SQL Star International

The Directors take pleasure to present the 21st Annual Report on the
 business and operations of the Company together with the Audited
 Financial Accounts for the year ended 31st March 2008.
 
 The financial highlights of the Company during the last year are as
 follows:
                                                       (Rupees in Lakhs)
 Particulars                                 SQL Star Group Consolidated
                                             Financial Year
                                             2007-08      2006-07
 
 Income from Training & Software Services    10,568.27     6,939.08
 Other Income                                    61.87       135.40
 Total Income                                10,630.14     7,074.48
 Expenditure before Depreciation, interest    9,631.10     6,391.16
 Interest and finance charges                   153.01       101.19
 Depreciation and amortization                  307.82       219.89
 Profit before prior period/Extraordinary items 538.21       362.24
 Prior Period Adjustments/Extraordinary items        -    (1,500.93)
 Provision for tax including deferred tax       153.49      (189.30)
 Profit / (Loss) after Tax                      384.72     2,052.47
 Add: Surplus brought forward                (2,342.63)   (4,395.10)
 Balance carried to balance sheet            (1,957.91)   (2,342.63)
 Earning Per Share (in Rs.)
 Before Extraordinary Items                       1.77         2.99
 Basic                                            1.70         2.79
 Diluted
 After Extraordinary Items
 Basic                                            1.77        11.13
 Diluted                                          1.70        10.37
 
 SQL Star,India Stand alonet Financial Year
 
 2007-08       2006-07
 
 5,063.85      4,191.88
    46.37        106.77
 5,110.22      4,298.65
 4,575.90      3,817.76
   111.10         66.33
   139.09        183.04
   284.13        231.52
        -       (956.76)
   146.18       (192.68)
   137.95      1,380.96
 (1,442.06)   (2,823.02)
 (1,304.11)   (1,442.06)
      0.63         1.19
      0.61         1.11
      0.63         7.49
      0.61         6.98
 
 Business Performance
 
 For the financial year ended March 31, 2008, your Companys
 consolidated total income is Rs. 10,568.27 lakhs as compared to Rs.
 6,939.08 lakhs in the previous financial year, registering a growth of
 52%. The Profit before Tax is Rs.  538.21 Lakhs as against Rs. 362.24
 Lakhs in the previous year, registering a 49 % increase.
 
 On a stand alone basis, the Indian Company reported total income of Rs.
 5,110.22 lakhs as compared to Rs. 4,298.65 lakhs in the previous
 financial year, registering a growth of 21 %. The Profit before Tax is
 Rs. 284.13 Lakhs as against Rs. 231.52 Lakhs in the previous year,
 registering a 23 % increase.
 
 Growth in all business segments has contributed to these results.
 Profits have grown largely due to higher margins.
 
 Transfer to Reserves
 
 In accordance with paragraph 145 of AS 15 - Employee Benefits - the
 excess of the liability recognised in the books as on 01/04/2007 over
 the transitional liability as per actuarial valuation amounting to Rs.
 84.01 lacs is transferred to General Reserve.
 
 Dividend
 
 Your directors have not recommended any dividend for the financial year
 2007-08.
 
 Auditors
 
 The Auditors, M/s. Maharaj N. R. Suresh & Co, Chartered Accountants,
 retire at the ensuing Annual General Meeting and have confirmed their
 eligibility and willingness to be re-appointed as the statutory
 auditors until the conclusion of the next Annual General Meeting.
 
 Directors
 
 As per Article 51 of the Articles of Association, Mr. K. Jayabharath
 Reddy retires by rotation at the ensuing Annual General Meeting and
 being eligible offers himself for re-appointment.
 
 A brief resume of Mr. K. Jayabharath Reddy as stipulated under Clause
 49 of the Listing Agreement with the Stock Exchanges, is forming part
 of this report.
 
 Mr. D. Ravichander Babu has resigned from the Board with effect from
 25th January 2008 due to his other commitments. We place on record our
 appreciation for the valuable services rendered by Mr. D. Ravichander
 Babu during his tenure as director.
 
 Board Committees
 
 During the year, the Audit and Remuneration Committee were
 reconstituted. Mr. C. P. Khandelwal has been inducted as a member of
 the Audit Committee and Remuneration Committee while Mr. D. Ravichander
 Babu has resigned from the Audit Committee and Remuneration committee
 of the Company. Mr. D. Ravichander Babu has also ceased to be a member
 of Investor Grievances Committee.
 
 Public Deposits
 
 Your Company has not accepted any fixed deposits during the year under
 review. As such no amount of principal or interest was outstanding on
 the date of Balance Sheet.
 
 Corporate Governance Code
 
 The Corporate Governance Report together with the certificate from M/s.
 Maharaj N. R. Suresh & Co, Chartered Accountants, confirming the
 compliance of conditions of Corporate Governance as stipulated under
 Clause-49 of the Listing Agreement with the Stock Exchange is annexed
 hereto and forms part of the Directors Report.
 
 Management Discussion and Analysis
 
 The Managements Discussion and Analysis on Companys performance -
 industry trends and other material changes with respect to the Company
 and its subsidiaries is annexed hereto and forms a part of this report.
 
 Internal Control
 
 Your Company has established reasonably sound system of controls in the
 operational areas. Internal controls have evolved in line with the size
 of the operations and organizational requirements are adequate to
 protect the enterprise resources. The audit committee reviews the
 adequacy of internal control system from time to time.
 
 People Management - Human Resources
 
 Your Company fosters a culture that encourages and values diversity and
 promotes personal and professional development. SQL administers a
 comprehensive human resources management system which includes
 attracting, developing, and retaining a highly qualified, continuously
 learning workforce.
 
 We believe that a satisfied employee can actually be the
 differentiating factor in the struggle to gain market share, to deliver
 customer delight, to innovate product and services and, ultimately, to
 deliver a better bottom line.
 
 We promote thought, stimulate discussion, diagnose the organizational
 environment and develop a sound human resource management strategy for
 our organization by providing continuous learning opportunities and
 training to our associates. Training workshops, seminars and
 conferences have been conducted for the benefit of the associates to
 keep abreast with the latest developments in the sphere of animation
 and gaming.
 
 One of the greatest learnings has been on leveraging the
 ever-appreciating assets, The people. At SQL, peoples policies are
 dynamic; they are reviewed and refined by an autonomous council to meet
 the,changing business environment and aligned with business objectives.
 
 We clearly demonstrate how individual organizations can improve and
 enhance the value of their human capital.  Even as the Company expands
 its business and integrates forward it focuses on building
 organizational capabilities through lateral infusion of talents. As a
 part of Talent Management initiative, the organization is in the
 process of defining both functional and behavioral competencies for all
 functions at various levels. We incorporate a blend learning approach
 including: coaching, assessment, a talent portal with access to
 online resources and coaching sessions, face-to-face learning and
 networking events and real business projects for mixed level learning
 communities that tie in with strategic objectives and make a difference
 to the organization and wider community.  This will form basis for
 implementing competency based HR systems and integrating various people
 practices like recruitment, performance improvement, career planning,
 compensation and benefits and employee development in line with people
 capability maturity model.
 
 Quality
 
 Continuous Quality improvement and adherence to quality standards and
 processes are important to remain competitive in the global market.
 During the year, your Company has focused on improving quality in every
 process, including project designs, product development and delivery,
 Testing and Implementation and maintenance. Your Company is in the
 process of performance improvement through various quality measures and
 initiatives. As a part of continuous improvement program, during the
 last year, your Company obtained ISO 9001-2000 recertification.
 Further, to keep pace with organizational growth and deliver value
 propositions to customer, your Company has indigenously developed
 quality model Software Product Engineering and Quality Assurance
 Service (SPEQS) and institutionalized across the Organization.  SPEQS
 is a unique suite of Outsourced Engineering Services, leveraging the
 Global Delivery Model that helps product companies gain significant
 cost leverage without compromising quality. Moving forward, your
 Company shall continue to further strengthen its processes by adopting
 best-in-class standards.
 
 Related Party Transactions
 
 As a matter of policy, your Company carries out transactions with
 related parties on an arms length basis.
 
 A statement of these transactions is given in the Notes to Accounts in
 Compliance of Accounting Standard AS-18.
 
 Strategic Acquisition
 
 Your directors are pleased to inform you the acquisition of Talent
 Fuse, Inc., USA - a pure play Technical Staffing Services Company based
 in San Diego, California. This 5 year old Company has reported strong
 and repetitive growth year on year and is a tier 1 vendor to several
 Fortune 500 Companies in the Telecommunications business. Therefore it
 gives us direct access to business opportunities that we could not
 reach earlier. With this acquisition, the combined operations of Talent
 Fuse Inc.  and the Companys US operations will make it one of the
 largest pure IT consulting Companies in Southern California., The
 consolidated revenues of the Company is expected to double by the end
 of the current fiscal year as a result of this acquisition.
 
 Awards and Recognitions
 
 The following are some of the recognitions that your Company won during
 the last year.
 
 - Deloitte Touche Tohmatsu , Asia Pacific 2007 Your Company has been
 ranked 485 in the Deloitte Touche TohmatSU, fast 500 Asia Pacific 2007
 Programme.
 
 - Company named under top 400 mid-cap companies.
 
 We take pleasure to inform you that your Company has been named among
 top 400 Mid Compendium Cap Companies by Dalai Street Investment
 Journal.
 
 - HYSEA Special Jury Award 2007 Our stellar product - Embinux won the
 Hyderabad Software Exporters Associations (HYSEA) Special Jury Award
 Best Software 2007 for Best Software Product from an established
 Company.
 
 Material changes and commitments affecting the financial position of
 the Company which have occurred between the end of the financial year
 of the Company to which the balance sheet relates and the date of this
 report.
 
 Pursuant to provisions of Section 217 (1) (d) of the Companies Act,
 1956, there has been no material change and commitment affecting the
 financial position of the Company except to the following, which
 occurred between the end of the financial year of the Company, related
 to the balance sheet and the date of the report;
 
 (a) Rs. 383.07 Lakhs invested in Equity Share Capital of US subsidiary
 Company SQL Star International Inc., USA, as on June 25, 2008.
 
 Conservation of Energy, Technology Absorption etc.
 
 Information in accordance with the provisions of 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 is given
 in Annexure-A forming part of this report.
 
 Wholly-Owned Overseas Subsidiaries
 
 Your Company has three wholly owned subsidiaries i.e.  SQL Star
 International Inc., USA, International SQL Star Pte. Ltd., Singapore,
 SQL Star International Pty Limited, Australia.
 
 (a) SQL Star International Inc., USA
 
 During the last year, SQL Star International Inc., USA, has generated
 Rs. 4,386.98 Lakhs in revenue, with a net profit of Rs. 177.31 Lakhs.
 Recently acquired Talent Fuse Inc., USA has been successfully
 integrated with our US Subsidiary and has created value in terms of
 direct high-end market reach and presence.
 
 (b) International SQL Star Pte. Ltd., Singapore
 
 During the last year. International SQL Star Pte. Ltd., Singapore,
 wholly owned subsidiary has generated Rs. 716.71 Lakhs in revenue, with
 a net Loss of Rs. 17.77 Lakhs.
 
 (c) SQL Star International Pty Ltd., Australia
 
 During the last year, SQL Star International Pty Ltd., Australia, step
 down wholly owned subsidiary Company of SQL Star International Inc.,
 USA, generated Rs. 443.1 5 Lakhs in revenue, with a net profit of Rs.
 91.14 Lakhs.
 
 As per Section, 212 of the Companies Act, 1956, the Directors Report,
 Balance Sheet and Profit and Loss account of these subsidiaries, and
 the consolidated final accounts for the year ended 31st March 2008 in
 accordance with the Accounting Standard AS-21 on Consolidated Financial
 Statements, read with Accounting Standard AS-23 on Accounting for
 Investment in Associates, are appended with this report.
 
 Particulars of Employees
 
 As required under the provisions of Section 21 7 (2A) of the Companies
 Act, 1956 read with Companies (Particulars of Employees) Rules, 1975,
 there are no employees covered under the above provisions.
 
 Directors Responsibility Statement
 
 Pursuant to the provisions of Section 21 7 (2AA) of the Companies Act,
 1956 as amended, the Board of Directors confirms that in the
 preparation of the Profit & Loss Account for the year ended 31st March
 2008 and the Balance Sheet as on date:
 
 (i) The applicable accounting standards issued by the Institute of
 Chartered Accountants of India have been followed;
 
 (ii) Appropriate accounting policies have been applied consistently.
 Judgment and estimates that are reasonable and prudent have been made
 so as to give a true and fair view of the sate of affairs of the
 Company, as at the end of the financial year and of the profits of the
 Company for the year.
 
 (iii) Proper and sufficient care has been taken for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Companies Act, 1956 for safeguarding the assets of the Company, and for
 preventing and detecting frauds and other irregularities.
 
 (iv) The annual accounts have been prepared on a going concern basis.
 
 Acknowledgements
 
 Your Directors would like to express their grateful appreciation for
 the continued co-operation, support and patronage received from the
 customers, shareholders, suppliers, bankers, legal advisors consultants
 and all government and semi-government departments. Your directors wish
 to place on record, their appreciation for the contribution made by the
 employees at all levels, who, through their competence, sincerity, hard
 work, solidarity and dedicated support, enabled your Company to make
 rapid strides.
 
                                          for and on behalf of the Board
                                         for SQL Star international Ltd.
 
 Place : Hyderabad                                           N. R. Ganti
 Date  : June 25, 2008                    Chairman and Managing Director