Mahindra Satyam

The directors are pleased to present their report for the financial
 year 2007-08.
 
 Financial highlights
 
                                                          Rs. in crores
 Particulars                              2007-08     2006-07   Growth%
 
 Income from software services           8,137.28    6,228.47     30.65
 
 Other income                              257.20      181.61     41.62
 
 Total income                            8,394.48    6,410.08     30.96
 
 Operating profit (PBIDT)                2,085.74    1,710.73     21.92
 
 Interest                                    5.94        7.61    (21.94)
 
 Depreciation                              137.94      129.89      6.20
 
 Profit before tax                       1,941.86    1,573.23     23.43
 
 Provision for tax                         226.12      150.00     50.75
 
 Profit after tax                        1,715.74    1,423.23     20.55
 
 Equity share capital                      134.10      133.44      0.49
 
 Reserves                                7,221.71    5,648.07     27.86
 
 Transfer to general reserve               171.60      142.32     20.57
 Earnings per share
 (Rs. Per equity share of
 Rs. 2 each)
 
 -Basic (Rs.)                               25.66       21.73     18.08
 
 -Diluted EPS (Rs.)                         25.12       21.25     18.21
 
 Dividend rate
 (Interim plus Final) (%)                     175         175
 
 Overview
 
 For the financial year ended March 31, 2008, your Company reported a
 total income of Rs. 8,394.48 crores, comprising income from software
 services of Rs. 8,137.28 crores, and other income of Rs. 257.20 crores.
 Total revenues grew by 30.65% over the previous financial year. The
 company recorded an operating profit of Rs. 2,085.74 crores, and a net
 profit of Rs.  1,715.74 crores, representing a growth of 21.92% and
 20.55% respectively, over the previous financial year. North America,
 Europe and rest of the world accounted for 60.35%, 20.58% and 19.07% of
 the revenues, respectively. Offshore revenue during the year was
 51.84%, while onsite was 48.16%.
 
 Dividend
 
 Your directors recommended a final dividend of Rs.2.50 per share for
 your approval. This, coupled with the interim dividend of Re.l per
 share already paid, raises the total dividend for the year to Rs. 3.50
 per share.
 
 Increase in the share capital
 
 During the year under review, the paid-up share capital of the Company
 increased from Rs. 133.44 crores divided into 667,196,009 equity shares
 of Rs. 2 each to Rs.134.10 crores divided into 670,479,293 equity
 shares of Rs. 2 each, consequent to issue of 3,283,284 equity shares of
 Rs. 2 each to Associates upon exercise of options under the stock
 option plans of the Company
 
 Listing on Euronext
 
 In a path-setting initiative, your Company listed its existing ADSs
 with Euronext Stock Exchange (NYSEs European trading platform). With
 this move, Satyam became the first Indian company to list on three
 major trading platforms around the world, making it a truly
 globally-tradeable entity. The listing was also the first of its kind
 globally, under the fast-track mechanism. Europe is a dynamic and
 growing market for your Company and our listing will demonstrate our
 continued and growing commitment to the region.
 
 Human resources
 
 The total number of Associates on March 31, 2008 was 45,969, against
 35,670 on March 31, 2007. The attrition rate for the year 2007-08 was
 13.09%.
 
 Your Company believes that today a major HR challenge for any
 organization is capability building and enhancement and associate
 engagement. Your Company continued to work toward these three
 components through various initiatives, such as:
 
 Building capability through collaboration with institutions at the
 national and international levels, and via campus link programs
 
 Capability enhancement by realigning leadership competency frameworks
 to new business realities and the companys future roadmap
 
 Delighting associates through empowerment, unique organization design
 and enablement of social participation for better productivity and less
 attrition
 
 Satyam Learning World: The emergence of knowledge economies has made
 learning and leadership critical. Satyam Learning World is the
 enterprise-wide learning ecosystem that captures and delivers the
 learning and development needs of the entire corporation through a
 single platform. Satyam Learning Center and Satyam School of
 Leadership, the two pillars of this ecosystem, are the learning and
 development partners of businesses across Satyam, each having a
 well-defined mandate.
 
 More than 70% of all learning at Satyam is delivered virtually.  We
 have a carefully designed learning and development strategy to meet the
 entire life cycle of learning and development of our Associates, from
 entry-level personnel to senior leaders. The SSLs vision is to make
 Satyam one of the top five organizations in the world in building
 global Associates, through effective learning and development.
 
 Further, our globally distributed workforce warrants the application of
 pervasive and potent communication technologies to ensure accessibility
 of learning and development initiatives to all associates. Through the
 newly launched Web Radio/TV station called Planet Satyam, more than
 50,000 associates across the globe have access to an entire range of
 learning and development programs via a mouse click. A
 first-of-its-kind initiative in the industry, Planet Satyam takes the
 organizations learning programs to another level of accessibility,
 convenience and inclusiveness. Complimenting the traditional model of
 classroom-based learning and development programs, it significantly
 virtualizes the learning ecosystem.
 
 Infrastructure
 
 During the year under review, your Company continued to create
 best-in-class infrastructure facilities to support its growth
 strategies and has added 10,000 spaces, an increase of approximately
 25% over the previous year. Of these, more than 40% have been created
 in own campuses at different locations.  The Company has established
 base for the first time in a Tier 2 city, i.e., Vishakhapatham in
 Andhra Pradesh. We have also established new development centers in
 Egypt, Malaysia and Nanjing in China and new marketing offices in
 Singapore and Sydney.
 
 During the current year, we will develop infrastructure in the SEZ
 campuses at two locations in Hyderabad and one location each in Chennai
 and Nagpur, in addition to taking on leased SEZ spaces in Hyderabad,
 Bangalore, Chennai and Pune.
 
 Network and Systems.- Your Company continuously focuses on upgrading
 SatyamNet, its sophisticated high-speed data, voice and other
 communicating network, to keep pace with contemporary global trends
 world. Your directors are happy to state that during the year under
 review, the Company has successfully undertaken technological upgrades
 in the wide area networking, security, business continuity and
 collaboration tools.
 
 Quality
 
 Quality is an integral part of everything that we do at Satyam. It
 implies the right Processes, Service Offerings and Projects are
 operating at the highest levels of maturity and are benchmarked with
 best niche players.
 
 Your company has set benchmarks by developing and deploying simple,
 efficient and effective processes related to Health Safety &
 Environment (HSE) in accordance with ISO 14001 and OHSAS 18001
 standards. Your company has received Payment Card Industry (PCI DSSl.l)
 certification for its banking sub-vertical operations. And, as part of
 ongoing efforts to reinforce the quality culture and customer
 orientation, your company has successfully implemented Quality
 Management Systems (QMS) certification for all associates.
 
 Your company has a comprehensive Business Continuity and Disaster
 Recovery framework in place to prevent and contain potential business
 disruptions in the event of disaster. It can quickly resume services to
 customers acceptable service levels.  Your company has also
 established leadership through participation and sharing of best
 practices in industry forums on Business Continuity Management.
 
 Six Sigma has been the main driver of continuous improvements and
 customer delight this year, with 2,200 Six Sigma projects implemented
 for new process definitions and solutions to business problems. A total
 of 2,200 associates are certified as Green Beits, Black Belts and
 Master Black Belts.
 
 Moving forward, your company will continue to endeavor to implement and
 institutionalize best-in-class systems and processes to achieve
 delivery excellence and stakeholder delight.
 
 Awards and recognitions
 
 Some of the recognitions your Company earned during 2007-08 are listed
 below.
 
 Satyam has been ranked No. 1 in the American Society for Training and
 Development (ASTD)s annual BEST awards program for 2007. This made
 Satyam the first non-US organization and the first in Asia to earn the
 top ranking. Satyam was tops among 103 organizations from in eight
 countries. The BEST awards recognize organizations that demonstrate
 enterprise-wide success through employee learning and development.
 
 Satyam has earned a Most Admired Knowledge Enterprise (MAKE) award-as a
 top Asian Knowledge Organization-for the second year in a row. The MAKE
 awards are given to leading Asian organizations that leverage
 enterprise knowledge to create value through innovation, product or
 service excellence, and operational effectiveness.
 
 Satyam also won the Partner of the Year 2007 award for Acquired
 Applications from Oracle. The award recognizes Satyams capabilities
 in building new competencies quickly and its ability to add value to
 Oracle, its customers, and products.
 
 Satyam won the VIP (Vision, Impact, and Progress) Award in the IMPACT
 category from Computer Associates Business Service Optimization (BSO).
 The Impact Award recognizes demonstrable and measurable results from
 improved IT, especially in terms of productivity, financial benefits,
 quality improvements and/or customer satisfaction.
 
 Satyam became the first Indian Service Integrator to win the
 prestigious Competitive Strategy Leadership Award for Offshore Testing
 Market from Frost & Sullivan, a leading International research and
 consulting company. The organization honored Satyam in the Thought
 Leadership Quadrant in the testing space.
 
 A Brown-Wilson survey ranked Satyam No. 1 among Indian IT services
 providers and No. 3 globally (based on cumulative rankings for years
 2004 through 2007). Satyam was selected from among 1,455 outsourcing
 vendors in 77 countries in a survey published in The Black Book of
 Outsourcing. Satyam also ranked No. 1 globally on the following sub
 categories: ITO: Application Services; ITO: Process Consulting; ITO:
 Business Intelligence & Data Warehousing; ITO: Full Service ERP: SAP/
 Oracle/PeopleSoft/JD Edwards; ESO: Integrated Solutions; ESO:
 Full-Service PLM /End-to-End.
 
 Satyam was Citizenship Partner of the Year at the Microsoft Worldwide
 Partner Conference Awards. The Citizenship Partner of the Year
 recognizes exceptional partners that have made a sustained commitment
 to society and their communities and can demonstrate the impact of
 their work.
 
 Chairman B. Ramalinga Raju won the Ernst & Young Entrepreneur of the
 Year Award. Raju was selected for this honor for his business acumen
 and efforts to enhance the community.
 
 Corporate Governance
 
 Your Company retained its eminent position in the 2008 Investor
 Relations Global Rankings for the Asia, Pacific and Africa Region and
 won the following recognitions:
 
 - IR Website: Top 5 in region
 
 - Corporate Governance Practices: Top 2 in region
 
 - Financial Disclosure Procedures: Top 5 in region; First in
 Technology; and First in India
 
 A report on Corporate Governance, along with Auditors certificate in
 compliance with clause 49 of the listing agreement, is provided
 elsewhere in the Annual Report.
 
 Subsidiaries
 
 Ministry of Company Affairs vide their letter dated February 29, 2008
 granted approval under section 212 (8) of the Companies Act, 1956
 exempting the Company from attaching the documents of subsidiaries as
 specified under section 212 (1) of the Companies Act, 1956.
 Accordingly, the documents as referred above are not attached to the
 Balance sheet. However, the summarised financial information of the
 subsidiaries is published elsewhere in this Annual Report-2007-08, for
 information of members of the Company.
 
 The name of Nipuna Services Ltd., subsidiary of the Company, has been
 changed to Satyam BPO Ltd. effective December 28, 2007. During the year
 under review, your Company acquired equity shares of Satyam BPO held by
 the strategic investors and consequently, it has become wholly owned
 subsidiary effective December 31, 2007.
 
 During the year under review, your Company has set up subsidiaries
 viz., Satyam Computer Services Egypt in Cairo, Egypt and SATYAM
 SERVICOS DE INFORMATICA LTDA in Brazil, to tap further potential
 business opportunities. Further, your Company incorporated its second
 subsidiary in Nanjing, China viz. Satyam Computer Services (Nanjing)
 Company Ltd.
 
 In line with the organizations strategy to add higher value service
 offerings, bridge competency gaps, enhance leadership capabilities, add
 sound and significant customer relationships and to strengthen the
 brand, your Company has been making acquisitions in various industry
 verticals and technology spaces.  During the year under review, your
 Company acquired Nitor Global Solutions Limited (Nitor), UK, a niche
 consulting firm providing Infrastructure Management Services (IMS) and
 Bridge Strategy Group (BSG), an US-based management consulting firm.
 Consequently, Nitor and BSG became subsidiaries effective January 4,
 2008 and April 4, 2008, respectively.
 
 On April 21, 2008, your Board of directors approved the acquisition of:
 
 i) S&V Management Consultants (S&V) a Belgium- based SCM strategy
 consulting firm in Supply Chain Management area for a total
 consideration of Rs. 141.50 crores (equivalent US$ 35.5 million). The
 acquisition will take place through a Companys subsidiary.
 
 ii) Market research and Customer Analytics (MR&CA) operations from
 Caterpillar Inc., USA (CAT) including the related Intellectual
 Property. The proposed acquisition is for a consideration of Rs~.
 239.16 crores (equivalent US million) comprising of initial and
 deferred considerations.
 
 iii) the remaining 50% equity held by CA Inc in its joint venture CA
 Satyam ASP Pvt. Ltd. (CA Satyam) for a total consideration of Rs.
 5.98 crores (equivalent US$ 1.5 million) payable in two tranches.
 
  Info-On-Demand Sdn, the Malaysian based subsidiary of Knowledge
 Dynamics Pte Ltd. (the Companys subsidiary), has been formally
 dissolved during the last fiscal.
 
 Joint ventures
 
 Satyam Venture Engineering Services Pvt. Ltd., a joint venture between
 Satyam and Venture Global Engineering (VGE), US, earned revenue of Rs.
 69.73 crores and a net profit of Rs. 0.45 crores for the year ended
 March 31, 2008. Based on VGEs breaches of the joint venture agreement
 and events of default, your Company filed a Demand for Arbitration with
 the London Court of International Arbitration, seeking, among other
 things, to purchase VGEs 50% interest in SVES at the agreed upon book
 value price of the shares. The sole arbitrator issued an Award granting
 all the relief your Company sought. Your company was then successful in
 enforcing the Award in the US courts. During the pendency of the
 enforcement proceedings in the US, the suit filed by VGE challenging
 the Award before the district court, Secunderabad and the appeal to the
 High court of Andhra Pradesh respectively, were rejected. Subsequently,
 in a special leave petition filed by VGE, Supreme Court granted an
 interim stay of the share transfer portion of the Award, set aside the
 orders of the district court and the High court and remanded the matter
 back to district court to try on merits.
 
 Social programs
 
 Creating value for society is an integral part of our business.  Your
 Company believes that contributing to the well-being and development of
 society is an extension of everything we do.  Reaffirming our role as a
 contributing member of social and economic environment, your Company
 aligns our business operations with social values. As a responsible
 corporate citizen, the Company leverages the power of IT to bridge the
 digital divide that limits opportunities for success and prosperity.
 As a result, we transform the lives of the underprivileged. In
 addition, Satyam reaches out to the society through its Corporate
 Social Responsibility partners, like Byrraju Foundation, for rural
 transformation and EMRI, for emergency management services.
 
 Another unique public-private partnership model that was launched
 during the year under review was Health Management Research Institute
 (HMRI), in association with the Government of Andhra Pradesh and Satyam
 Foundation, the CSR arm of Satyam, to provide health services on call.
 HMRIs vision is to transform health delivery services via an easily
 accessible virtual platform.
 
 During the year under review your Company contributed Rs. 4.19 crores
 to Satyam Foundation. A report on the Corporate Social Responsibility
 is given elsewhere in the Annual Report.
 
 Fixed deposits
 
 Your Company did not accept any deposits during the year under review.
 
 Directors
 
 Prof. M Rammohan Rao and Mr. Vinod K Dham non-executive and independent
 directors, retire by rotation at the ensuing Annual General Meeting and
 are eligible for re-appointment.
 
 Auditors
 
 The statutory auditors M/s Price Waterhouse, Chartered Accountants,
 Hyderabad, retire at this Annual General Meeting.  Your directors
 recommend their reappointment as auditors.
 
 Conservation of Energy, Technology Absorption and Foreign Exchange
 earnings and outgo
 
 The particulars as prescribed under sub-section (l)(e) of Section 217
 of the Companies Act, 1956 read with Companies (Disclosure of
 particulars in the report of Board of Directors) Rules, 1988 forms part
 of this report (Annexure - A).
 
 Employee particulars
 
 Particulars of employees as required under Section 217(2A) of the
 Companies Act, 1956 and the Companies (Particulars of Employees) Rules
 1975 as amended forms part of this report.  However, in pursuance of
 Section 219(l)(b)(iv) of the Companies Act, 1956 this report is being
 sent to all the shareholders of the Company excluding the aforesaid
 information and the said particulars are made available at the
 registered office of the Company. The members interested in obtaining
 information under section 217 (2A) may write to the Company Secretary
 at the registered office of the Company.
 
 Directors Responsibility Statement
 
 As required by the provisions of Section 217 (2AA) of the Companies
 Act, 1956, the Directors Responsibility Statement is attached as
 Annexure - B.
 
 Associate Stock Option Plans (ASOP)
 
 As required by clause 12 of SEBI (Employee Stock Option Scheme and
 Employee Stock Purchase Scheme) Guidelines, 1999, the particulars of
 the Stock option plans of the Company are furnished as Annexure - C.
 
 Acknowledgements
 
 Your directors gratefully acknowledge the continued support being
 received from all investors, customers, vendors, banks, and other
 service providers as well as regulatory and government authorities in
 the initiatives of the Company. Your directors specially thank
 Associates of the Company for their focussed contributions in realizing
 the growth strategies of the Company.
 
                             For and on behalf of the Board of directors
 
 Place: Hyderabad                                    B Ramalinga Raju
 Date : April 21, 2008                                   Chairman