The Directors have pleasure in presenting the Sixteenth Annual Report
 of your Company together with the Audited Statement of Accounts for the
 financial year ended 31st March, 2011.
 
 FINANCIAL RESULTS
 
                                                        (Rs. in Crores)
 
                                 Standalone               Consolidated
 Description            Year ended    Year ended   Year ended Year ended
                        31.03.2011    31.03.2010   31.03.2011 31.03.2010
 
 1.  Total Income          256.10        241.37     1,411.10   1,393.29
 
 2.  Total Expenditure     191.81        179.66     1,298.39   1,278.08
 
 3.  Profit before Tax      64.29         61.71       112.71     115.21
 
 4.  Provision for Tax      10.70         10.50        25.00      28.77
 
 5.  MAT credit            (8.28)        (8.99)       (8.28)     (8.99)
 
 6.  Share of earnings in 
 affiliates   
                                -             -         0.40     (1.54)  
 Minority Interest
                                                      (10.79)   (14.01)
 
 7.  Net Profit             61.86          60.20        85.61     79.87
 
 8.  Appropriations :
 
 Proposed Dividend          10.52           8.41        10.52      8.41
 
 Interim Dividend           10.52           9.46        10.52      9.46
 
 Provision for 
 Dividend Tax                3.45           3.01         3.45      3.01
 
 Transfer to General 
 Reserve                     7.00           7.00         7.00      7.00
 
 BUSINESS PERFORMANCE
 
 Your Company is primarily engaged in the business of providing IT
 services and solutions to its customers in the US, Europe, Middle East
 and India. The financial results of the Company both on standalone and
 consolidated basis have been encouraging despite headwinds faced in
 terms of weaker than expected economic recovery in the Companys
 primary markets of US and Europe and fluctuating currency trends. On
 the standalone front, the Companys revenue has grown by 6% on a year
 over year basis and profit before tax has shown a growth of 4%. The
 focus during the year had been to continuously invest in improving our
 delivery practices and enhance our relationships with our existing
 customers to deliver higher value.
 
 The Consolidated financials show a revenue growth of 1 % on a year over
 year basis with a corresponding growth in net profits of 7%. The
 Consolidated financials cover the three business lines of the
 Company-(a) the Software Services business, (b) Domestic Products and
 Services and (c) our Joint venture - TUI InfoTec, Germany. The three
 business lines of the Company have unique business rhythms,
 profitability and growth trends.
 
 The Software services contribution to the profits of the Company is a
 massive 77% of the profits and 21 % of the consolidated revenues. This
 business line continues to show high traction in terms of revenue and
 profit growth.
 
 The Domestic business accounts for 43% of consolidated revenues and 10%
 of profits. In this business, focus is on improvement of margins,
 increase revenues from services vis-a-vis product re-sale revenues. TUI
 InfoTec-our German JV accounts for 36% of consolidated revenues and our
 share of profits in the JV (50.1%) contributes to 13% of consolidated
 profits. The JVs focus is to continue building its business within the
 TUI Group and also foray into the Central European markets to acquire
 third party customers outside of the TUI Group.
 
 DIVIDEND
 
 Your Directors are pleased to recommend payment of a fina dividend of
 Re.1/- per equity share (@100% on par value of Re.1/- each), subject to
 the approval of shareholders at the forthcoming Annual General Meeting,
 which along with the interim dividend of Re.1/- per equity share adds
 up to a total dividend of Rs.2/- per equity share (Previous year -
 Rs.1.70/- per equity share of Re.1/- each). If approved, the final
 dividend will be paid to all those equity shareholders, whose names
 appear on the Register of Members of the Company on 9th June, 2011 and
 to those whose names appear as beneficial owners in the records of
 National Securities Depository Ltd and Central Depository Services
 (India) Ltd as on the said date.
 
 QUALITY
 
 During the year under review, your Company has crossed few important
 milestones related to Quality Management System.  Foremost of them is
 the ISO 27001 certification which testifies your Companys commitment
 to delivering solutions with an eye on information security. This
 enhances customer confidence in your Companys delivery since standard
 encompasses Confidentiality, Integrity and Availability. Your
 Company has also stayed focused on improving the quantitative aspect of
 project management - a critical requirement for achieving high level of
 process maturity. There is great emphasis laid on leveraging
 innovations and broad basing them so as to achieve better performance.
 Alignment with SEI-CMMI best practices is complete and formal
 certification activity to confirm highest maturity level is underway.
 
 Your Company also continued its efforts towards achieving excellence in
 project management through training and certification. Your Company is
 looking forward to achieving greater milestones in the quality journey
 in the current year.
 
 LISTING / LISTING FEES
 
 Pursuant to Regulation 7 of the Securities and Exchange Board of India
 (Delisting of Equity Shares) Regulations, 2009, your Companys equity
 shares have been voluntarily delisted from Bangalore Stock Exchange Ltd
 (BgSE) with effect from November 26, 2010 as there was no trading of
 Companys equity shares in the BgSE for past several years. However,
 your Companys equity shares will continue to be listed on Bombay Stock
 Exchange Ltd and National Stock Exchange of India Ltd, exchanges having
 nationwide terminals. There was no change in the capital structure of
 the Company post delisting from BgSE.
 
 The Annual listing fee for the year under review has been paid to
 Bombay Stock Exchange Ltd and National Stock Exchange of India Ltd,
 where your Companys shares are listed.
 
 SUBSIDIARY COMPANIES
 
 The statement pursuant to Section 212(1 )(e) of the Companies Act, 1956
 in respect of subsidiaries is attached except for Abisko Development
 Ltd, Cyprus which is being wound up voluntarily as there have been no
 transactions in that company for the last several years. The
 Consolidated Accounts of your Company and its subsidiaries viz., Sonata
 Information Technology Ltd, Sonata Software North America Inc., USA
 (formerly known as Offshore Digital Services Inc), Sonata Software
 GmbH, Germany, Sonata Europe Ltd, UK, Sonata Software FZ LLC, Dubai and
 TUI InfoTec GmbH, Germany are presented as part of this Report in
 accordance with Accounting Standard 21.
 
 Your Company has been exempted by the Ministry of Corporate Affairs,
 vide letter No.47/98/2011-CL-lll dated February 9, 2011 from attaching
 the audited accounts of overseas subsidiary companies for the financial
 year ended March 31, 2011.  Accordingly, the audited accounts of the
 above mentioned overseas subsidiary companies are not attached.
 However, they are available on the Companys website
 www.sonata-software.com.
 
 The audited accounts of overseas subsidiaries have been made available
 for inspection by any investor at the Companys Registered office.
 Copies can be made available, on request to the investors of the
 holding and subsidiary companies at any point of time.
 
 RECOGNITION
 
 As per the industry rankings released by NASSCOM for FY 2009- 10, your
 Company was ranked among the Top 20 IT Software and Service Exporters
 in India for the third consecutive year. Your Company also featured in
 the list of Top Outsourced Product Development Vendors brought out by
 Global Services Media for FY 2009-10. Your Company was also listed
 among Global Services Top 100 Companies that define Global Outsourcing
 for FY 2009-10.
 
 For FY 2009-10, your Company was ranked among Top 50 companies by
 Dataquest, based on a nationwide survey across more than 1000 IT
 companies in India.
 
 CORPORATE GOVERNANCE
 
 As required under Clause 49 of the Listing Agreement with Stock
 Exchanges, a Report on Corporate Governance is provided elsewhere in
 this Annual Report along with the Auditors Certificate on the
 compliance thereof.
 
 During the year under review, your Company has not adopted any of the
 voluntary guidelines of Corporate Governance Voluntary Guidelines
 2009 .
 
 SECRETARIAL COMPLIANCE REPORT
 
 As a reflection of your Companys commitment to transparency, the Board
 is pleased to enclose the Secretarial Compliance Report for the
 financial year 2010-11, as part of this Directors Report.
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 Your Directors, to the best of their knowledge and belief, state that
 the Company maintains proper accounting records which disclose with
 reasonable accuracy, the financial position of the Company.
 
 Further, your Directors state that these accounting records have formed
 the basis for the preparation of financial statements of the Company in
 compliance with the provisions of the Companies Act,1956, including any
 amendments thereto.
 
 Your Directors also confirm that the financial statements of the
 Company are prepared in such a manner to give a true and fair view of
 the state of affairs of the Company as at the end of 31 st March, 2011
 and of the profit of the Company for the year to that date.
 
 Your Directors state that in preparing the aforesaid financial
 statements of the Company, appropriate accounting policies have been
 consistently applied and supported by reasonable and prudent judgements
 and estimates,whilst applicable accounting standards have been followed
 and that these financial statements have been prepared on going-concern
 basis.
 
 Further, your Directors to the best of their knowledge and belief,
 state that appropriate internal control systems are in place which are
 reasonably expected to safeguard the assets of the Company and to
 prevent and detect fraud and irregularities.
 
 ENERGY CONSERVATION, RESEARCH & DEVELOPMENT, FOREIGN EXCHANGE
 
 The particulars, as prescribed 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, with regard to conservation
 of energy, research & development and foreign exchange earnings & outgo
 are set out in the annexure attached to this Report.
 
 Your Company has nothing to report on Technology absorption, adaptation
 and innovation.
 
 PUBLIC DEPOSITS
 
 Your Company has not accepted any deposits from the public during the
 year under review.
 
 PERSONNEL
 
 Particulars of employees as required under the provisions of Section
 217 (2A) of the Companies Act, 1956 read with the Companies
 (Particulars of Employees) Amendment Rules, 2011, is attached to this
 Report.
 
 COMMUNITY SERVICE
 
 During the year under review your Company and its employees were part
 of following activities:
 
 - New Year e-Greeting Cards made from paintings done by students at
 Rasoolpura Government High School and the Hope Foundation. This
 initiative served the dual objective of a green, pollution - free
 environment by saving paper, as well as supporting the cause of the
 NGOs
 
 - Wall Calendars created with the paintings done by Hope and BHUMI
 children to increase awareness about the NGO partners
 
 - Funds collection campaign organized to sponsor the salaries of
 English and Computer teachers at the Rasoolpura Government High School,
 Hyderabad
 
 DIRECTORS
 
 Mr.S.N.Talwar, Mr.Viren Raheja and Mr.P.Srikar Reddy, Directors, retire
 by rotation and being eligible offer themselves for re- appointment at
 the ensuing Annual General Meeting (AGM). Brief profiles of these
 Directors are given in the notes to the Notice of the ensuing AGM.
 
 AUDITORS
 
 M/s N.M.Raiji & Co., Chartered Accountants, Mumbai, Statutory Auditors
 of the Company retire at the forthcoming AGM and have expressed their
 willingness to continue as Statutory Auditors for the financial year
 2011-12 and accordingly, a resolution proposing their appointment is
 being submitted to the AGM.
 
 ACKNOWLEDGEMENTS
 
 Your Directors would like to place on record their gratitude for all
 the guidance and co-operation received from all its clients, vendors,
 bankers, financial institutions, business associates, advisors,
 regulatory and government authorities.
 
 Your Directors also take this opportunity to thank all its investors
 and stakeholders for their continued support and all the Sonatians for
 their valuable contribution and dedicated service.
 
                                       For and on behalf of the Board
 
                                                       Pradip P Shah
                                                            Chairman
 
 Place: Mumbai 
 Date : 20thApril, 2011