Mastek

(Rs. in Lakhs)
                                               As at             As at
                                       June 30, 2008     June 30, 2007
 
 1.  CONTINGENT LIABILITIES AND COMMITMENTS
 
 (i) Counter guarantees outstanding 
 in respect of guarantees given
 by banks on behalf of the Company            100.18           63.02
 
 (ii) Corporate guarantees given
 
 - on behalf of subsidiary, Majesco Mastek 10,328.40               -
 
 - on behalf of subsidiary, Mastek (UK) 
   Limited                                 17,797.28               -
 
 - Corporate guarantee given on behalf of 
 the subsidiary to a key customer for 
 performance of the contractual 
 obligations by the subsidiary. Though 
 there is no specific limitation on the
 amount to be indemnified, the Company 
 has not received any claim from the 
 beneficiary as on date.
 
 (iii) Claim against the Company not 
 acknowledged as debts                        105.78          105.78
 
 (iv) Estimated amount of contracts 
 remaining to be executed on capital 
 account not provided for                   3,087.44        2,882.99
 
 2.  BUYBACK OF SHARES
 
 The Board of Directors at their Meeting held on October 11, 2007 had
 announced buy back of its fully paid equity shares from existing
 shareholders and beneficial owners in accordance with the relevant
 provisions of Companies Act, 1956 and Securities and Exchange Board of
 India (Buy Back of Securities) Regulations, 1998 at a price not
 exceeding Rs. 750 per share. The Company opted to buy back shares from
 open market through stock exchange route and the total offer size
 aggregates to Rs. 65 crores representing 25% of the Companys paid up
 capital and free reserves as on June 30, 2007.
 
 As of June 30, 2008, the Company had bought back 14,83,232 equity
 shares of Rs. 5/- each at an average price of Rs. 393.58 per share. Out
 of this, 9,15,714 equity shares of Rs. 5/- each have been extinguished.
 Balance 5,67,518 shares have been extinguished subsequent to balance
 sheet date i.e. by July 11, 2008 and have accordingly been shown under
 the Share Capital Suspense Account and disclosed as a reduction from
 Issued and paid up Share Capital amounting to Rs. 74.16 lakhs. The
 difference between the nominal value and amount spent for buy back,
 amounting to Rs. 5,763,56 lakhs has been appropriated from the share
 premium account to the tune of Rs. 1,156.64 lakhs and from General
 Reserve to the tune of Rs. 4,606.92 lakhs.
 
 The Company has transferred Rs. 74.16 Lakhs from General Reserve to
 Capital Redemption Reserve which represented the nominal value of
 shares bought back during the year.
 
 3.  Forward Contracts outstanding Rs. 10,866.34 Lakhs (Previous year
 Rs. 6,822.04 Lakhs). Gain/(Loss) on foreign exchange forward contracts
 are included under the head Exchange loss (net).
 
 Exchange loss (net) includes an amount of Rs. 49.35 Lakhs being
 exchange loss incurred on forward contracts taken to cover future
 projected receivables.
 
 4.  EMPLOYEE STOCK OPTIONS
 
 Plan I
 
 The Company established a plan in June 1999 for granting 150,000
 options to the employees of the Company at an issue price of Rs. 320
 per option representing one equity share of the Company. The scheme is
 governed by the guidelines issued in 1996 by the Securities and
 Exchange Board of India (SEBI) which did not specify the accounting
 treatment.
 
 Consequently, there is no compensation cost recognised. The Company
 passed a special resolution at the Extraordinary General Meeting held
 on April 18, 2000 to extend the plan to the employees of its
 subsidiaries. Further, in view of the bonus shares of 1:1 allotted to
 the shareholders of the Company in January, 2000, and also, in view of
 the sub-division of the shares in the ratio 2:1 in November, 2000, the
 Company passed a special resolution in October, 2000 giving effect to
 the number of total options reserved as also the price of the options.
 
 Subsequently, the total number of options reserved under the plan got
 enhanced to 600,000 and the issue price got adjusted to Rs. 80 per
 option, one option being equivalent to an equity share of Rs. 5 each.
 In April, 2006, the Company issued Bonus Shares in the ratio of 1:1 and
 the number of unvested and unexercised options and the price of the
 said options have been adjusted accordingly.
 
 5.  RETIREMENT BENEFIT PLANS
 
 (a) Defined contribution plans
 
 The Company makes contribution towards provident fund and
 superannuation fund to a defined contribution retirement benefit plan
 for qualifying employees. The provident fund plan is operated by the
 Regional Provident Fund Commissioner and the superannuation fund is
 maintained by making contribution to Life Insurance Corporation of
 India. Under the schemes, the Company is required to contribute a
 specified percentage of payroll cost to the retirement benefit schemes
 to fund the benefits.
 
 The Company recognized Rs. 586.47 Lakhs (Previous year Rs. 452.19
 Lakhs) for provident fund contribution and Rs. 36.16 Lakhs (Previous
 year Rs. 22.93 Lakhs) for superannuation contribution in the profit &
 loss account. The contributions payable to these plans by the Company
 are at rates specified in the rules of the schemes.
 
 6.  INCOME TAXES
 
 The Company follows Accounting Standard 22 Accounting for taxes on
 income.
 
 (a) The Companys operations are eligible for significant tax
 incentives under the Indian taxation laws. These incentives presently
 include an exemption from payment of Indian corporate taxes for a
 period of ten consecutive years of operations of software development
 facilities designated as Software Technology Park or in Special
 Economic Zone. The management estimates the provision for current taxes
 and deferred taxes after considering such tax benefits and the expected
 results of the future operations of the Company.
 
 (b) Pursuant to the changes in the Indian Income Tax Act, the Company
 has calculated its tax liability after considering Minimum Alternate
 Tax (MAT). The MAT liability can be carry forward and set off against
 future tax liability. Accordingly, a sum of Rs. 1,114.74 Lakhs
 (Previous Year Rs. 87.70 Lakhs) has been carried forward and shown
 under Loans and Advances.
 
 (c) The Finance Act 2007 included Fringe Benefits Tax (FBT) on
 Employees Stock Option Plan (ESOP). FBT liability crystallizes on the
 date of exercise of stock options. The Company has recovered FBT
 liability on ESOPs from its employees.
 
 (d) Provision for tax includes additional provision amounting to Rs.
 302.30 Lakhs (Previous Year Rs. Nil) relating to prior periods.
 
 7.  JOINT VENTURE WITH DELOITTE CONSULTING
 
 The Company had during the year 2001-02 established a joint controlled
 entity in India, named Mastek - DC Offshore Development Private
 Limited (DCOTG) with Deloitte Consulting LLP, USA (Deloitte), to set
 up and operate an offshore development centre for developing IT and
 other related services. The Company owned 50.1% of the shares in the
 joint venture. Both the venturers had equal voting rights in the
 entity.
 
 On March 9, 2007, the Company had sold its entire stake in the joint
 venture to Deloitte for a consideration of Rs. 5,844.40 Lakhs. The
 excess of sale consideration over the carrying value of investment
 amounting to Rs. 5,137.99 Lakhs has been shown as an Exceptional Item
 in the profit and loss account for the year ended June 2007.
 
 The Company follows Accounting Standard 27 Financial Reporting of
 Investments in Joint Ventures and in terms of the disclosure
 requirements contained therein, following is the Companys shares of
 the assets, liabilities, income and expenses of the jointly controlled
 entity as at March 9, 2007:
 
 8. SEGMENTS
 
 The Company has presented data relating to its segments in its
 consolidated financial statements which are presented in the same
 annual report as Mastek Limited. In terms of provisions of Accounting
 Standard (AS) 17 - Segment Reporting, no disclosures related to
 segments are presented in its stand-alone financial statements.