money realized by exercise of options                   Nil
 Total number of options in force                    591,375
 
 Details of options granted:
 
 (i) Senior Managerial Personnel As per statement attached
 
 (ii) Any other employee receiving a grant Fiscal 2006: Nilesh Patel,
 Ritesh Pothan, in any one year of option amounting to Neville Bharucha,
 Sunil Malkani, Rajeev Bhattacharya 5% or more of the options granted
 during that year Fiscal 2007:Ritesh Pothan, Neville Bharucha , Sunil
 Malkani, Suneer Kotian, Venu Atmakur, Anees Merchant, Gokul Perumal,
 Rajeev Bhattacharya, Prateek Bharadwaj, Mukesh Mall Fiscal 2008: Nil
 
 (iii) Identified employees who were granted option, Nil during any one
 year, equal to or exceeding 1% of the issued capital (excluding
 outstanding warrants and conversions) of the Company at the time of
 grant.
 
 Diluted Earnings Per Share (EPS) pursuant to issue Rs. 25.37 for Fiscal
 2008 of shares on exercise of option calculated in accordance with
 Accounting Standard (AS 20 ‘Earning Per Share’)
 
 Difference, if any, between the employee Not Applicable (since the
 employee compensation cost is compensation cost calculated using the
 intrinsic calculated based on fair value).
 
 value of stock options and the employee compensation cost recognized if
 the fair value of the options had been used and the impact of this
 difference on profits and EPS of the Company.
 
 Vesting Schedule Options granted under ESOP 2005 would vest not earlier
 than one year and not later than five years from the date of grant of
 such options.
 
 Details of options granted to senior managerial persons of your Company
 by grantee:
 
 Name of key managerial personnel              No. of options
 granted
 
 Hoshi Mistry                                   53,250
 Kaushal Mahajan                                38,250
 Rohitash Gupta                                 38,250
 Kishore Poduri                                 25,500
 
 No. of options               No. of options
 exercised                     outstanding
 
 Nil                           53,250
 Nil                           38,250
 Nil                           38,250
 Nil                           25,500
 
 Details of options granted to senior managerial persons of foreign
 subsidiaries of your Company by grantee:
 
 Name of key managerial personnel       No. of options
 granted
 
 Daniel Foarde                            37,500
 Mahesh Muthu                             56,250
 
 No. of options               No. of options
 exercised                     outstanding
 
 Nil                           37,500
 Nil                           56,250
 
 The difference between the fair value of the shares underlying the
 options granted on the date of grant of option and the option price is
 expensed as Employees Compensation over the period of vesting.
 Accordingly, the Company has charged a sum of Rs.0.70 million to the
 profit and loss account for the year ended on March 31, 2008 as
 employee compensation cost.
 
 The equity shares to be issued and allotted under ESOP 2005 of the
 Company shall rank pari-passu in all respects including dividend with
 the existing equity shares of the Company.
 
 10.  Particulars of Conservation of Energy, Technology Absorption and
 Foreign Exchange Earnings and Outgo
 
 Information as required under Section 217(1) (e) of the Companies Act,
 1956 read with the Companies (Disclosure of particulars in the report
 of board of directors) Rules, 1988 are given in the annexure forming
 part of this report.
 
 11.  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. However, as per
 the provisions of Section 219(1) (b) (IV) of the said Act, the Annual
 Report excluding the aforesaid information is being sent to all the
 members of the Company and others entitled thereto.  A member, who is
 interested in obtaining such particulars, may write to the Company
 Secretary at the registered office of the Company.
 
 12.  Corporate Governance
 
 The Securities and Exchange Board of India (SEBI) has prescribed
 certain corporate governance standards vide Clause 49 of the Listing
 Agreement with stock exchanges. Your Directors reaffirm their
 commitment to these standards and a detailed Report on Corporate
 Governance together with the Auditors’ Certificate on its compliance is
 annexed hereto.
 
 13.  Auditors
 
 M/s. Walker Chandiok & Company, Chartered Accountants, Mumbai, who are
 the statutory auditors of the Company, retire at the conclusion of 8th
 Annual General Meeting. You are requested to appoint auditors for the
 current financial year.  The retiring auditors, M/s. Walker Chandiok &
 Company, Chartered Accountants are eligible for re-appointment.
 
 14.  Acknowledgement
 
 The Directors thank the Company’s customers, vendors, investors,
 consultants, business associates and bankers for their support and
 co-operation to the Company.
 
 The Directors are also thankful to the Government of India, the
 Governments of various countries, the concerned State Governments and
 other government and regulatory agencies for their co-operation.
 
 The Directors also acknowledge the hard work and effort made by every
 member of the eClerx family across the world and express their sincere
 gratitude to the shareholders for their continuing confidence in the
 Company.
 
                            For and on behalf of the Board of Directors
 
 Place: Mumbai                            V. K. Mundhra
 Date : May 26, 2008                      Chairman