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Hexaware Technologies Ltd.

BSE: 532129 | NSE: HEXAWARE | Series: NA | ISIN: INE093A01033 | SECTOR: Computers - Software

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Hexaware Technologies is not traded on NSE in the last 30 days

Annual Report

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Director’s Report

The Directors are delighted to present their Fourteenth Report on the business and operations of Hexaware Technologies Limited (hereafter referred to as `Hexaware') together with Audited Accounts for the financial year ended December 31, 2006. Financial Performance: Global Operations: Year ended December 31, 2006 2005 Growth % Rs. Million Rs. Million Income from Operations 8,482.14 6,786.62 24.98 Other Income 281.67 145.74 93.27 Total Income from Operations 8,763.81 6,932.36 26.42 Profit before Depreciation & Tax 1,561.34 1,222.24 27.74 Less : Depreciation 198.58 209.90 (5.40) Profit before taxation 1,362.76 1,012.34 34.61 Less: Provision for taxation Current Tax 115.54 43.65 MAT Credit Entitlement (8.40) - Deferred Tax (11.30) 38.96 Fringe Benefit Tax 24.59 14.76 Net Profit after tax 1,242.33 914.97 35.78 India Operations: Year ended December 31, 2006 2005 Growth % Rs. Million Rs. Million Income from Operations 4,126.92 3,557.93 15.99 Other Income 533.29 142.96 273.03 Total Income from Operations 4,660,21 3,700.89 25.92 Profit before Depreciation & Tax 1,382.98 971.68 42.33 Less : Depreciation 156.70 177.27 (11.60) Profit before taxation 1,226.28 794.41 54.36 Less: Provision for taxation Current Tax 25.02 5.13 MAT Credit Entitlement (8.40) - Fringe Benefit Tax 23.05 13.88 Net Profit after tax 1,186.61 775.40 53.03 Add: Balance b/f from previous year 904.06 392.42 Balance available for appropriation 2,090.67 1,167.82 79.02 Appropriation Transfer to/(from) General Reserve 200.00 100.00 Interim Dividend* 112.65 71.00 Proposed final Dividend* 127.89 71.62 Dividend for previous year 6.78 - Tax on Dividends 34.69 21.14 Balance carried to Balance Sheet 1,608.66 904.06 * Interim and final dividend includes dividend on Preference shares for the year 2006. Results of Operations a) Global operations The Company has recorded consolidated income (as per Indian GAAP) of Rs. 8,763.81 million in 2006 compared to Rs. 6,932.56 million in 2005. The revenue from software business grew by 24.989/o to Rs. 8,482.14 million in 2006 from Rs. 6,786.62 million in 2005. The net profit after tax increased by 35.78% to Rs. 1,242.33 million in 2006 from Rs. 914.97 million in 2005. Excluding PeopleSoft BOT business, your Company's revenue growth was at 39.90% to Rs. 8,482.14 million compared to Rs. 6,062.58 million in 2005 and net profit after tax was up at 99.10% to Rs. 1,242.33 million compared to Rs. 624.08 million in 2005. Excluding PeopleSoft BOT business, contribution was at 37.31% as against 35.68% in 2005, EBIDTA registered a healthy improvement to 15.59% as against 12.98% in 2005, Profit After Tax improved substantially to!4.65% of revenue compared to 10.29% in 2005. The major key drivers/contributors for good growth are: (i) the ability to successfully replace PeopleSoft BOT business with other accounts (ii) the addition of 49 clients, the highest ever so far (iii) the ability to acquire new business at a better rate- both for offshore and onsite (iv) the ability to achieve 88.40% of revenue through repeat business and (v) the ability to execute projects efficiently and manage accounts effectively. During the year, the quality of your Company's offerings have significantly improved. This is testified by (i) acquisition of highest number of new clients ever i.e. increase in clients' confidence in your Company (ii) an active client base of 129, of which 41 clients are fortune 500/global 500 compared to 30 clients in the previous year, (iii) top 10 clients contribute around 47% of revenue compared to 58% of revenue in the previous year, (iv) increase in Testing business by over one and half times as compared to the previous year. Your Company strengthened this offering by acquiring FocusFrame Inc; USA in November '06. (v) your Company has successfully penetrated into new geographies like Belgium, Sweden, Denmark, Norway and Philippines b) India operations The Company has recorded a total income of Rs. 4,660.21 million in 2006 compared to Rs. 3,700.89 million in 2005, demonstrating a growth of 25.92%. The revenue from the Software business grew by 15.99% to Rs. 4,126.92 million in 2006 from Rs. 3,557.93 million in the previous year. The net profit after tax grew by 53.03% to Rs. 1,186.61 million in 2006 from Rs. 775.40 million in the previous year. Reserves During the year, your Company proposes to transfer Rs. 200 million to the General Reserve as compared to Rs. 100 million in 2005. An amount of Rs. 1,894.79 million was proposed to be retained in the Profit &. Loss Account. Dividend a) Preference Dividend During the year 2006, your Company paid an amount of Rs. 8.12 million as interim dividend @ 2.95% for 67 days on 10,55,570 Series 'A' Redeemable and/or Optionally Convertible Preference Shares. Your Directors recommend a final dividend @ 2.95% for 184 days amounting to Rs. 22.31 million (Previous year Nil) on 10,55,570 Series `A' Redeemable and/or Optionally Convertible Preference Shares subject to the approval by the members at the ensuing Annual General Meeting. b) Equity Dividend During the year 2006, your Company declared and paid an interim dividend @ 40% (Re. 0.80 per share on par value of Rs. 2/-). Your Directors recommend a final dividend of 40% i.e. Re. 0.80/- per share on par value of Rs. 2/- subject to the approval by the members at the ensuing Annual General Meeting. The total dividend declared for the year 2006 would be 80% (i.e. Rs.1.60/- per share on par value of Rs.2/- each) as compared to 60% (i.e. Rs.1.20/-per share on par value of Rs. 2/- each) in the previous year 2005. The total cash outgo on account of total dividend &L tax thereon amounts to Rs. 274.27 million. The break up of dividend is shown in the table: (Rupees in Millions) Total Preference Equity Dividend Shares Shares Interim 112.65 8.12 104.53 Final - proposed 127.89 22.31 105.58 Tax -33.73 4.27 29.46 Total 274.27 34.70 239.57 The final dividend, if approved, will be paid to those members whose names appear in the Register of Members as on the date of the Annual General Meeting. As per Investor Education and Protection Fund (Awareness and Protection Investor) Rules, 2001, an amount of Rs.1.01 million for the financial year 1997 towards unclaimed dividends was transferred during the year to the Investor Education and Protection Fund. During the year, your Company circulated a reminder letter to those shareholders who had not claimed their dividend from the year 1998 onwards. Share Capital During the year 2006, the paid-up Share Capital of your Company increased to Rs. 1,763.92 million (i.e. Rs. 263.96 million equity + Rs. 1,499.96 million Preference) from Rs. 238.72 million. The break up of Share Capital comprising of (i) 131,980,625 equity shares of Rs. 2/- each. This increase was on account of (a) Private Placement of 10,569,790 equity shares of Rs. 2/- each at a premium of Rs. 140.10/- per share to GA Global Investments Limited; and (b) Upon exercise of warrants/options, allotment of 62,955 equity shares of Rs. 2/- each and 1,989,185 equity shares of Rs. 2/- each under Employee Stock Option Scheme 1999 and Employee Stock Plan - 2002 respectively; and (ii) 1,055,570 Series `A' Redeemable and/or Optionally Convertible Preference Shares at a price of Rs. 1,421/- issued and allotted to GA Global Investments Limited. The market capitalization of your Company as on December 31,2006 was at Rs. 26,304 million (US$ 595.21 million). Market capitalization is calculated on the basis of closing price of Rs. 199.30 per share as of December 31, 2006. Acquisition During the year, your Company acquired FocusFrame Inc; USA (FocusFrame) for US$ 34.3 million, all in cash. FocusFrame's business revolves around Systems Verification, Quality strategy and IT Governance Solutions and various functional performance, and system stress verification exercises. As per the terms of the Agreement, your Company has paid US$ 25 million in cash towards acquisition of FocusFrame along with its employees and consultants base of over 200. The balance amount of US$ 9.3 million is being paid out over 24 months contingent on achieving the projected revenue and margin targets. FocusFrame became a wholly owned subsidiary of your Company w.e.f. November 28, 2006. The Company and FocusFrame together will reinforce their expertise in Independent Testing and Verification Services, which is amongst the fastest growing business opportunities for offshore vendors. Your Company will now be in a position to offer comprehensive solutions of Testing Service and aim to achieve more than US$100 million revenue from this practice in the next three years. The firm's specialty is to provide end-to-end enterprise systems validation and optimisation for CRM, ERP, and Web based business technologies. This is accomplished with a suite of services that utilises proprietary process methodology, highly skilled professionals, and third-party automation validation and optimisation tools. FocusFrame is a global firm with offices in the US, Europe and Mexico which will help your Company to strengthen its global presence and relationship with its clients. Investment During the year, your Company made an investment of Rs. 1,209.51 million of which (i) Rs. 1,164.51 million were utilised for acquiring common stock of FocusFrame Inc; USA; and (ii) Rs. 45 million were invested in Caliber Point Business Solutions Limited. These investments are strategies to (i) complete the Testing competencies that would allow increase in market share, accelerate growth and position your Company to take advantage of global demand and (ii) to meet the growing global demand of BPO services by adding new offerings including call centre. Infrastructure The Company's endeavour has been to build scale with latest technology to win customers' trust and confidence. Your Company is committed to invest in attracting and retaining talent and to create capacity to serve the customers better. * People TALENT is your Company's key asset that will constantly enhance and develop by harnessing the full potential of people. Your Company's Human Resource Capital will become source of competitive advantage. The Company focuses on campus recruitment to build a comprehensive framework that will enable the organisation to attract the best talent from leading engineering institutes across the country and to develop a diverse workforce that can adapt and contribute across all spheres of the organisation. * Facilities In line with the anticipated growth and vision, during the year, your Company has expanded its presence by acquiring on lease a 13,000 sq.ft facility in Gurgaon, as well as a 22,500 sq.ft. facility in Pune. Your Company also acquired around 25 acres of land in the SEZ area of Hinjewadi, Pune and around 14 acres in Airoli, Navi Mumbai from MIDC. The progress on 1st phase of Green Campus in Siruseri, Chennai, one of India's largest campuses will be operational by August 2007. The total capacity of this 1st phase of the environment friendly and world-class facility will be around 4,000 software professionals. The Company's new facility in Millennium Business Park, Navi Mumbai housing 600 software professionals has become operational from February, 2007. Business During the year, your Company re-invented its technology strategies to compete successfully in the global business environment by re-aligning its offshore and onsite business, global talent and understanding the impact of global business. In line with the strategy, your Company has achieved various milestones; a few of them are listed below: a) Business portfolio enhancement and differentiated offerings * The Company strengthened its testing Services by acquiring FocusFrame Inc; which will reinforce expertise in Independent Testing and Verification services. The testing services being the fastest growing business segment, your Company will leverage on it and with the acquisition, your Company encompasses a complete range of testing services across the globe. * The Company expanded its offerings in Transportation & Hospitality by adding Shipping, Hospitality, Car rentals and Third Party Logistics (3PL) companies, thereby enabling the Company to position as market leader. * The Company established its footprint by providing comprehensive Enterprise Application service portfolio with strong capability and competency to its clients in the entire spectrum of Enterprise Application and maintaining globally its leading position by offering its services in PeopleSoft. * The Company also gained momentum in Insurance segment by leveraging in Enterprise Content Management and winning new business from Europe region. b) Flexible delivery excellence * During the year, your Company has commenced its offshore development centers in Pune and Gurgaon with an aim to de-risk from the existing presence and easy access of talent pool, which will help in creating a scalable model. * The Company's `partner-in-business' approach generates high business value for customers and rich dividends to your Company in the form of a continual stream of repeat business. Your Company's domain capability expertise and reduced learning curves enables significant compression in time-to-value deliverables. Your Company's customer-centric philosophy is further strengthened by a robust Key Account Management process to find more ways to delight our key customers and grow market share. c) Expanding & establishing global footprint * The Company has opened new office in the business capital of the world, New York, and a near shore facility at Mexico which will reinforce its position as leading software services provider. * The Company has been acknowledged amongst the fastest growing Indian based IT Companies in the year 2006. Operations Striving to continue the growth momentum in overall business scenario for off-shoring, onsite and on-shoring, your Company achieved good growth in 2006. Some of the key drivers for your Company's growth are: a) Effective Delivery The Company has invested in building a significant offshore delivery and consulting capability to absorb the process overheads of onsite by locating our business practice leaders, account managers and top management team in North America and Europe. This structure enables quicker decision-making and ease of access to customers. b) Innovative & Flexible Contract Mechanism The Company provides a great deal of flexibility in both the contractual and delivery models. This includes using innovative pricing and payment models that meet the unique expectations of its clients, as also optimising its SEI CMMI Level 5 processes to meet specific customer requirements. Working relationships stretch from fixed time/fixed fee to time and material. c) Multi-Cultural Dimension The Company operates on a global platform, working with several Fortune 500 customers in North America, Europe and Asia Pacific. This gives us a unique understanding and access to not only the business practices but also the cultural and work-ethics in different regions and industry sectors. d) Process and Methodologies The Company has institutionalised a number of processes and innovative methodologies, which has built in risk mitigation strategies and cost efficiencies. Our approach addresses the key issues of transition management and operational efficiency improvement. e) Leadership in Focus Areas The Company has demonstrated leadership and expertise in focus areas like global market leader in PeopleSoft services, leading IT solution providers for the Transportation &. Hospitality Industry and your Company is also fast emerging among the top two Indian IT services provider in Germany. f) Focus versus Generic Strategy In alignment with our focus on select areas, your Company's investment and focus is dedicated on growing to attain leadership in each sector. This has helped us to compete and win in these areas against much larger and more established vendors. g) Domain Expertise Another key differentiator is your Company's emphasis on bringing in domain experts in almost every project. h) Our size the right size Being a right-sized company, your Company has the ability to demonstrate adaptability and flexibility in our operation's to suit the dynamic needs of our customers. Your Company has demonstrated capability in meeting resource and infrastructure requirements for large projects, at the same time remaining small enough for relationship comfort. Quality and Security The Company's desire and continuous effort to improve and maintain a competitive position, continues to ensure benchmarking against international standards like SEI-CMMi, ISO 9001:2000 and TicklT. All the new centres in Chennai and Mumbai were certified against the ISO 9001:2000 and TicklT. As a new initiative, your Company has trained several employees in Six Sigma techniques and identified some projects for improvement. A major process automation in the project management area was initiated. Thrust areas for 2007 include re-assessment against the SEI CMMi model, inclusion of SEI-PCMM standards, thrust on improvement through Six Sigma, and completion of implementation of the new project management tool. The Company has achieved a new milestone in Information security with the successful completion of the certification audit and recommendation for certification against the ISO 27001 standard for all its development centres by Det Norske Veritas (DNV). This is a re-confirmation of your Company's enforcement of data privacy and protection practices, and our commitment to managing information security to ensure Confidentiality, Integrity and Availability of organisational and customer assets. Talent Management - Asset Development Consecutively, for the second year, your Company has been ranked among the top ten Best IT Employers in the DQ-IDC Survey in 2006 and was ranked 6th in terms of employee satisfaction among the 250 Companies rated. During the year, your Company's employee strength stood at 5,829 as compared to 3,646 in the previous year. Your Company has, over the years, made consistent efforts to retain and nurture talent by providing quality work, openness, training, world class infrastructure and net wealth programmes like ESOP. The attrition rate stands at 15% on an annualised basis. Hexa Varsity The Company firmly believes that professionals need to exhibit dynamism, not only in their respective fields, but also in their overall personality which includes leadership capabilities, resource of knowledge etc. Towards this, your Company's training arm - HexaVarsity organises seminars on a regular basis where eminent speakers from diversified fields continuous basis arranges for seminars where eminent enlighten our professionals on various topics. Your Company believes that each day is a learning experience and your Company has supported this ongoing learning process in more than one way. Corporate Social Responsibility (CSR) The Company firmly believes that actual growth cannot be quantified in money and its equivalents. Your Company is committed to, and there has been a desire over the years, to help social causes. The Company believes that children are the future of this nation, and at Hexaware everyone believes that your Company can provide a Helping Hand. Our H3O - (Helping Hands from Hexaware - Outreach Program) has been consistently taking up social responsibility projects in Mumbai and Chennai to facilitate the health and education of the underprivileged children. * The Company has joined hands with the Helen Keller Institute for the Deaf and Blind and celebrated Valentine day and New Year with nearly 150 Hearing Impaired and Visually Challenged students of the institute. * The Company and the employees donated close to Rs. 3 lakh for the development of the institute and built a fence around the institute to address security concerns. * The Company celebrated Christmas with the Little Flower Covent for hearing impaired and visually challenged and employees donated Rs. 1 lakh to the institute. * The Company organised a function at Chennai's Christ Faith Home for Children which is home to 43 infants, 34 destitute women and 25 orphaned girls. Milestones * Nominated amongst top 25 companies for `National Award for excellence in Corporate Governance - 2006' by ICSI * Ranked 12th in N ASSCOM Top 20 * Ranked 6th as India's Best Empoyer survey by DQ-IDC. Outlook The year 2006 was a year of good growth and 2007 will be a year of advancement. The software industry is on new footing and is poised for significant moves in 2007. New technologies such as software as a service (SaaS) and services-oriented architecture (SOA) - have become a well-integrated part of life for both vendors and buyers. The software vendor landscape continues to evolve rapidly. M&.A has become a way of life. The offshore services firms play an ever larger role and new crops of innovative services to keep everyone excited and moving forward. The Company's key revenue streams for the year 2007 are expected to come from the Vertical segment i.e. Asset Management, Transportation 6k Hospitality, HR IT solutions & Testing services and the Horizontal segment of Enterprise Solutions. These platforms continue to be the focus of your Company, on which new verticals &. horizontals will be built. In addition to that your Company is confident to win new businesses with better rate for the focused service offerings. With the visibility of a formidable order book, your Company is confident of strengthening business in terms of quality, client base, geographies, verticals and horizontal services by which every stakeholders value will be enhanced. Corporate Governance and Management Discussion and Analysis The Company takes pride in the belief that Corporate Governance not only in law but also in spirit. Your Company is endeavours to maximize the wealth of the stakeholder by managing the affairs of the Company with a pre-eminent level of accountability, transparency and integrity. A report on Corporate Governance including the relevant (i) CEO and CFO certificate (ii) Auditors' Certificate regarding compliance with the conditions of Corporate Governance as stipulated in Clause 49 of the listing agreement with stock exchanges; and (iii) declaration by CEO regarding compliance by Board Members and Senior Management with the Company's code of conduct are annexed. Management discussion and analysis of financial conditions and results of operation is also annexed. Directors' Responsibility Statement As required under Section 217(2AA) of the Companies Act, 1956, your Directors hereby state and confirm that: (i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanations relating to material departures; (ii) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period; (iii) the Directors have taken proper and sufficient care 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 fraud and other irregularities; (iv) the Directors have prepared the annual accounts on a going concern basis. Employee Stock Option Plans (ESOP) During the year under review, your Company allotted 2,052,140 equity shares of Rs. 2/- each on exercise of Stock Warrants/Options. These shares have been listed on the Bombay Stock Exchange Limited and National Stock Exchange of India Limited. Pursuant to the approval of the shareholders, your Company had instituted the Employee Stock Option Scheme, 1999 and the Employee Stock Option Plan, 2002 for all eligible directors (excluding promoter directors), employees of the Company and employees of its subsidiaries. Both the Plans are administered by the Remuneration & Compensation Committee of the Board. As at December 31, 2006, diluted earnings per share was at Rs. 8.09/- as compared to Rs. 7.52/- for the financial year ended December 31, 2005. Fixed deposits During the year under review, your Company did not accept or invite any deposits from the public. Insurance All the properties of your Company are adequately insured and safeguarded. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo The information relating to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo required under Section 217(1)(e) of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is annexed and forms part of this Report. Subsidiaries In accordance with the provisions laid down in Section 212 of the Companies Act, 1956 (the said Act), your Company is required to attach the Directors' Report, Balance Sheet and Profit and Loss Account of the subsidiaries to its Balance Sheet. In accordance with Section 212(8) of the said Act, your Company had made necessary application to the Central Government for seeking exemption from the aforesaid requirement. In this regard, your Company has received an approval from the Government of India, Ministry of Company Affairs, vide their letter no. 47/307/2006-CL-III dated February 8, 2007, granting an exemption from attaching the audited accounts of the subsidiaries to this Annual Report for the financial year ended December 31, 2006. Audited Accounts of all subsidiaries of the Company are available at the Registered Office of the Company for inspection by members. The Company will make available these documents upon request by any member of the Company. A Statement, as directed by the Ministry of Company Affairs, furnishing particulars of the subsidiaries forms part of the Annual Report and is available at the Registered Office of the Company for inspection by members. The Company will make available the said document upon request by any member of the Company. Directors In accordance with the Articles of Association of the Company, Mr. Rusi Brij, Dr. Bakul H. Dholakia and Dr. (Mrs.) Alka Nishar, Directors of the Company, retire by rotation at this Annual General Meeting and being eligible; offer themselves for re-appointment at the ensuing Annual General Meeting. The Directors are pleased to inform you that with effect from March 23, 2007, Ms. Preeti Mehta has been inducted on the Board as a Director of the Company in terms of the provisions of the Companies Act, 1956 (the said Act) and Articles of Association of the Company. Ms. Preeti Mehta holds office upto the date of the ensuing Annual General Meeting. As required under Section 257 of the said Act, the Company has received notice in writing alongwith the requisite deposit from a member, proposing candidature of Ms. Preeti Mehta for the office of Director. Mr. P. G. Kakodkar, Director of the Company retires at the ensuing Annual General Meeting. Mr. Kakodkar has expressed his unwillingness for seeking re-appointment. The Board has taken on record the immense contribution made by Mr. P. G. Kakodkar during his tenure as a Director of the Company. The shareholders information as necessitated in Clause 49 of the Listing Agreement pertaining to brief resume, expertise in functional areas, names of companies in which Mr. Rusi Brij, Dr. Bakul H. Dholakia, Dr. (Mrs.) Alka Nishar and Ms. Preeti Mehta are Directors etc. is being provided separately in the Annexure on page no. 36 of the Corporate Governance Report section of this Annual Report. Members are requested to refer to the said section of the Corporate Governance Report. Auditors Pursuant to the recommendation of the Audit Committee at its meeting held on February 14, 2007, for re-appointment of M/s. Deloitte Haskins & Sells as Statutory Auditors of the Company, for the financial year 2007, the Board of Directors have, at their meeting held on February 15, 2007, approved the re-appointment of M/s. Deloitte Haskins 6k Sells as the Statutory Auditors of the Company for the financial year 2007 and to hold office till the conclusion of the next Annual General Meeting scheduled to be held in 2008. In terms of the provisions of Section 224 of the Companies Act, 1956 (the said Act) M/s. Deloitte Haskins & Sells retire at this Annual General Meeting and being eligible, offer themselves for re-appointment. In terms of provisions of Section 224(1B) of the said Act, M/s. Deloitte Haskins 6k Sells have furnished a certificate that their appointment, if made, will be within the limits prescribed under Section 224(1B) of the said Act. Particulars of employees The particulars of employees, required to be furnished under Section 217(2A) of Companies Act, 1956, read with the Companies (Particular of Employees) Rules, 1975 is annexed hereto and forms part of this Report. Acknowledgement The Directors place on record their gratitude towards their clients, bankers, Government of India, regulatory authorities of other countries, Registrar and Share Transfer Agent, vendors and Technology Partners for the whole hearted support extended by them. Your Directors are also deeply touched by the efforts, sincerity and loyalty displayed by our employees without whom the growth was unattainable. Your Directors wish to thank the investors and stakeholders for placing immense faith in us. Your Directors seek, and look forward to, the same support during the future years of growth. Your Directors hope that they can continue to satisfy you better in the years to come. For and on behalf of the Board of Directors Atul K. Nishar Executive Chairman Place : Mumbai Date : March 23, 2007 ANNEXURE TO THE DIRECTORS' REPORT Information relating to conservation of energy, technology absorption, research and development and foreign exchange earnings and outgo forming part of directors report in terms of Section 217(1)(e) of the companies act, 1956, and rules made thereunder. CONSERVATION OF ENERGY: In the age where conserving power has become an obsession, keeping in view the shortage of power, your Company is fortunate that the operations are not energy intensive. Your Company believes that it forms part of the duty to save energy wherever possible and also install apparatus which would help in conservation of energy. Your Company's computer terminals, air-conditioning systems, lighting and utilities are modern technology enabled so that optimum use of energy and power can be made. TECHNOLOGY ABSORPTION: The Company believes that in addition to progressive thought, it is imperative to invest in research and development to ascertain future exposure and prepare for challenges. In its endeavour to obtain and deliver the best, your Company has entered into alliances/tie-ups with major global players in the I.T. Industry, to harness and tap the latest and the best of technology in its field, upgrade itself in line with the latest technology in the world and deploy/absorb technology wherever feasible, relevant and appropriate. At the same time, your Company has also attached tremendous significance to indigenous development and upgradation of technology through its extensive Research and Development operations. The benefits derived from these processes are phenomenal and have improved the quality of our world class services. It has also helped in diversifying the services portfolio while increasing cost efficiency. RESEARCH & DEVELOPMENT: The Company has a state-of-the-art Research and Development (R&D) wing carrying on Research and Development activities. This is in line with the Company's philosophy of maintaining and sustaining leadership status and the management team of your Company recognises the fact that in the long run, R & D will be a crucial differentiator between companies. FOREIGN EXCHANGE EARNINGS AND OUTGO: The details of Foreign Exchange Earnings and Outgo are mentioned in Point No. 19 of Para 3 &. 4 of Schedule 13(B) of Notes to Accounts, forming part of the Balance Sheet. For and on behalf of the Board of Directors Atul K. Nishar Executive Chairman Place : Mumbai Date : March 23, 2007

Director’s Report