eClerx Services

I.  a) Basis of preparation
 
 The financial statements have been prepared and presented under the
 historical cost convention on the accrual basis of accounting and
 comply with the Accounting Standards [AS] as notified under the
 Companies Act, 1956.
 
 b) Use of estimates
 
 The preparation of the financial statements in conformity with
 generally accepted accounting principles [GAAP] in India requires
 management to make estimates and assumptions that affect the reported
 amount of assets and liabilities and disclosure of contingent
 liabilities on the date of the financial statements.  Management
 believes that the estimates made in the preparation of financial
 statements are prudent and reasonable. Actual future periods results
 could differ from those estimates. Any revision to accounting estimates
 is recognized prospectively in current and future periods.
 
 1.  Investments
 
 a.  The Company entered into a share purchase agreement dated April 1,
 2007 with shareholders of eClerx Limited, United Kingdom to acquire the
 entire share capital of that Company for a consideration of Rs. 3.31
 million.
 
 b.  The Company entered into a share purchase agreement dated April 1,
 2007 with shareholders of eClerx LLC, United States of America to
 acquire the entire share capital of that Company for a consideration of
 Rs. 0.72 million.
 
 c.  The Company has incorporated a 1 00% subsidiary, eClerx Investments
 Limited in the British Virgin Islands on June 25, 2007. The Company has
 invested Rs. 129.96 million upto March 31, 2009 in the equity share
 capital of this wholly owned subsidiary company.
 
 2.  Segment Reporting
 
 The Company operates under a single primary segment i.e.  data
 analytics and process outsourcing services.
 
 3.  Operating Leases
 
 The Company has various operating leases for office facilities and
 residential premises for employees which include leases that are
 renewable on a yearly basis, cancellable at its option and other long
 term leases.
 
 4.  Related Party Information
 
 As per Accounting Standard 18 - Related Party Transactions, as notified
 under the Companies Act, 1956, the Companys related parties and
 transactions with them are enumerated below:
 
 A.  Related Parties
 
 [a]   Where control exists:
 
 1.  eClerx Limited, United Kingdom (wholly owned subsidiary)
 
 2.  eClerx LLC, United States of America [wholly owned subsidiary]
 
 3.  eClerx Investments Limited, British Virgin Island [wholly owned
 subsidiary]
 
 4.  Igentica Travel Solutions Limited (99.4% held by eClerx Investments
 Limited, BVI)
 
 5.  Igentica Limited (100% held by Igentica Travel Solutions Limited)
 
 6.  *Electrobug Technologies Limited [100% held by Igentica Travel
 Solutions Limited)
 
 7.  *E-Bug Pricing Intelligence Limited [100% held by Electrobug
 Technologies Limited)
 
 *These companies have been wound up on March 17, 2009
 
 (b) Enterprises where Key Managerial Person and / or relative of such
 personnel have significant influence:
 
 1.  Innovative Impex Private Limited
 
 2.  Duncan Stratton & Company Limited
 
 3.  Inner Challenges Private Limited
 
 (c) Key Management Personnel:
 
 1.  V. K. Mundhra (Chairman)
 
 2.  P. D. Mundhra (Executive Director)
 
 3.  Anjan Malik [Director]
 
 11. Earnings Per Share
 
 The basic earnings per equity share are computed by dividing the net
 profit attributable to the equity shareholders for the year by the
 weighted average number of equity shares outstanding during the
 reporting period. The number of shares used in computing diluted
 earnings per share comprises the weighted average number of shares
 considered for deriving basic earnings per share, and also the weighted
 average number of equity shares, which may be issued on the conversion
 of all dilutive potential shares, unless the results would be anti
 dilutive.
 
 5. Employee Benefit Plans
 
 The Company makes annual contribution to the Employees Group Gratuity
 Assurance Scheme of the Life Insurance Corporation of India (UC) from
 July E008. The Scheme provides for lump sum payment to vested employees
 at retirement, death while in employment or on termination of
 employment based on completed year of service or part thereof in excess
 of six months. Vesting occurs on completion of five years of service.
 
 The following table sets out the status of the gratuity plan for the
 year ended March 31, 2009 as required under AS 15 (Revised) as notified
 under the Companies Act, 1956
 
 6. Secured Loans
 
 The Company has been sanctioned working capital facilities and short
 term loan to the tune of Rs. 250 million from Citi Bank. The amount
 outstanding on account of pre-shipment export finance loan as on March
 31, 2009 is NIL (P.Y: Rs. 39.97 million). The loan is secured by way of
 charge on movable assets, book debts, outstanding monies, receivables,
 claims, bills, investments, rights to or in movable properties/ movable
 assets forming part of current assets both present and future
 
 7.  Initial Public Offer (IPO)
 
 The Company completed the Public Issue of 3,206,349 equity shares of
 Rs. 1 0 each for cash at a price of Rs.  315 per equity share
 aggregating to Rs. 1,010 million in the year 2007-08. The issue
 comprised of a fresh issue of 2,316,349 equity shares aggregating Rs.
 729.65 million and an offer for sale by Mr. P.D Mundhra, Mr. Anjan
 Malik and Burwood Ventures Limited [being the then existing
 shareholders of the Company), of 890,000 equity shares aggregating
 Rs.280.35 million. The issue constituted 16.99% of the fully diluted
 equity share capital of the Company. The premium of Rs. 305 per share
 amounting to Rs.706.48 million has been credited to Share Premium
 account. Pursuant to the Public issue, shares of the Company are listed
 on National Stock Exchange and Bombay Stock Exchange effective December
 31, 2007.
 
 8.  Dues to Small scale, micro and medium enterprises
 
 Based on the information available with the Company, there are no dues
 payable to micro, small and medium enterprises as defined in The Micro,
 Small & Medium Enterprises Development Act, 200B.
 
 9. Contingent Liabilities
 
 The Company has received an Income Tax demand notice for Rs 11.52
 million pertaining to the financial year 2005-06. The Company has filed
 an appeal against this order and expects a favorable decision. Hence no
 provision has been made in the financial statements for the Income Tax
 demand.